Anyone burnt by PFGBEST's closure?

Would be interesting to hear about your recovery process from the trustee.

I note amusingly that you can still download their MT4 platform, along with connecting to their trade server.

I wrote a small observation on counterparty risk rising from this incident.
https://raidenworks.com/2012/07/14/your-specific-counterparty-risk-is-pretty-much-a-crapshoot/

I'm not involved in PFG, but I'm going to comment.......based on my experience with JadeFX which is strikingly similar, it took the CFTC over a year to get us our funds back, eventually returning 58.5% to us.

I'm done with the thieving bastards in the USA.

That's tragic, sorry to hear that.

I'm reading that Jade FX was domiciled in Belize, and run as a bucket shop. It sounds like it would have folded in time had the CFTC not got involved, in which case, you might have gotten nothing back at all if Jacob Juma Omukwe absconded.
https://forexmagnates.com/cftc-shuts-down-jadefx-owned-by-jacob-juma-omukwe/

Raiden posted:
Would be interesting to hear about your recovery process from the trustee.

I note amusingly that you can still download their MT4 platform, along with connecting to their trade server.

I wrote a small observation on counterparty risk rising from this incident.
https://raidenworks.com/2012/07/14/your-specific-counterparty-risk-is-pretty-much-a-crapshoot/

Haven't been burnt by them, but will be interesting to see how this develops.
I don't understand why they're not taking the website down - it looks to be working normally and still accepting new accounts?

Unlikely, from the Notice of Member Responsibility Action under NFA Compliance Rule 3-15 issued, they are 'prohibited from soliciting or accepting any additional customer accounts or customer funds, except as margin for existing positions.'

So technically, you could deposit more money to maintain your existing positions, but I'm pretty sure not a single person/entity is doing that.

The day after it happened I read somewhere that some traders were trying to sell their frozen account funds located at PFG to a company that buys distressed debts and were quoted $0.22 - $0.25 on the dollar. That has got to hurt!!! lol. Anyone have a link or a current quote?

dlathrop posted:
The day after it happened I read somewhere that some traders were trying to sell their frozen account funds located at PFG to a company that buys distressed debts and were quoted $0.22 - $0.25 on the dollar. That has got to hurt!!! lol. Anyone have a link or a current quote?

Tried searching on google but haven't found anything yet. But that's a disastrous business model anyways for a company which is knowingly buying accounts with an unknown value! Who really knows how much the accounts still worth? (if anything)

Raiden posted:
Unlikely, from the Notice of Member Responsibility Action under NFA Compliance Rule 3-15 issued, they are 'prohibited from soliciting or accepting any additional customer accounts or customer funds, except as margin for existing positions.'

So technically, you could deposit more money to maintain your existing positions, but I'm pretty sure not a single person/entity is doing that.

How can they do that? That is quite misleading for new customers who have no clue of the current situation. Newly deposited funds will be probably only used to reduce losses for existing accounts. It's like they're taking part in the scandal.

James_Bond posted:
How can they do that? That is quite misleading for new customers who have no clue of the current situation. Newly deposited funds will be probably only used to reduce losses for existing accounts. It's like they're taking part in the scandal.

It would be better for the trustee to place a notice on the site and divert any attention to the necessary links/emails for resolution. But as with any business failing, much less one this sudden, and with fraud involved, things get a little messy. I understand there's a skeleton crew but they would most likely be doing forensic accounting now.

Their accounts have most likely been frozen by court order and any deposits would probably be bounced back by the banks administering to them.

James_Bond posted:
Tried searching on google but haven't found anything yet. But that's a disastrous business model anyways for a company which is knowingly buying accounts with an unknown value! Who really knows how much the accounts still worth? (if anything)

It's not necessarily a bad business transaction. You never know, the buyers may be privy to how much the company accounts hold. And client funds rank above secured creditors. Of course, in this particular case, if $5mil is what was left of the declared $220mil client funds account, it's not a stretch to say that there isn't much money left in the company accounts either.

James_Bond posted:

dlathrop posted:
The day after it happened I read somewhere that some traders were trying to sell their frozen account funds located at PFG to a company that buys distressed debts and were quoted $0.22 - $0.25 on the dollar. That has got to hurt!!! lol. Anyone have a link or a current quote?

