A few questions have come to mind:
1. Does anyone know of an FX trading application that automatically scalps, and can do this some 1500 times a day. Ok don't laugh here is my understanding and remember that introducers are not providing any paperwork but going through the investment verbally:
so we have an FX trading application that is given whether the go long or short on a currency pair. it then sees if the market is trending in the same way as the app (say long), if so it stays in the trade. if the market goes against the trend of the app, the app trades one more time. if the market goes again against the trend of the app the app reverse its trade position (it would go short)
2. what sort of power do the FCA have over unregulated investments
3. if your investment money is placed into an escrow type account, what right has the investor on this account.
Shame you are leaving the thread deltatrader12, thanks for your previous posts
No problem and thank you all too ! This will be my last post.
I thought it best to take a step back as I think that the facts will more or less present themselves in the weeks ahead. Also, the recent posts with Indignation were beginning to get slightly emotional as opposed to factual. The original purpose of my posts was simply to encourage caution and due diligence nothing more and this purpose has been served.
As final comments to your last post (Disclaimer: This is purely my opinion and may need further research).
1 The FX application question. There are of course all manner of systematic trading strategies, algorithms and HFT (high frequency trading) strategies. They vary in complexity but can involve vast banks of servers located close to exchanges with low latency feeds. In other words, they are usually highly resourced and complex entities requiring teams of experts. (These firms normally hire smart people known as 'quants' who might be phd graduates from MIT or actual rocket scientists as well as IT experts ). Usually, if a firm has developed a systematic trading edge it can attract walls of institutional money and does not need to market themselves to 1000s of Joe Publics (with all the associated problems, risks and expense involved). Also, due to the high level of competition between these firms, margins in this space are actually being squeezed recently. A kind of 'arms race' has taken place in this field. So you can imagine that, despite being very well resourced, even such huge HFT or quant firms are finding it more and more difficult to make money. It could be said that the days when somebody could do this with an 'application' are well and truly over, however, we have to keep an open mind in the interests of fairness.
The problem is people often do not think objectively. An FX 'app' fits into some people's idea of a Holy Grail or magic formula. A modern-day Philosopher's Stone which our modern FX alchemists say can turn base metals into gold. Just like a way of 'Making Money While you Sleep' or in '10 Easy Steps to Success.' It is what some people genuinely want to believe and it is easier to sell something to someone who wants to believe in something.
Now of course, the only way to find out if this is real is to perform some due diligence and look for objective facts. Are there externally audited results? For how long do they go back? Who are the money managers? What is their background? How big is this 'app' (is it just 10 megabytes) ? What are the risk adjusted returns ? (Risk adjusted is an important concept few people get). No genuine person should be afraid of giving them and shouldn't obfuscate. Also, logically, there is the question, 'Why market this to Joe Public when you can attract institutional money?' Also, 'how come your 10 megabyte app works and the big firms have never thought of it?'
2 The power the FCA has over unregulated investments question. First of all we have to understand what an unregulated investment is. To market an investment to the general public (e.g shares, REITs, unit trusts etc) a firm has to comply with all manner of regulations and compliance. Risk warnings, KYC, AML regulations and give detailed fact sheets. Structurally, the investments themselves can involve expensive trustees (as in unit trusts) or the investments may themselves be restricted by not being allowed to take on permanent leverage or only being allowed to invest in listed securities, for example.
The exception is what are known as 'hedge funds' or rather offshore funds. They can do pretty much everything (go long/short, up/down/sideways the market with maximum leverage) . These fund vehicles themselves are usually regulated offshore (the BVI or Caymans) for tax reasons and not regulated in the UK. Yet, here is the problem. According to the FSMA 2000 in order to offer them in the UK you have to be regulated. There are no exceptions and anyone who is offering financial services in the UK has to be regulated. So the FCA gives a license to asset management firms (known as hedge funds) based usually in Mayfair. They are regulated in the UK yet they cannot market to the general public and can only speak to what are known as professional investors (generally HNW individuals or eligible firms based on a standard test). So these investments are, in fact, regulated (both offshore) and in the UK (by the FCA). The difference is that the regulation is very light-touch in comparison to the big funds (less restriction on investment strategies, less reporting and so on) and they are not allowed to be sold to the general public because they are riskier and more complex. Hence the confusion about being regulated or not. The protection is there for the general public. It is broadly a similar structure in the US and other countries too.
To add to the confusion. The FCA has a list of things which it regulates (shares, ISAs, funds, futures etc) and wine, diamonds, rare earth metals, strange miraculous plants in Africa, carbon, financial education and ...indeed ...binary options are not on the list. So they cannot do anything in these fields although occasionally you hear about the Serious Fraud Office or Office of Fair Trading arresting people and closing firms down (these are different agencies). These investments are not regulated. In these fields salesman can and do say everything and anything as there are no regulations.
3 The escrow question. My understanding is that a lot depends on the escrow agreement. However, normally when managing investments you have a different format to an escrow account (again this is pretty standard in most countries). Usually you use a prime broker or custodian account which is separate from the management firm. The management firm has the ability through a power of attorney to make trades either with express permission every time (an advisory license) or usually without permission every time (a fund or discretionary asset manager). They NEVER have the right to transfer the money from one account to another or take money out. The money always stays protected and in the client's control and this is the role of the custodian or brokerage account to protect it. Of course, they can lose money if they manage it badly but they can't touch it.
