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uturn

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Post Number: 503
Registered: 09-2002

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Votes: 0


Wednesday, July 30, 2003 - 12:07 pm:

Hi Ice,
(To keep the topics in order, I have replied here, under derivatives.)

I am trading the NASDAQ with CMC.
The spreads rarely match the real market.
During market, the CMC Market Makers adjust the spreads to suit themselves.
As an example:
One Long position I hold, SAPE had the following spreads last night:
SAPE: Market $3.49/51 = 3c = 0.8%
CMC: $3.30/55 = 25c = 7%!!!!
On the NASDAQ CMC also adjust their spreads against the market direction.
i.e. As the market rises they open the spreads so that Buyers pay a much higher price than market, and Sellers must accept a much lower price than market.
It is therefore very difficult at times, to trade and take profit without a substantial move in the market.
There are very small windows of time between market direction swings where the spreads are closer to market.
As the market rises my account balance falls dramatically due to the widening effect of the spreads. Long positions are linked to the Bid.
ie Holding only Long positions, all in the money and rising, while my account balance is dramatically falling and or swinging like a pendulum.
When I was option trading, a very successful, wealthy and wise man said to me:
"Why do you swim with the sharks?"

dealforfree (one word) does or does not mean 'Deal for Free'?

IG markets use the real market for all markets.
Their product seems much better suited to position or trend trading.
Fair to be clear, I am not a day trader.

The problem that occurred on Friday night happened after the close.
Due to a CMC technical glitch, the spreads blew out on two of my Long positions.
One had a spread of $33-83 and the other $23-19.
Because the Bids were so low, the software triggered liquidation orders (pending) on all my positions, and a string of email margin calls.
I went into damage control, and due to the stress of the situation, and because my MRL (Long) had a liquidation order (pending) placed on it, I didn't raise my sell limit (as I would normally have done pre Aus market). My Sell order was tripped.
CMC refused to re-instate my MRL trade.
This was my 'picture perfect' demo trade (not a large position) that I had used in my presentation at last months IC meeting.
I've been nuturing it like a baby, and they put an axe in its head.
I wasn't chasing the money (few hundred dollars), just wanting them to take more responsibility for the situation and consequences that I incurred due to their error.
CMC admitted it was an 'across the board' error, though how many traders were effected we may never know.

Cheers ..... uturn

Something:
Of all the world, there is Something that only You can Do. Only You can Be.
It is not for anyone else..... Chaitanya
_________________________________________________________________________________
The author is not a Licenced Investment Advisor. The material in this post is of a general nature and for discussion purposes only. It neither purports nor intends to be advice. Readers should
not act on the basis of any matter in this post.

uturn

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Post Number: 505
Registered: 09-2002

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Votes: 0


Wednesday, July 30, 2003 - 01:32 pm:

Some good news:
Thanks to the efforts of Peter Oxlade (CMC Sydney) my MRL position has been retored.
Thank you Peter, sanity prevails.
Cheers ..... uturn

angler

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Post Number: 163
Registered: 12-2002

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Votes: 0


Wednesday, July 30, 2003 - 03:52 pm:

Hi uturn,

Yes that is good news,,but should you really have needed to go to that much trouble when they admitted it was there error in the first place. Goes to show that its not as safe as many believe. As you said with the number of people trading using it on here I wonder how many others were effected.

Regards
Angler

spider

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Post Number: 1549
Registered: 10-2002

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Votes: 0


Friday, April 09, 2004 - 10:24 pm:

This might explain why CMC 'pulled it's head in' last year.
Ouch, this would have hurt!

http://www.theage.com.au/articles/2004/04/08/1081326873847.html

spider.

.

"The only time I really ever lost money was when I broke my own rules." - Jesse Livermore

"When choosing between two evils, I always like to try the one I've never tried before."
- Mae West

deanrosario

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Post Number: 260
Registered: 11-2002

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Votes: 0


Saturday, April 10, 2004 - 10:13 am:

Yes, Spider, interesting article.

