Making a claim against a cfd provider

[dreamer628]

But what does the small print say?

I would never be a customer of a CFD provider that gave clients 3 working days to meet margin calls. One day that company WILL be blown out of the market.



In these markets? Rubbish. It would be absolutely UNreasonable for yiou to assume that.

Nope. It's insanity to ever take so highly a leveraged position

Of course the small print of all these organisations phrases everything in terms of 'we may' 'might' 'can' etc giving them endless wiggle room.

Firstly if you find that unnacceptably risky then fine don't use them, but bear in mind that companies like Ig (FTSE250) have been running from the beginning of trading in such products and hardly appear to be going broke anytime soon based upon the amounts that they're raking in, despite giving a full three working days for payment of margin requests of unlimited amounts.

Secondly, it is precisely because this is standard practise amongst all other CFD&SB companies that I am trading with that it is reasonable to expect cmc to operate in a similar manner. The volatility has led to most providers increasing their margin deposit requirements on indices severalfold, whilst cmc have been boasting that they alone are keeping their requirements the same and have NOT been changing procedures, so this evidently is how they always function, which again for a futures broker would be nothing unusual but for a marketmaker with their tiny deposit requirements is behaviour I have not found as of yet anywhere else. If you think the standard CFD&SB procedure is nuts then fair enough, but that is how all the others operate.

Whether you or anyone else regard my postions as conservative or wildly out of control is irrelevent to the issue at hand which is a question of CFD&SB operating procedures. Whilst it is a discussion for another place and time this is precisely the benefit (and liability) of SB - that you are able to take huge positions for small initial outlays. If you don't like that as many won't then nobody is suggesting that you use it. On the question of high risk/reward trading it is significant that most multimillionaire traders have 'made' themselves through a few highly rewarding trades where they did take stakes that would have destroyed them had they gone the other way. In my case I do employ risk management by putting lines in place that if the position moves past will invalidate my forecast, at which point I will immediately close the positions. These mental stops are never far enough away to destroy me. But again a discussion for another place and time.

 

[dreamer628]

Check out elitetrader. Everyone there is a millionaire/billionaire just like you.....

Believe what you want, I don't know you and couldnt care less.

 

[dreamer628]

Because this guy would blow half his account through slippage when his (non existant) stops were hit in the current environment

Actually as mentioned previously my exit points are never far enough away for that. Incidentally slippage/market maker price manipulation is precisely the reason why I do not deploy manual stops. I can read the prices as well as the next man.

 

[dreamer628]

did you dream this up?

No it was more of a nightmare. Again I have absolutely no trouble with taking a >30k loss or for that matter ten times that amount if it is the result of the market moving against me or my failure to comply with payment requests. It is only unnacceptable for to me to have to pay amount an amount equivalent to up to 2 years of standard wages because the company refuses to answer the phone when a customer is responding immediately to a request for payment giving the option of using that format.

 

[dreamer628]

Actually as mentioned previously my exit points are never far enough away for that. /QUOTE]

Well, not any more anyway lol

 

[A Dashing Blade]

. . . . so the question is whether I should directly speak to a solicited to take them to the high courts, or take the issue up with the financial ombudsman instead. The quicker and simpler the process, the better, but I just cannot accept this theft whatever it takes. Anyone else think it's unnacceptable? Thanks Michael

Geting back to the original point . . .

I think it fair to say that the general position of this forum is that the majority do NOT think CMC's actions were unacceptable in this instance and it's a case of caveat emptor.

 

[gfrost]

Dreamer628,
I really feel sorry for your loss, I know how frustrating it is to get stopped out, only to see the market turn around and race off.
To be honest I think that CMC have acted fairly reasonably, they waited until your account was well in the red before closing. I am with IB, as soon as the margin falls below a certian point they will start closing the position. I think maybe what's different about IB is that they would start closing the position in stages, so effectively allowing more downside, wheras they just closed it in one go as I understand it.
What I don't understand is why, if you are making hundreds of thousands of pounds, you didn't leave more margin with them, knowing that the markets are likely to be volatile. I understand your frustration that you couldn't get through on the phone, but really you do need to take some of the blame for this.

 

[dreamer628]

Geting back to the original point . . .

I think it fair to say that the general position of this forum is that the majority do NOT think CMC's actions were unacceptable in this instance and it's a case of caveat emptor.

Fair point but cfd accounts are subject to a high degree of regulation that puts the onus for making private customers aware of procedures on the vendor, and there is no provision anywhere that they can close your positions and make you liable as a result of their refusing to answer the phone to take payment once margin becomes required, and to the contrary give this specifically as an accepted option for meeting the funding requirements.

 

[dreamer628]

Dreamer628,
I really feel sorry for your loss, I know how frustrating it is to get stopped out, only to see the market turn around and race off.
To be honest I think that CMC have acted fairly reasonably, they waited until your account was well in the red before closing. I am with IB, as soon as the margin falls below a certian point they will start closing the position. I think maybe what's different about IB is that they would start closing the position in stages, so effectively allowing more downside, wheras they just closed it in one go as I understand it.
What I don't understand is why, if you are making hundreds of thousands of pounds, you didn't leave more margin with them, knowing that the markets are likely to be volatile. I understand your frustration that you couldn't get through on the phone, but really you do need to take some of the blame for this.

