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Oanda versus FXCM

wlk1
Feb 10 2015 at 10:45
69 posts
To each their own. I'm not here to convince you that I'm right and you're wrong. I'm just sharing my opinion.

Btw, 300 pips ?



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The market will go up, failing which, it will go down.
theHand
Feb 10 2015 at 10:56
365 posts
@wlk1

What was it on UsdChf ? I never really looked at the event, but we have a traders skype room and the guys in there were talking I as if it moved 300 before the actual 1000 pip event. A few people I know made good money from it. I don't have a computer to look at it right now, apparently Mac's aren't as reliable as they used to be.

If it was 300 then it's even less significant, which is even more worrying considering what it did to FXCM.

The wise thing to do is probably to have accounts at several brokers. Absolute minimum is two in my opinion. But preferably 3 to 4 just to be safe. Especially in 2015/2016 period, it's going to be a very, very strange year or two.

But so many brokers didn't get nuked by it, why stick to one that did ? FXCM at this point is to me a third party risk I (or anyone else) doesn't have to take. They barely survived this.

vontogr (togr)
Feb 10 2015 at 12:23
4862 posts
theHand posted:
@wlk1

It was a 1 300 pip move. Yeah it was fast (as in a tick, which was the problem for the brokers), but 1 300 is not that big an event. It was only a central bank announcement after all. Watch Greece exit the euro or default on their loans or one of the top 5 banks go insolvent. Then you'll see an event. And those are coming.

As for FXCM, I work to hard for my money to take third party risk. They are in the poop and they will remain in the poop for a considerable time to come, with really major events coming that will test their tech and systems to the limit, which didn't do so well in the last test.

Clearly Oanda did much better with the same problem and doesn't have a huge hole in the balance sheet. So it's a no-brainer at this point.


@theHand
It was movement so huge it wiped out some brokers. Show me another event like that.
Numbers
USDCHF drops from 1.03000 to 0.83000
That's 20,000 pips on 5 decimals.
It does mean you needed 103,000 CHF to buy 100,000 USD. And suddenly you needed just 83,000 CHF to buy 100,000 USD.
So the pair lost about 20% in 15 minutes.



theHand
Feb 10 2015 at 12:38
365 posts
@togr

I'm not disputing it was a noteworthy event. It clearly was. But what was the fall of the Berlin wall then or the fall of USSR compared to this ?

These events happen all the time. Shit happens. And there's much bigger shit just over the horizon if you look carefully. Big shit, the kind of stuff they teach kids in school 50 years later (if there are any left). The kind of shit that makes empires fall.

When history is written no one will mention the CHF peg broke. Just not big enough an event. This was nothing. A mere blimp.

Historically markets always continued to function during times of severe disruption and fortunes were made or lost. But you can't go into this kind of history with a weak hand.
 

john (moneycoder)
Feb 10 2015 at 14:40
18 posts
theHand posted:
@wlk1

What was it on UsdChf ? I never really looked at the event, but we have a traders skype room and the guys in there were talking I as if it moved 300 before the actual 1000 pip event. A few people I know made good money from it. I don't have a computer to look at it right now, apparently Mac's aren't as reliable as they used to be.

If it was 300 then it's even less significant, which is even more worrying considering what it did to FXCM.

The wise thing to do is probably to have accounts at several brokers. Absolute minimum is two in my opinion. But preferably 3 to 4 just to be safe. Especially in 2015/2016 period, it's going to be a very, very strange year or two.

But so many brokers didn't get nuked by it, why stick to one that did ? FXCM at this point is to me a third party risk I (or anyone else) doesn't have to take. They barely survived this.


You do make some good points, however I think it's critical when comparing which broker got nuked and which ones didn't, to consider why???
Some brokers did very well, but at the expense of their clients losses. That's apples and oranges. A STP broker takes honorable losses and a Dealing desk takes dishonorable profits. They should not be compared like that imo.
To compare STP brokers with eachother and Dealing Desk brokers with eachother, would be fair. That comparison would hold true value imo.
The same goes for earnings. Comparing a NDD with DD in earnings is irrelevant to a trader. Because itls the traders losses that boost the DD earnings. Not so with the NDD earnings.