I remember CMC raising the margin on AMP CFDs from 5% to 20%, without warning, one day soon after the surge in the AMP share price, which leads me to believe CMC lost significant money on the transaction mentioned in the newspaper article.

I'm not sure how much money CMC lost on this transaction, however, if it were the full amount then there are serious risks with doing business with CMC. As a market maker, in my opinion, it is business suicide for CMC to not adequately hedge its positions. (Of course, business suicide for CMC means immediate death for its clients!)

Admittedly, it may be difficult to fully hedge certain stocks however, with an ASX20 stock, like AMP, there is no excuse for not fully hedging the exposure to adverse market movements.

It appears that Man Financial is about to launch CFD instruments in Australia in May, which may be an opportune time to reduce one's counterparty risk when dealing CFDs.

Regards
Dean

(Message edited by deanrosario on April 10, 2004)

palace

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Post Number: 304
Registered: 06-2003

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Votes: 0


Sunday, April 11, 2004 - 07:46 pm:

hey guys dean and spider

you are making me nervous

mick

deanrosario

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Post Number: 368
Registered: 11-2002

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Votes: 0


Tuesday, June 29, 2004 - 12:55 pm:

I received a private e-mail from someone on the Forum in relation to CMC.

Unfortunately, in my haste I inadvertently deleted the message and cannot recall who asked the question.

My sincere apologies - happy to answer on the Forum, or please re-send the message privately.

Dean

kev

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Post Number: 12
Registered: 01-2004

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Votes: 0


Thursday, July 01, 2004 - 10:09 pm:

Re CFD Providers and Man Financial.
I recently attended a Man Financial Seminar.
Thought it might be of interest to others.
Late June-July was mentioned as the start period.
Some of the key points
- They are offering the top 200 stocks and they say with expansion to the top 500 sometime in the future.
-Man say they do not act as a market maker in CFD's-they offer direct access to the real market and exchange prices.This means price transparency as CFD's are the same as the underlying market.
-The upside of this is that the spreads are transparent. They claim the ability to improve the spread will potentially save money compared to other CFD providers
-The downside of this is that stop losses are not guaranteed as they do mirror the market.
-Min Acct balance $10,000
-eMpower trading platform $99.00/Month
-Man base rate is equal to RBA Cash Rate Target
-Interest on long positions -Man base Rate +3%
-Interest received on short positions -Man base rate -3%
-Interest on free equity- Man base rate less 1%

Cheers
Kevin

perler59

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Post Number: 195
Registered: 09-2003

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Votes: 0


Friday, July 02, 2004 - 10:44 am:

Hi Kevin. How much commission do they charge on entering and exiting a CFD position? IG markets are similar but without the $99.00 per month. IG have recently reduced commission on ASX CFDs from 0.5% to 0.2% and they have guaranteed stop losses.

kev

Member

Post Number: 13
Registered: 01-2004

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Votes: 0


Friday, July 02, 2004 - 06:27 pm:

Steve
From their brochure:
Commission Schedule for CFD accounts

Via eMpower platform: Commission is 0.25% of face value (Minimum ticket charge of A$25 will apply)

Via phone/email/fax: Commission is 0.35% of face value (Minimum ticket charge of A$35 will apply)

The $99.00/month charge for the trading platform does make you scratch your head although thay say this includes ASX fees (wonder how much these add up to)

The key difference to other providors is the fact that thay are not market makers but go directly to market.This has positives and negatives, as per post prior, with the main negative being they cannot offer guaranteed stop losses.

I guess it comes down to whether the negatives outweigh the ability to directly trade the market via CFD's.

I haven't yet made up my mind which provider to use.

Cheers
Kevin

perler59

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Post Number: 197
Registered: 09-2003

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Votes: 0


Friday, July 02, 2004 - 07:35 pm:

Thanks for the info Kevin.
IG offer less commission, guaranteed stop losses and direct market prices, so I think I'll be staying with them.

