Hi Steve
Yes, I'm C level in a Spread bet and CFD firm. I've posted on here fairly regularly and have always said i'm not here to drum up business for my firm or to recommend any of our services. in fact you wont find any reference at all to me mentioning who I work for and I wont. I want to tell you what its like from our side of the fence without being accused of being biased or talking my own book. I'm happy for you to believe all, some or nothing of what I say but I can assure you that even though you may disagree with me, the points I make are fact as far as spreadbet and cfd firms are concerned.
those fills that you thought were binding aren't binding. That's crazy right? of course it is but there is enough wiggle room to let some firms off the hook and that is what is happening in this scenario.
Palpably wrong - who determines what is 'palpably wrong' I think if you look in to the t+c's you may see that a price is palpably wrong if it is more than three times outside of the normal spread.. for example a 1 pip eur/usd could be palpably wrong if theu're quoting 11/12 when the right price could be 15/16.
The T+C's are set up to protect the firm writing them and whilst that doesn't make it morally fair it is the road map for the way you are allowed to do business with them.
you say that 'some firms were careful first to remove their own hedge' - when the eur/chf move happened no one new what was going on, there wasn't time to remove any thing. Most brokerages will have systems that automatically fill orders at the next price and most of the time this saves a lot of dealers having to fill tiny orders but the trouble this time meant that one price may have been 1.2001/1.2003 and the system may have thought the next price was 1.1987/1.1989 once the cap was removed when we all know it actually wasn't there and it was thousands of points lower. this is what happened at IG, the first wave of orders were automatically filled on the basis the price action triggered them, but the second and subsequent waves were filled at levels the dealers determined.
spreadbet firms were designed to offer wider prices than the interbank market to a retail audience but as this market has matured more and more people are finding a way to try and take advantage of slow prices or large autofill sizes in illiquid markets and spread bet firms have had to react to protect themselves and unfortunately thousands of honourable and decent people get caught up in a net that has been built to ensure scammers don't/cant profit.
Some great points in there.
I do try to see things from both sides of the fence.
In terms of the 'binding contracts'... If such a matter ever reached court then they would be binding in nature. That is to say that the client would generally be very successful in enforcing such a contract against a firm.
There is a very simple reason why; it's deemed to be a contract in law.
There's a very good reason why all of the online retailers make it clear that orders placed online are not binding until acceptance and this is to prevent breach of contract (on their part) in the event of mis-priced items on a website. What the online retailers now do is manually check each order before accepting it. In other words they have moved the 'point of contract'. It used to be a contract when the customer clicked 'buy' and made their payment.
As I mentioned in a previous post, what this comes down to is;
offer + acceptance = contract.
Put simply, a firm should not accept an order unless it is prepared to be bound by it's terms.
This appears to be backed up by The Financial Services & Markets Act (2000) which makes spread bet contracts enforceable in law.
I realise that this conversation is mainly theoretical in nature but it is also worth noting that the T&Cs of any SB / CFD firm fall under the remit of The Markets Act which I mention above. What that means is that the T&Cs cannot seek to circumvent the terms of the Act itself - Your "wiggle room" appears to try and do that (by not making trades 'binding') and thus wouldn't be acceptable. In such a dispute the Markets Act would prevail over the T&Cs. There's probably something in the T&Cs which covers this.
Getting technical now but you mention that the T&Cs are written to protect the firms. Of course this is widely regarded as being true and I certainly wont argue with your point in that respect.
There are however a number of points which massively favour the clients if only the clients know the true legal position.
In law the T&C's make up the 'client agreement'. This is technically called a 'standard form contract' meaning a contract where the terms and conditions are not individually negotiated by each client. The 'client agreement' is simply sent to each client to be signed and then sent back.
What a lot of firms don't realise is that such a contract makes them subject to 'contra proferentem'. This is actually covered in FCA Conduct of Business document but you'd be surprised how many compliance officers ignore its existence!
You're not allowed terms which, when interpreted, cause 'significant imbalance' either.
What contra proferntem allows is for clients to turn the tables on the firm themselves providing that the client can show that he / she has a reasonable interpretation of the term which he / she feels is relevant. In theory the firm have no choice but to accept the clients interpretation over their interpretation.
I had to point all of this out to a head of compliance once and even he admitted that it was "a real eye opener".
So I don't think there is the wiggle room which you suggest. Firms might present it as such but when pressed they give in. The BIG risk for any firm is when a group get together and really push hard. Apparently there is a group pressing IG Index at the moment - 340 clients seeking around £18m... ouch. It will be interesting to see what happens there.
In terms of the case of Barry (the original poster), I think he will get his money back as he can clearly show that his original stop loss trade was filled.
Steve.