Tried searching on google but haven't found anything yet. But that's a disastrous business model anyways for a company which is knowingly buying accounts with an unknown value! Who really knows how much the accounts still worth? (if anything)

Actually, you're wrong. It's a great business model when executed correctly. There are various methods of evaluating distressed debt. Companies that buy distressed debt have access to the distressed company's data (previous financial statements, etc.). There are also various other avenues of collecting information about distressed companies. This enables the (buyer) companies to be able to come up with a somewhat accurate estimate of the distressed debt's value. Let's say they believe the value of the debt is $0.35 on the dollar. There's always a risk that their estimate doesn't fall within an acceptable range, and they don't want to over pay for the debt, so they then mark down their bid. (i.e. to $0.25 on the dollar.) Usually, such a practice is profitable. If it wasn't, these companies wouldn't exist.

dlathrop posted:

James_Bond posted:

dlathrop posted:
The day after it happened I read somewhere that some traders were trying to sell their frozen account funds located at PFG to a company that buys distressed debts and were quoted $0.22 - $0.25 on the dollar. That has got to hurt!!! lol. Anyone have a link or a current quote?

Tried searching on google but haven't found anything yet. But that's a disastrous business model anyways for a company which is knowingly buying accounts with an unknown value! Who really knows how much the accounts still worth? (if anything)

Actually, you're wrong. It's a great business model when executed correctly. There are various methods of evaluating distressed debt. Companies that buy distressed debt have access to the distressed company's data (previous financial statements, etc.). There are also various other avenues of collecting information about distressed companies. This enables the (buyer) companies to be able to come up with a somewhat accurate estimate of the distressed debt's value. Let's say they believe the value of the debt is $0.35 on the dollar. There's always a risk that their estimate doesn't fall within an acceptable range, and they don't want to over pay for the debt, so they then mark down their bid. (i.e. to $0.25 on the dollar.) Usually, such a practice is profitable. If it wasn't, these companies wouldn't exist.

I see. I was under the impression the company buys the accounts with no prior or inside knowledge of what's going on with the bankrupting firm. In that case, I agree - it is actually a sound business model of buying low and selling higher.

I never traded live with pfg best, but I did participate in their 'go for the gold' trading contest in November of last year.
What I found, was a glitch on the platform that allowed for cheating.
Because I am not a cheater, I emailed them and showed evidence of the glitch and why it was a cheat. They did not respond to my email about cheating, did not seem to investigate the demo contestants with 2000 percent gains, and overall just did not seem to care. I knew on that day I would NEVER trade live with a company like that.

sandelchayes posted:
I never traded live with pfg best, but I did participate in their 'go for the gold' trading contest in November of last year.
What I found, was a glitch on the platform that allowed for cheating.
Because I am not a cheater, I emailed them and showed evidence of the glitch and why it was a cheat. They did not respond to my email about cheating, did not seem to investigate the demo contestants with 2000 percent gains, and overall just did not seem to care. I knew on that day I would NEVER trade live with a company like that.

Since they're already closing, may I know what was the glitch? A feed lag?

Ahh yes, what I found was for some reason the price would get pegged on the chart at a certain price, and not update very quickly. then you could open the instant execution pane and see bids and asks and the actual market price (verified by using another feed for prices) so basically the platform had the price pegged and allowed you to execute a trade at that price, and also the actual current market price. Then you could open a trade at the 'peg price' and close it at the 'real market price' or vice versa and instantly capitalize on the difference, something that would never be allowed to happen in a live trading account. hope that makes sense

sandelchayes posted:
Ahh yes, what I found was for some reason the price would get pegged on the chart at a certain price, and not update very quickly. then you could open the instant execution pane and see bids and asks and the actual market price (verified by using another feed for prices) so basically the platform had the price pegged and allowed you to execute a trade at that price, and also the actual current market price. Then you could open a trade at the 'peg price' and close it at the 'real market price' or vice versa and instantly capitalize on the difference, something that would never be allowed to happen in a live trading account. hope that makes sense

Was this on the MT4 platform? Or their proprietary one?

This week the CFTC will be holding a public roundtable to address the concerns of traders in response to the bankruptcies of PFG and MF Global. FXCM would like to announce its own proposals ahead of Thursday's meeting and encourages the public to so as well.

[b][u]Proposals to Bring Full Market Transparency and Accountability to the Futures/Forex Industry [/u] [/b]

1) Require All FCM’s to Publicly Publish Their Financials Once a Quarter:
Currently, the CFTC publishes monthly “Net Capital” reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCM’s to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that a Futures Commission Merchant has.