Note that the following is a bit out of date because the commission is now 0.2% for positions of $15,000 or more (if you ask for it :-)

2.8 Limited Risk Protection
IG Markets offer a guaranteed Limited Risk facility, which allows you to trade CFDs on a wide range of shares, indices and currencies without assuming a potentially open-ended liability in the event of a violent stock-market
movement. When you trade on a Limited Risk basis you specify a stop-loss level at which your position will be closed should the market move against you. Your position will be closed automatically at exactly your selected level
if the market price (or our quote, in the case of stock index, stock index option and FX CFDs) reaches or goes beyond it.

There is an extra charge for this service, which is similar in effect to an insurance premium. The charge for limited risk protection on share and stock index CFDs is set out in Part 2 of this PDS. For share CFDs the amount is typically between 0.3% and 1.5% of the underlying transaction value (as defined in section 3.3 below). Circumstances where the premium varies include volatile market conditions. Limited Risk protection is not available on all CFDs and the size of the positions on which we are able to offer this
facility may be limited. Details of availability and premium will be confirmed with you before you enter into a transaction with us.

2.9 Example: Buying AMP with Limited Risk protection

Opening the position
AMP is quoted at $8.60/8.61 in the market, and you buy 2,000 shares as a CFD at $8.61, the offer price, on a Limited Risk basis. You decide to put your Guaranteed Stop loss at $8.10. Should the market move against you, your
position would be closed at exactly $8.10, even if, for example, the share opened at a substantially lower level after an overnight profit warning. So the most you can lose on the position (excluding our commission, Limited Risk
premium, interest and dividend adjustments) is $1020 ($8.61, the opening level,minus $8.10, the Stop level = $0.51. $0.51 x 2000 shares = $1020).
The commission on the transaction is 0.5% or $86 (2000 shares x $8.61 x 0.5%). The Limited Risk premium is also charged when the position is opened. In this case it is 0.3% or $52 (2000 shares x $8.61 x 0.3%).
The initial margin percentage required for a Limited Risk trade of this type is equal to the maximum potential loss on the position plus an additional 10% to cover any interest or dividend adjustments (although, if the CFD were
open for an extended period, you may need to increase this additional percentage). In this example the initial margin percentage requirement would be $1122 ($1020 maximum potential loss + $102 (10% x 1122)).
Interest and Dividend adjustments are applied to Limited risk positions in exactly the same way as to standard CFD positions, as shown in section 2.4 above.

Triggering the Guaranteed Stop-loss
The following day, AMP announces a profit downgrade and the shares open sharply lower at $5.63. Your Guaranteed Stop loss is triggered, and your position is closed at $8.10, even though the share opened well below this level. You sell 2000 shares as a CFD at $8.10. The commission on the
transaction is 0.5% or $81 (2000 shares x $8.10 x 0.5%).
Your loss on the trade is calculated as follows:
Opening level: $8.61
Closing level: $8.10
Difference: $0.51
Loss on trade: $0.51 x 2000 = $1020
Without the Guaranteed Stop, you would have been lucky in this example to close your position at $5.63 (the opening market price), representing a
loss on the position of $5960. Instead you have limited your loss to $1020.

perler59

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Post Number: 207
Registered: 09-2003

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Votes: 0


Monday, July 05, 2004 - 08:36 pm:

More info about Man Financial CFDs.

You actually control the buying and selling of the shares on the ASX (SEATS)! This means that you can only short when there is a supply of real stock to sell. You can participate in opening and closing price auctions. You do *NOT* have to buy at the offer and sell at the bid! You don't get voting rights or dividend imputation credits (So who does get them?). Its very like a fat line of credit at base rate + 3% requiring only 10% deposit. The scalping games that could be played are interesting. Margin requirements are 10% on ASX100 and 15% or above on ASX200 depending on volatility and liquidity.

quamox

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Post Number: 114
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