'Fake margin calls': Forex traders furious after losses
Date:January 27, 2015
A group of foreign exchange day-traders from around the world have vented their fury with a Sydney-based online broker after the Swiss National Bank's surprise currency move triggered "fake margin calls" that resulted in tens of thousands of dollars of losses.
The foreign exchange broker, IC Markets which is headquartered in Bligh Street in Sydney's central business district has been fielding complaints from clients who were caught out by the shock decision by the Swiss Central bank to drop the Swiss franc's peg against the euro.
In the chaotic aftermath of the Swiss central bank move, IC Markets told its customers that it was fed erratic foreign exchange prices by its "liquidity providers" allowing the banks to execute "client trades at prices they shouldn't have".
After several days of sifting through client trades, IC Markets adjusted their clients' accounts to reflect correct trading levels. But some traders became further enraged when they realised that they suffered losses a result of margin calls triggered by the erratic prices.
'Fake margin calls'
"These misquotes were so far away from the market price that the misquote basically caused fake margin calls," said a trader who claimed to have lost $40,000 as a result of the incident.
One Thailand-based trader who claimed to have lost about $10,000 from a "fake margin call" said only 15 per cent of his deposit was reinstated and that IC Markets initially told him they were not responsible for the loss.
IC Markets said it was still working extensively to resolve issues with the 80 affected clients.
"Any situation where a client was stopped out due to insufficient margin arising from unfavourable fills which we have since amended are being reviewed on a case-by-case basis, not dissimilar to the practices adopted by many brokers globally," IC Markets managing director Andrew Budzinski said.
The broker is assessing whether further adjustments to client accounts is warranted and is considering cancelling negative client balances although a final decision has not been made, Mr Budzinski said.
The source of the problem appears to lie with the apparent sporadic pricing provided by the bank's liquidity provider when currency markets dislocated. It is understood some liquidity providers have since been removed.
"IC Markets simply streams the prices quoted by the banks and have acted appropriately in every regard. We pro-actively contacted our liquidity providers in instances where we felt the prices may not have been reasonable and have adjusted client accounts accordingly to our clients benefit," Mr Budzinski said.
IC Markets lays claim to being an Electronic Communication Network (ECN) that passes all trades into the broader interbank market, earning a small commission as a middleman. Other brokers act as market makers and directly take on client trades – earning the difference between the bid and offer prices on a currency pair.
Read more:
http://www.smh.com.au/business/mark...ter-losses-20150126-12ypsm.html#ixzz3izD188KQ
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...ahhh, okkk.... I see that ICM has faked margin calls and account stop/wipe out as a result of those fake margin calls. Interesting!