It's like only considering one side of a coin. Maybe DD brokers did better during the dump, but did their clients do better? It's not about the brokers, it's about the clients.
It was a wake up call that's for sure.

vontogr (togr)
Feb 10 2015 at 14:40
4862 posts
theHand posted:
@togr

I'm not disputing it was a noteworthy event. It clearly was. But what was the fall of the Berlin wall then or the fall of USSR compared to this ?

These events happen all the time. Shit happens. And there's much bigger shit just over the horizon if you look carefully. Big shit, the kind of stuff they teach kids in school 50 years later (if there are any left). The kind of shit that makes empires fall.

When history is written no one will mention the CHF peg broke. Just not big enough an event. This was nothing. A mere blimp.

Historically markets always continued to function during times of severe disruption and fortunes were made or lost. But you can't go into this kind of history with a weak hand.
 

@theHand
you wrote it was 1300 pips but it was 20000 pips
you wrote it was not big event but it was
now you compare it to 25 years old events that are not forex.
Well waste of time to discuss it with you.


theHand
Feb 10 2015 at 15:13
365 posts
@togr

Please man, I've been at this forever. I know what a big event is. It's not a central bank announcement. So 3 or 4 brokers saw their arse . So what ? Whole world is about to see it's arse.

As far as events go it wasn't a big thing. LTC was a big thing. Look it up if it's pre your age. Or even Creditanstalt. Might learn something.

@moneycoder

You know, I have some very clever friends that have spent a lot of time trying to figure this out. People who have been making a living for decades from not only fx, but API's on fx. And they don't have an answer. Neither do you.

Why did some brokers do better than others? I don't know. And I don't care, my money is going to the most stable broker, the one that doesn't need a bail out after a once a decade event, which he was ready for.

vontogr (togr)
Feb 10 2015 at 15:25
4862 posts
theHand posted:
@togr

Please man, I've been at this forever. I know what a big event is. It's not a central bank announcement. So 3 or 4 brokers saw their arse . So what ? Whole world is about to see it's arse.

As far as events go it wasn't a big thing. LTC was a big thing. Look it up if it's pre your age. Or even Creditanstalt. Might learn something.

@moneycoder

You know, I have some very clever friends that have spent a lot of time trying to figure this out. People who have been making a living for decades from not only fx, but API's on fx. And they don't have an answer. Neither do you.

Why did some brokers do better than others? I don't know. And I don't care, my money is going to the most stable broker, the one that doesn't need a bail out after a once a decade event, which he was ready for.

@theHand
You are not brave enough to admit you said nonsense. Show me another event like that.

theHand
Feb 10 2015 at 15:31
365 posts
Pffttt..look for it mate, not going to do your work for you. I've always planned for GBPJPY type moves. Look on the monthly.

And what's brave got to do with this ? You'll learn sooner or later. I've just been there already a few times. Clearly you haven't.

Seriously, this was not such a big event. Some of them take out countries and regimes. A few brokers are nothing.

wlk1
Feb 10 2015 at 15:45
69 posts
Guys, chill out. No need to be offended or defensive.

Everyone has their own opinion on whats better, and what works for them. You win some, you lose some. There's no point on trying to impose your values on someone else, less so when its on an anonymous forum.

The USDCHF move was less than on the EURCHF, but to me, still significant. Here it is.

Peace.

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The market will go up, failing which, it will go down.
theHand
Feb 10 2015 at 21:31
365 posts
Don't know what an opinion has to do with values. But clearly I know nothing. I have been shown the errors of my ways by the far superior minds here.