Thank you gfrost, and I would have left any amount required had my previous experience with all other cfd&sb providers not been that they will give you significant opportunity to deposit additional funds once the market has moved against you. I have accounts with cityindex, Ig, and spreadex, of whom Ig will give you three working days to deposit additional funds regardless of the size of the movement against you, and cityindex and spreadex have limits of £10000, and £20000 respectively that the market can move against you (below which they also allow you three and two working days respectively) before requiring payment on the same working day. But even then they allow you several hours to make payment if necessary.

Actually as a result of this difference in margin procedure the deposit necessary for maintaining positions is far higher with cmc than with other cfd&sb providers despite the stunningly low ntr requirements they advertise, which was what had enticed me to open an account with them in the first place, and I think that it is only fair that people should be made aware of this.

Certainly had I known of their procedure beforehand I would have either put a far larger deposit down or simply sticked with my current providers.

 

[stevespray]

Listen, this just doesnt add up,

Firstly it doesnt seem possible to be able to open the positions mentioned given the low level of deposited margin. Generally, if you try to open a position where the NTR exceeds the avaliable equity then the software politely informs you so.

Secondly, if you are "making millions" with another firm, who you have built up a fairly robust trading relationship with, why is there a need to move to another?

Thirdly, you say that you've turned £5k into millions etc but your comments regarding trading are largely immature in nature (I'm not trying to insult you here) - You speak about being "certain" that some thing was going to happen - this is not the sign of a skilled trader; skilled traders prepare themselves for all outcomes because they know that they are NEVER ALWAYS RIGHT.

Fourthly, dispite your high claimed IQ you seem to have completely overlooked the natural math which surrounds this situation with regard to 'risk of ruin' etc. Pretty much all the '154s' I know would not do that!

Fifth and final point is that £30k is a very small slice out of £1m+ so your best bet is to use it as a learning experience. Also learn that 'You cant be right all the time' and therefore you need flexibility in your trading if you are to succeed in the longer term.

Steve.

 

[A Dashing Blade]

Another thing that doesn't add up is the fact that this thread has gone on for 5 pages.
Dreamer . . . you've had your question answered.
We are not lawyers, I suggest you continue this discussion with a good one.

 

[dreamer628]

Listen, this just doesnt add up,

Firstly it doesnt seem possible to be able to open the positions mentioned given the low level of deposited margin. Generally, if you try to open a position where the NTR exceeds the avaliable equity then the software politely informs you so.

Secondly, if you are "making millions" with another firm, who you have built up a fairly robust trading relationship with, why is there a need to move to another?

Thirdly, you say that you've turned £5k into millions etc but your comments regarding trading are largely immature in nature (I'm not trying to insult you here) - You speak about being "certain" that some thing was going to happen - this is not the sign of a skilled trader; skilled traders prepare themselves for all outcomes because they know that they are NEVER ALWAYS RIGHT.

Fourthly, dispite your high claimed IQ you seem to have completely overlooked the natural math which surrounds this situation with regard to 'risk of ruin' etc. Pretty much all the '154s' I know would not do that!

Fifth and final point is that £30k is a very small slice out of £1m+ so your best bet is to use it as a learning experience. Also learn that 'You cant be right all the time' and therefore you need flexibility in your trading if you are to succeed in the longer term.

Steve.

In order:
1. Required margin for opening positions on the FTSE100 is just 0.5% with cmc (same for S&P, and was an ntr of 50 with spreadex (S&P 10) and 80 with Ig (unsure of S&P, but substantially higher), both of whom have however raised it in the current market conditions (as of Monday) to 200. Therefore for 500 Ftse cfds there is a margin of £10000 with cmc, normally £25000 with spreadex, and £40000 with Igindex, currently £100,000 for both. £30000-£10000-$12700=sufficient initial margin to open the described positions.
2. Firstly there are maximum deposit limits with Igindex (although these are regularly raised) which is understandable considering the risks that they face. Secondly I am becoming increasingly fearful about doing all of my trading with one provider because of the possibility that in the current environment they may become insolvent. This is also the reason that I have become loath to leave more than is absolutely necessary for maintaining my positions in my trading account. I reason that diversifying amongst providers will help to reduce that increasingly worrying risk. Thirdly cmc markets were advertising incredibly low margin requirements by comparison with my current providers, as I showed above. Fourthly I just like shopping around to find providers with the best service, if I didn't I would still be stuck with cityindex, which is significantly inferior to IG and Spreadex. I see it as part of growing as a trader. Doesn't everyone shop around?
3. Obviously I accept that I am not always right and as I have stated previously I am now careful to determine exit points that if reached will show me that I was wrong. In deciding the size of the stake I take into account how much I can afford to pay out if this level gets breached, because when it does get hit I will always cut my losses. It has happened and frankly getting it wrong bothers me more than a short term loss, but I use it as a learning opportunity because it shows how my system of analysis has to be modified. Having said that there is only one person I need to prove myself to and that is myself. So far I have.
4. Answered in 3, although unfortunately ones intelligence quotient is not a perfect determinant of correct decision making. Having said all of the above when I began trading I did not employ any risk management. My calculation was that I was as broke as broke could be anyway - whilst I had £5000 in savings, I also had £25000 of debt that I could no longer hope to service as a result of redundency - so it was worth taking the unmitigated risk at the time. A gamble, yes but 'who dares wins' and I would almost certainly have had to go bankrupt anyway had my trades not succeeded. Praise be to the Gods Who delivered me.
5. Yes, a learning experience, and as I have said in several posts now I would have no difficulty in accepting ten times the losses if they were to the market as I would look to improve my analysis as a result, so it would be well worth it, and in any case that is the nature of the game. But this is an unacceptable loss as it was due to the provider's refusal to take payment so I see this as utterly unfair and all it has taught me is that different providers of supposedly the same product can have widely different operating procedures and so to be careful when making enquiries of potential new providers in the future rather than relying on past experience.

