PFGBest in Liquidation Mode

[bakrob99 11]

Incredible but turns out that PFG Best president tried to commit suicide.

 

http://www.zerohedge.com/news/pfgbest-now-mf-global-part-2-220-million-segregated-client-money-has-just-vaporized

 

Wow, any wonder why this business is losing clients and volume thinning out.

 

http://www.zerohedge.com/news/futures-brokerage-pfg-best-freezes-accounts-following-discovery-accounting-irregularity

[TheNegotiator 13]

Doesn't look great really. After MF Global debacle, the same question is raised again of what you can really do to ensure your margin is safe?

[bakrob99 11]

Keep your account only as large as you need for margin requirements. And have more than one. I use Tradestation (owned by Japanese firm Monex, sizeable) and also ThinkorSwim which is owned by TD Ameritrade (sub of TD Bank Canada).

 

I feel ok with funds in these institutions.

[TheNegotiator 13]

One I don't really like those companies and the tools they offer. Two how can you be so sure that the same couldn't happen with them? MF Global for example was a pretty huge firm and that didn't end well did it?

[bakrob99 11]

... how can you be so sure that the same couldn't happen with them? MF Global for example was a pretty huge firm and that didn't end well did it?

 

I can't. So that's why I have 2 accounts and remove every week 50-75% of my profits.

 

But what is your alternative which is "safer"

[TheNegotiator 13]

I can't. So that's why I have 2 accounts and remove every week 50-75% of my profits.

 

But what is your alternative which is "safer"

 

Get the home address of the owner of your clearing firm?

[bakrob99 11]

It is absolutely CRAZY that we even have to worry about it. There should be responsibility taken by the CME (exchanges) that they should hold the funds and be restricted from placing them in anything other than a CFTC/NFA guaranteed account.

 

It is mind numbing that an individual trader can work thru the difficulty of becoming successful in trading only to see the rewards of his/her effort evaporate. Incredible.

[TheNegotiator 13]

It is absolutely CRAZY that we even have to worry about it. There should be responsibility taken by the CME (exchanges) that they should hold the funds and be restricted from placing them in anything other than a CFTC/NFA guaranteed account.

 

It is mind numbing that an individual trader can work thru the difficulty of becoming successful in trading only to see the rewards of his/her effort evaporate. Incredible.

 

Absolutely. I think this is a good idea, although the trouble with that is that then they would be 'visible' client funds and I think there would be issues with qualification of traders to trade. When I started, most people had to take some form of exam to be allowed to trade. In fairness that wasn't retail. Retail traders have to do nothing other than deposit funds! Is it any wonder that there's a whole heap of people trading who don't have the first clue? I think there really needs to be some changes, but honestly I don't know how that'd work precisely.

[zdo 20]

Yep, I been saying/posting it for years now – your money is just as safe with a small fly by night fx outfit as it is with a major FCN. (Incidentally) I also blve your money is just as safe with a small fly by night fx outfit as it is with a major or minor retail bank... that not a single federal agency or fdic in the world can really be depended upon.

 

The great deleveraging is on folks... re protecting your deposit funds, one of the side effects is that the levels of protection offered by the better brokerages will be retracted. Discount services like at IB that sweep x% of your funds into a seg’d account nightly will stop being so discount, etc.

 

As others have mentioned -

spread your funds widely…

and be nimble / ie be willing to work it - cause it’s a hassle…

and be lucky…

 

 

PS Anecdotal note - Every brokerage that I have ever seen go out of business was caused by 'personal failings' of the principles / senior managment. My knowledge here comes from watching (and thankfully only suffering once) small to medium sized firms where I actually knew the players... the same can be inferred from the likes of the growing litany of larger players like MF Global, etc.

Edited July 10, 2012 by zdo

[khamore1 10]

Doesn't look great really. After MF Global debacle, the same question is raised again of what you can really do to ensure your margin is safe?[/qu

 

 

 

 

 

I was shocked to read the above quote from Reuter’s article. I was always under the assumption that we are fully insured, either by the broker insurance, or by a government agency like the FDIC. This is something very strange and begs a lot of questions like why “They” would allow the industry to operate under such conditions

I would like to take this opportunity and warn any trader who has an account with AMP “GET OUT AS SOON AS YOU CAN” these guys are outright thieves I had to call the police on them, they will play with the margin any which way they want and make “new” rules as they go I hate to come here and tell you “I TOLD YOU SO”

[minoo 11]

Here is the link to the above mentioned Reuters article

 

MF Global redux as regulator says PFGBest client funds missing | Reuters

 

+-------Below is short Extract from the article------------------+

 

Unlike the securities markets, customers of futures brokers do not enjoy any government or industry-backed insurance scheme in the event funds are stolen or go missing.