Yup, this was nearly the end of the word as we know it. Whole 3 brokers went insolvent...we are doomed..!! Run for your lives..!!

vontogr (togr)
Feb 10 2015 at 22:06
4862 posts
togr posted:
theHand posted:
@togr

Please man, I've been at this forever. I know what a big event is. It's not a central bank announcement. So 3 or 4 brokers saw their arse . So what ? Whole world is about to see it's arse.

As far as events go it wasn't a big thing. LTC was a big thing. Look it up if it's pre your age. Or even Creditanstalt. Might learn something.

@moneycoder

You know, I have some very clever friends that have spent a lot of time trying to figure this out. People who have been making a living for decades from not only fx, but API's on fx. And they don't have an answer. Neither do you.

Why did some brokers do better than others? I don't know. And I don't care, my money is going to the most stable broker, the one that doesn't need a bail out after a once a decade event, which he was ready for.

@theHand
You are not brave enough to admit you said nonsense. Show me another event like that.

@theHand
However, the best soundbites today will surely come from US hedge funds which are just waking up to the biggest FX shocker in years, and of course, any retail investors who may have been long the EURCHF, and who are not only facing epic margin calls, but are unable to cover their positions, as one after another retail FX brokerage has commenced 'Rubling' the Swissy and the CHF pair is suddenly not available for trading for retail accounts.

Examples of long-tail events include the “black Monday” stock market crash of 1987, the events leading to the failure of Long Term Capital Management, the Japanese Tsunami, and last week the re-valuation of the Swiss Franc.

It is event comparable to the above but still not big enough for your ego? :) Gosh.

vontogr (togr)
Feb 10 2015 at 22:06
4862 posts
theHand posted:
Pffttt..look for it mate, not going to do your work for you. I've always planned for GBPJPY type moves. Look on the monthly.

And what's brave got to do with this ? You'll learn sooner or later. I've just been there already a few times. Clearly you haven't.

Seriously, this was not such a big event. Some of them take out countries and regimes. A few brokers are nothing.

@theHand
Whatever you say.

theHand
Feb 10 2015 at 22:12
365 posts
When the banks start failing it's big. When the ATM stops working, that's big.

This is so-so. Noteworthy, but not strategy changing.


Jason Rogers (jasonrogers)
Feb 10 2015 at 23:25
272 posts
wlk1 posted:
IMHO, the CHF travesty was a major event. Directional volatility was up over 1000% on CHF pairs. You'd be hard pressed to find another event like that in the last 10 years.


At the time of the SNB announcement over 3,000 FXCM clients held slightly over $1 billion in open positions on EUR/CHF. Those same clients held approximately $80 million of collateral in their accounts. This was the largest move of a major currency since currencies started floating 1971.

The EUR/CHF move was 44 standard deviation moves, while most risk management systems only contemplate 3-6 standard deviations. The moved wiped out those clients’ account equity as well as generated negative equity balances owed to FXCM of over $225 million. We believe that the FXCM system operated properly during this event.

The caveat of our no dealing-desk execution system is that traders are offset one for one with a liquidity provider. When a client entered a EUR/CHF trade with FXCM, FXCM Inc. had an identical trade with our liquidity providers. During the historic move, liquidity became extremely scarce and shallow, which affected execution prices. This liquidity issue resulted in some clients having a negative balance.

While clients could not cover their margin call with us we still had to cover the same margin call with our banks. When a client profits in the trade FXCM gives the profits to the customer, however, when the client is not profitable on that trade FXCM Inc. ends up having to pay the liquidity provider.

FXCM ended with a regulatory capital shortfall. Accordingly, FXCM needed to get a loan to cover this balance, which it did. For anyone that still thinks FXCM is running an FX dealing desk, we have now demonstrated that such is not the case.

Jason Rogers (jasonrogers)
Feb 10 2015 at 23:27
272 posts
theHand posted:
But so many brokers didn't get nuked by it, why stick to one that did ?


moneycoder posted:
You do make some good points, however I think it's critical when comparing which broker got nuked and which ones didn't, to consider why???
Some brokers did very well, but at the expense of their clients losses. That's apples and oranges. A STP broker takes honorable losses and a Dealing desk takes dishonorable profits. They should not be compared like that imo.