Furthermore, the published financial statement should include everything (i.e. holding company’s financials) since what happens to other subsidiaries of the company can easily effect the regulated FCM. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence.

Too often, those FCM’s that are teetering on the edge of bankruptcy lure customers in by offering unsustainable gimmicks (dirt cheap commissions, account opening bonuses) that temporarily puts off the inevitable. Customers should be aware of the perilous finances of those FCM’s that would offer these kinds of gimmicks before opening an account with such a firm. PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match.

2) Require all FCM’s to Employ a Top Ten Accounting Firm:
There need to be much higher accounting standards than currently exist in the FCM world. The Platt Group publishes an annual ranking of public accounting firms that could be used by FCM’s. Whether it is top 10 or top 25, the main point is that FCM’s must use a nationally recognized and respected accounting firm that could apply the same tough standards to FCM’s that publicly traded companies must meet.

While no one proposal will guarantee that a future FCM will not fail, these proposals will enhance the public’s due diligence capabilities by bringing greater market transparency and accountability into the world of futures/forex trading.

Traders can show their support for these proposals by leaving comments with the CFTC using the following web page:
https://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1250




Charles Delano
Director of Government Affairs
FXCM, LLC
https://www.fxcm.com/financials.jsp

to answer your question raiden, it was the platform Best Direct 8 in the DOM 'Depth of Market' screen that I found the ability to set a trade a current depth of market price feeds, then closing them where the price feed on the candlestick chart was froze. And as for the above guy FCMReform, he made an account just to repost the 'roundtable' letter. lol

Last Thursday the CFTC held a public hearing to determine what steps should be taken to repair the damage done by the bankruptcies of PFG and MF Global. I’d like to share with everyone some of the highlights of the hearing:

Better Accounting Standards: There was much discussion of auditing standards for both Regulators of FCM’s and the CPA’s who audit FCM’s. There was general agreement these standards need to be raised. FXCM believes FCM’s should be required to use a top accounting firm to avoid the kind of accounting issues that plagued PFG.

Additional Disclosure Requirements: An extensive discussion on FCM transparency was held and it is clear that FCM’s are going to have to make more disclosures of their books to regulators and to the public. The question is how much is to be disclosed? On the one hand there was testimony from FCM’s like Vision who publish their balance sheet on their website and on the other hand were those who were concerned that too much disclosure could lead to possible “bank runs” by investors. FXCM believes investors should be able to see a company’s audited financial statement once a quarter. Too many investors are forced to fly blind when they choose a Futures Commission Merchant or Forex Dealer. No trader should be subjected to this kind of risk post-PFG.

Insurance: Commissioner Bart Chilton released his proposal for a futures insurance fund on the same day of the hearing. Towards the end of the Roundtable the topic turned to insurance and John Roe of the Commodity Customer Coalition once again made a forceful case for a fully insured fund for the futures industry. As of now, Commissioner Chilton’s proposal does not include retail forex, but there is no reason that it shouldn’t. FXCM supports insurance for the futures/forex industry.

The CFTC will now deliberate into October before announcing their proposals. We encourage everyone to comment using the link below:

https://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1250

Just read a very interesting comment letter to the CFTC by James Gellert of Rapid Ratings:
https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=58346&SearchText=

Mr. Gellert makes the following comment about the benefits of FCM’s being required to disclose their audited financials:

Would Mr. Wasendorf have been as ready to invent financials if his customers had demanded full, audited balance sheets and income statements all along? Would Mr. Wasendorf have been able to compose such reports with sufficient skill as to withstand rigorous third-party examination over twenty years? Rapid Ratings recalls that, by applying large numbers of interrelated calculations to the published reports of Enron, our firm was able to detect vivid inefficiencies entirely inconsistent with the investment grade ratings that Enron enjoyed from the...

Mr. Gellert’s point about the difficulty of forging financial documents using the kind of standards that publicly traded companies use is well taken. Had PFG been forced to use such standards Wasendorf’s scam would have likely been caught long before July of 2012. Furthermore, ratings agencies like Rapid could break down the data in a manner that average investors could more easily understand. Although, we disagree that only ratings agencies be allowed to see such data. We believe any trader who opens an account with a FCM or Forex Dealer should be able to judge for themselves a firm’s financial health.

You can make your feelings known to CFTC by posting comments here:
https://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1250