In the wake of the MF Global collapse last year, exchange operator CME Group set up an insurance fund that covers farmers and ranchers for up to $25,000 and cooperatives for as much as $100,000 when a clearing member fails.

CME did not immediately respond to a question about whether the fund would kick in for PFGBest.

While the Commodity Futures Trading Commission (CFTC) has taken some small measures to toughen up rules protecting customer accounts, investors have said they may not be sufficient to fully restore faith in the industry.

A joint review of the 70 largest Futures Commission Merchants (FCMs) by the CFTC and NFA in January said they found no "material breaches of customer funds protection requirements during the spot check," leading traders to question how thorough the review was.

"You would think that the government would be watching these accounts and doing something," one PFGBest employee said.

"The NFA can't regulate this industry."

+--------------------------------------------------------------+

 

Also check the Commodity Customer Coalition website

Commodity Customer Coalition | Fighting for the Quick Return of 100% of Customer Assets in the MF Global Bankruptcy

 

If anyone in reality has gone through such experience than would like to hear from yourself.

 

Thankyou

Minoo

[zdo 20]

unfortunately these days it is usually more accurate to err on the side of jaded and cynical

 

Part of Systemantics 101 = new agencies (NFA and CFTC in this case) actually perform their intended purpose for only a short period of time. Then they gradually transition to performing their roles and duties in appearance only. At some point in their lifecycle, corruption enters and ultimately even the appearance of performing it’s stated role / job becomes barely evident.

So re: "The NFA can't regulate this industry.". It could. But for a long time now the 'job' at the upper levels of the NFA has not been to execute the stated job of the agency... for a long time now, their job and their work has been focused only on keeping that little agency / system 'alive' and funded ... and by now, odds are, high NFA officials are complicit in the wave of embezzlements unfolding

 

Another example of this progression is DHS airport security after 911… first six months or so, it was real… then transitioned to in reality what is only an outward show of ‘authentic’ security … now the signs of the inevitable corruption are popping up everywhere…

 

Same with other agencies … right now the FDA is probably the most extremely egregious and least known example of this progression.

 

Same with quasi agencies like the FDIC … even if the financial realities weren’t completely overshadowing the ethical issues now, at this point we can no longer trust them to be non corrupt … of the millions who are eligible, the few who would collect any insurance payouts from the FDIC are already selected…

 

One point to be taken from this post – Don’t just look at the bottom of that list from the “… joint review of the 70 largest Futures Commission Merchants (FCMs) by the CFTC and NFA in January.” Currently, there are as many ‘suspect’ firms in the top ten FCM’s on that list as they are in the bottom ten FCM’s…bottom line, Negotiator, there is NOTHING you can really “do to ensure your margin is safe”

 

All the best,

 

zdo

 

This post has been screened by the NSA and several other federal agencies. If you hear from me again, then you can assume the content of this post was deemed tolerable.

[minoo 11]

Sincerely to all those are affected its time to take proper action and plan to move on

I will struggle myself to file it and get on but absolutely need to do so.

Will try to make peace with this happenings first though with some positive pun

 

Here is the advise from NFA to do

Important Message for Customers of Peregrine Financial Group and Peregrine Asset Management

 

 

Thankyou NFA,

You await for things to go wrong

When will you learn to let us justly earn

Despite such incidence you ignore Traders Plight

Has not Uncle Sam, made you mighty and bright ?

 

Was right on path to gain my yearly goal

Yet on your watch, Some punter's created hole Got paid by my Dole

Last time it was by MFG this time its by PFG

Sounds all familiar & you let repeat it all the more

 

This is Neither of my Stakes, Nor off my Mistakes

Left again to fill, others punters Hole

I condole not yet, but seek chance to console

Will your cousin IeRA, fill my (f ing) Tax Hole ?

 

(emotional matter of grey come pouring in my native tongue but difficult to translate into another language, did me best to maintain the pun)

 

Thanks for the messages guys, will live to earn another day.