Many people traded EUR/CHF with FXCM, because we are a no dealing-desk broker and offset each trade one-for-one with our liquidity providers, and only make money on trades not customer losses. We published a study a few years ago called “traits of successful traders” that looked at FXCM traders over a long period of time and their general behavior to find what was destructive behavior to stay away from and what worked for clients.

The study focuses on what the majority of profitable traders did to increase their odds of success. What the study found was that traders who traded during quiet range-bound market hours like Asian hours OR that traded rang- bound low volatility currency pairs tended to be more profitable.

Obviously many of our competitors who are on the opposite side of their clients’ trades did not find this trade to be helpful to their bottom line, as they lose money when traders profit. We saw many of the dealing desk firms begin to increase overnight rollover cost as well as raise margin requirements to get these trades off their system and that’s why FXCM and other STP brokers had much bigger exposure.

Jason Rogers (jasonrogers)
Feb 10 2015 at 23:28
272 posts
wlk1 posted:
250mio is a lot of money to lose, but it does prove a few things :
1. they are NOT a bucket-shop
2. they are a business worth saving, and it took less than 72 hours for investors to decide
3. even in the thick of it, clients were able to move 5-6 figure amounts out without hassle


As a regulated broker we are required to notify our regulators in a timely manner when any event occurs that may be deemed sensitive to clients. When we notified the regulators, they required FXCM Inc.’s regulated entities to supplement their respective net capital on an expedited basis.

We explored multiple debt and equity financing alternatives in an effort to meet the regulator’s deadline. The deal we ended up doing with Leucadia was the only deal that could and would happen in the very short timeframe we were given by the regulators. The CEO and the president of Leucadia were here in the office working on the deal.

It was a tall order for someone outside of the FX industry to come in and write a $300 million dollar check. This was the type of thing only top management could do. But they see the sustainability of FXCM, and that was everyone’s end goal.

Jason Rogers (jasonrogers)
Feb 10 2015 at 23:29
272 posts
theHand posted:
It will take them years to pay back that loan in a best case scenario. Next time there's an event like that, which is very likely in current market conditions, they're gone.


moneycoder posted:
I believe it's non-core assets their selling. Not the retail side.


We anticipate that with the proceeds from the sale of some non-core assets and continued earnings we can meet both near and long-term obligations of our financing, while preserving the strength of our franchise. It’s widely known and understood that FXCM’s core business has always been retail FX; It is the majority of FXCM’s revenue.

However, over the past few years, the company has spent over $250 million dollars making strategic acquisitions building up our non-core businesses, mainly the institutional side as we tried to diversify the firm. We are now looking to sell some of those non-core assets; But, we are not in a rush and are looking to get the highest valuations for these assets.

We are considering closing or selling smaller regulated entities that require large sums of capital requirements, but that offer increasingly low return on capital. The latter move allows us to free up significant amounts of cash that is currently trapped. We believe that in the near term we can pay down a majority of the loan.

Jason Rogers (jasonrogers)
Feb 10 2015 at 23:30
272 posts
theHand posted:
FXCM took $250 000 000 bath on that and for all practical purposes is insolvent. They had to borrow $300 000 000 just to keep going and is up for sale.


FXCM is not insolvent, has not filed for any form of bankruptcy, and is in compliance with all regulatory capital requirements in the jurisdictions in which it operates. The financing we received from Leucadia has strengthened our balance sheet and gives us the opportunity to grow our core business. With Leucadia, our pockets are even deeper and we aren’t going anywhere. Additionally, all of our regulated entities except the U.S. provide clients with segregated funds. All of our global client base in our regulated entities minus US clients would be protected under a bankruptcy. Our UK regulated entity through the FSCS even offers clients £50,000 per person in protection. Canada has similar insurance for retail traders of up to $1 million CAD.

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