 

[dreamer628]

Another thing that doesn't add up is the fact that this thread has gone on for 5 pages.
Dreamer . . . you've had your question answered.
We are not lawyers, I suggest you continue this discussion with a good one.

Five? Not any more!!!

Just one more question though if I may: does anyone have any recommendations as to reliable solicitors with expertise in derivatives of this nature? The cost isn't an issue. I live in London, UK. Thanks

 

[ian]

Five? Not any more!!!

Just one more question though if I may: does anyone have any recommendations as to reliable solicitors with expertise in derivatives of this nature? The cost isn't an issue. I live in London, UK. Thanks

I would think that with the millions you have earned recently and your high I.Q. the best and most satisfying route for you to take would be to fund the 'offending' account properly and get your money back - in spades!

 

[dreamer628]

I would think that with the millions you have earned recently and your high I.Q. the best and most satisfying route for you to take would be to fund the 'offending' account properly and get your money back - in spades!

But that won't make them change anything. Further they will make money on the spreads, so I am more inclined to claim against them and close the account.

 

[anley]

I'm sure Herbert Smith or Clifford Chance would only be too happy to take your case on at £250 an hour + VAT.

They'll have the right people with experience working for them.

PS. Remember, don't gosspip too much about the weather and football when you phone them (as a client) as their stopwatch's will be ticking

 

[dreamer628]

I'm sure Herbert Smith or Clifford Chance would only be too happy to take your case on at £250 an hour + VAT.

They'll have the right people with experience working for them.

PS. Remember, don't gosspip too much about the weather and football when you phone them (as a client) as their stopwatch's will be ticking

Thanks a lot

 

[Lee Shepherd]

Dreamer,

I have read through all the pages and see what the problem is from the very first post.

Firstly, you were overtraded by a rediculous amount, this is absolutely careless of the person that done this (ie, you).

To have your account wiped out and 5k in debt from and initial balance of 30k and in a short amount of time and on one trade tells you this.

Secondly, wheres the stop on your worked out maintenance margin, if you knew it was possible it could hit your stop AFTER getting a margin call then surely you would have made sure you had the money in place BEFORE opening the trade.


To keep it simple heres an example (please note: figures do not add up but you get the idea)
If I have £500 on account and margin myself upto half of this (£250), this would be deemed crazy, however, I do and say its £50 a point,therefore I know that if it moves 5 points against me I know one of two things will happen, I get stopped out (if stop used to maximum of account)or I lose the position if not funded. You done one of these two things (but... set the stop outside your maintenance margin required)and therefore my friend do not have a leg to stand on. This wasn't a standard margin call, this was a negative equity call and the worst call one could ever recieve. The spreadbetting company should have closed you out earlier so at least you didn't owe any money, however, once again, this is your responsibilty, not theirs.

For all others, this guy is crazy, overtrades, doesn't maintain his positions then blames the Spreadbetting company for doing exactly what they say they do, close him down.

This guy shouldn't be allowed anywhere near a trading desk until he sorts his attitude.

I'm sure he will find a solicitor to take on the case, but he won't get anywhere and will just rake up more losses.
Good money after bad springs to mind.

My verdict:
More money than sense.

 

[dreamer628]

Oh if only I could be bothered to destroy the same ignorant comments over and over again. But then as Shepherd is evidently illiterate there would be very little point. Shepherd should stick with his sheep. No doubt they make a lot more sense. There should be a way of closing these threads once the issues have been resolved so as to prevent them from going on endlessly with the selectively illiterate repeating the same piffle from page 1 ten pages on. Anyway I'm still in a fairly positive frame of mind having made another 60k today. Baaah

 

[keano]

24 year old millionaire all made from a £5000 one year ago? Good going