 

Goodnight

Minoo

 

Note:

I found the below thread, I wonder which one of them posted it? Interesting though!

http://www.traderslaboratory.com/forums/introduce-yourself/8585-managing-director-pfgbest.html

[SIUYA 11]

a friend sent this through to a few of us caught in MFG - I think it was from facebook.....

 

...................

 

Jon Macmichael

12:39pm Jul 10

Woa, I can pick 'em. Having had 2 MF Global accounts (one here & one in U.S. for futures with its 'connectivity' to TradeNavigator), when the CME went about saving face coughing up 72% of the funds JPMorgan has been allowed to abscond with I transfered the bucks into a PFG acc. Again for better TradeNavigator connectivity. But most amazing is how the media is controlled with all its super news about things like changes in the GirlGuides policy, a few boat people etc.

Like to know some more of my 'picks'?

[steve46 12]

This latest problem is the "last straw" for me as well. I "used to" leave a significant amount of capital in my account, but now it seems that this is simply not wise given the news...so what I am going to do is to remove all but the bare minimum for my business and sweep profits every Friday (used to just leave it alone)....

 

I think the idea of using multiple brokers is probably a good one however, for my purposes what I have decided to do is to let my accountant do his own eval of the balance sheet and fiscal condition....personally I figure if the owner of a business is going to commit fraud, or embezzle funds, there probably isn't much we can do about it except to limit losses by keeping the account small and keeping vigilant (being "nimble")....

 

For those interested I seem to remember that Vanguard offers brokerage services....don't know if they have direct access, but I am sure they have primary access to capital markets (best to check out their website if you are a swing or long term trader). My take on this is that my money is safer (if there is such a thing) in a bigger firm where no one single entity (owner or relative of an owner) can "cook the books".

 

Other alternatives include Goldman (for those who can meet the minimums) and the bigger banks (don't know that they offer brokerage services, but I am going to check it out now)..in those cases if there were fraud, presumably the firm would have sufficient capital to indemnify losses and they would be motivated to do rather than see their rep damaged.

 

Good luck

[SIUYA 11]

My take on this is that my money is safer (if there is such a thing) in a bigger firm where no one single entity (owner or relative of an owner) can "cook the books".

 

Other alternatives include Goldman (for those who can meet the minimums) and the bigger banks (don't know that they offer brokerage services, but I am going to check it out now)..in those cases if there were fraud, presumably the firm would have sufficient capital to indemnify losses and they would be motivated to do rather than see their rep damaged.

 

Good luck

 

MFG - I think was 8th largest bankruptcy in the US - so larger firms are not safer.

I would also be wary of Goldmans and other bigger firms as they do have a history of "screwing" their own customers -

 

The unfortunate reality is just as you say, you need to be nimble, small, sweep money and have multiple accounts - and all this will do is diversify your risk.

 

As a list of possible red flags, and I hope others will add to this constructively these are things to look out for......

 

Firm conducts proprietary trading

Firm uses off balance sheet vehicles to hide its true liabilities

Firm does not have segregated accounts

Firm is controlled by 1 or a few individuals with no checks and balances

Firm does not have the ability to sweep accounts into segregated accounts

Firm makes it difficult to withdraw money.

Firm hires new CEO who plans to turn company into a larger risk loving entity

If company is listed and its share price is diving, others may think the firm is not such a great bet.

The firms accounts it supplies to the clients are pretty poor - they should be able to provide detailed history, costs breakdowns etc.....if they cant provide it for you they probably dont have it internally

the firm has been fined multiple times for treating customers unfairly etc;

The firm conducts most of its business through separate parties, related or unrelated

 

 

Of course this may mean they are all pretty much f...d

[karoshiman 10]

 

...

 

Other alternatives include Goldman (for those who can meet the minimums) and the bigger banks (don't know that they offer brokerage services, but I am going to check it out now)..in those cases if there were fraud, presumably the firm would have sufficient capital to indemnify losses and they would be motivated to do rather than see their rep damaged.

 

 

 

Hi Steve,

 

I was thinking the same, but from their websites I've got the impression that they provide "retail" services only to "whales" ("prime services"... no fee & margin table provided... you've got to contact a "financial advisor", etc.)... that would also be in line with my experience from a corporate perspective... they are not interested in small transactions... they leave these for others...

 

Regards,

k

[steve46 12]

Noticed this article in ZeroHedge

 

First MFG(lobal), Now PFG: Who Is Next? | ZeroHedge

 

The Atlas Review provides a pretty decent "educated" opinion as to the financial health of the brokerages. I think this is probably as good a review of existing brokerage service companies as we can get at this point.

 

and now when someone decides to comment about a Broker (as Khamore did about AMP), all you have to do is look them up....in this case you can see that AMP is in relatively good financial health....

 

Hope this helps

 

Steve

[FCM-Reform 10]

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 do so as well.

 

Proposals to Bring Full Market Transparency and Accountability to the Futures/Forex Industry

 

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:

 

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

 

 

 

 

Charles Delano

Director of Government Affairs

FXCM, LLC

http://www.fxcm.com/financials.jsp

[bakrob99 11]

Thank you for your ideas and comments. However - it seems to me that the real issue is not credit worthiness. Of course, credit worthiness is a mandatory condition - but both these companies were employing fraudulent money management (shuffling) tactics which were undiscovered until too late.

 

It's the access to the customer's funds which need to be secured, not the management of them.

 

I believe that the the exchange should hold a fiduciary responsibility for these funds as they are the body which determines the amount of margin required to support trading on their exchange. CME as an example - has demonstrated the ability and indeed willingness to manage funds in this manner. Customer's funds should also earn interest which could be managed by the exchange.

 

Finally - there should be a responsibility by government agencies which regulate these issues to guarantee any funds misappropriated in this manner.

 

It is my understanding that in Canada - the customers of MF Global Canada did not lose any money - and the same with PDF Global Canada as these funds are secured . This insurance is paid for by the Companies and I suppose that the interest earned on the margin deposits could be used to pay for it.

 

You case for a Top 10 Accounting firm is laffable I am sorry to say. Ask the shareholders and debtors of Enron, and so many others which had top 10 auditors.

[SIUYA 11]

I agree with both of you....

Accounting irregularities and fraud will not be stopped just because

a...accounts are published quarterly

b....top ten accounting firms are used.

 

thanks Charles,

While it is a start, all it really becomes is a subsidy by the customers to support the bigger brokerages and the accounting firms. Fees will go up, less competition will occur as a result of smaller honest brokerages not being able to compete due to regulatory costs and extra accounting that larger firms can minimise the impact due to economies of scale.....and yet, none of this will eliminate the same effect should either the accounting requirements not be adequate or fraud occurs......in other words - not exactly worth it, as the customers and firms get little benefit from the extra costs.

 

I do agree with bakrob99 - the only way is to really segregate the accounts.

While fees may go up if FCMs cannot use our money for their own funding etc; at least if the fees go up, we know we are getting some security for that cost.

 

(I dont know about Canada, but most of the rest of the world is still waiting for court cases and allocation disputes to be finalised before MFG holders outside the US get any money back - even though the 'crime' of vaporised client cash happened in the US, by an American, and under US laws - its the wild west that is the UK with unlimited re-hypothecation that is scariest. That is why client money needs to be secured by authorities who have little incentive to use it to make money - much like the exchanges .)

[bakrob99 11]

...Your case for a Top 10 Accounting firm is laffable I am sorry to say. ...

 

Re-reading this post what is really laughable is my spelling of laffable (sic).

[BlueHorseshoe 10]

But what is your alternative which is "safer"

 

Purchase puts on the stock of your brokerage firm?

[bakrob99 11]

Purchase puts on the stock of your brokerage firm?

Expensive insurance.

[SIUYA 11]

yes - puts will become expensive.....however a couple of things to keep in mind re this strategy.

1...make sure your puts are held at another brokerage firm.

2...you only really need to cover the amount of your margin/account at the the broker you are worried about, if that broker goes to zero.

So for most it might not be very much.....but it is still expensive.

 

I hope my math is right for US options....and no I dont think IB are in trouble.....

 

eg; Interactive Brokers is at $14.00, OTM option strike $10 Jan 2014 costs (guesstimate) 0.50, broker goes to zero puts worth $9.50 -- cost of insurance/options for 18 months $500 ($1 per day)

assuming each option covers 100 shares, PL = 100*9.50=$9500. - that might be enough cover for each $10,000 in the account.

 

At $1 per day its not too expensive if you just add it to any brokerage.

......................

 

Only real option is diversification really.