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Velocity Excess Net Capital Requirement
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Velocity Excess Net Capital Requirement

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Velocity Excess Net Capital Requirement

@Dale Box,

I am curious to know a bit more about the reasoning behind Velocity basically having such a low excess net capital when compared to peers with similar size of customer funds, such as the following other FCM's..

Velocity Futures LLC $768,365.00 Excess (1.1%) with $64,334,635 customer funds
York Business Associates, LLC. $1,465,175.00 Excess (2%) with $74,230,727 customer funds
OpenECry, LLC. $2,099,420.00 Excess (2.5%) with $85,536,664 customer funds
Dorman Trading, LLC. $9,183,106.00 Excess (9.4%) with $97,703,713 customer funds
MBF Clearing Corp $7,795,516.00 Excess (11%) with $70,609,167 customer funds
Crossland, LLC. $7,936,369.00 Excess (11.25%)with $70,592,757 customer funds

I excluded from my list any BD just in case, as well as any FCM that was not truly accessible for most retail.. or with customer funds over $100M or below $50M...

my questions have to do with stability of the FCM... I mean, if a rogue trader manages to slip through the cracks with regards to your risk management, which can in fact happen; $768K is peanuts and the customer funds can be placed at risk as a result.. specially since we are protected against your failure, but not against the risk management failures of individual traders within your firm...

as I current customer, i am very curious, and somewhat concerned.. I mean, dont take me wrong.. I am a big fan of your technology, and there are worse cases than you (such as AMP clearing with 1.6% for example, which might seem healthier, but they only got $461K excess net capital)... but sometimes I look at your numbers and it just worries me that you are just a few bad trades away from taking a hit with such low buffer...

thoughts?


Last edited by sysot1t; August 12th, 2011 at 11:41 PM.
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@sysot1t, sorry for the slight diversion , but I wonder if you had a list of a few firms that clear through MBF? I was trying to poke around and couldn't find the info.

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Big Mike View Post
@sysot1t, sorry for the slight diversion , but I wonder if you had a list of a few firms that clear through MBF? I was trying to poke around and couldn't find the info.

Mike

There are no Introducing Brokers for MBF that I am aware of... Mark is rather selective with the traders that go through him, I mean the account opening process itself is a bit of an interview and they do reserve the right to turn the business away... but even before that process even gets started... $100K account minimun will make certain to keep most average $5K $500 margin accounts away... and only offers CQGIC and Xtrader... so there goes another $1K-2K for platform, and then add on top of that market data.... more filters to keep the average retail away and focus on the true professional...

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CFTC FCM Data

for those that might be curious where I get my numbers from..

http://www.cftc.gov/ucm/groups/public/@financialdataforfcms/documents/file/fcmdata0611.pdf

Financial Data for FCMs - CFTC

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Dale Box View Post
Sysot1t,

Whatever balance you have in your futures account, is that all of the money you have? Is Velocity the sole firm you’re a customer of? I’m sure you’d answer ‘’no’’ to both questions, correct? The same would apply to Velocity. Just because you can’t see it doesn’t mean it isn’t there. Velocity Futures LLC is one piece of the ‘’V’’ pie. Do you really think Velocity would continue to grow at the rate it has being an unsafe place? If you follow the Leader Board I’m sure you know we have some very large traders. Rest assured they would not be with Velocity if we were ‘’a few bad trades away from taking a hit.’’ Velocity risk control is very tight… if you’re a customer I’m sure you know that. In regards to AMP…they’ve only been an FCM for 1yr and they already have $28,398,073. Those numbers seem pretty healthy to me…

I know you’re not attacking Velocity and please understand I am not attacking you.

Best regards,

Dale

not attacking velocity, nor AMP, not a personal attack either.. I am glad you understand that and we are on the same page on the debate.. now, your questions and reply still dont answer my questions...

Velocity is a business; so you are saying that velocity has lines of credit available that the founders can access in the event of bad risk management? or are you saying that the founders have plenty of cash to put personally back into the business to restitute any funds that are lost to bad trades?

saying that the clearing is just a part of the bigger "V" is not really all that reasuring to begin with... the clearing should have enough funds to address any possible challenges (specially with this volatility as of late) on its own, without having to recur to external sources or the founders; to me that would just be sound business practice, after all if I was a founder, do I really want the business liability to extend to my assets? that would be a no.

ALso, as to your LB.. you only have about 5-10 Very Large traders at best from the numbers shown... and yes, your risk control is good, but something might happen one day that will just eat through that, my question goes to the worst case scenario.. what are you doing to prevent against that besides risk control? I understand part of the risk control is not making all instruments and contracts available to most retail unless they have $3MM or $5MM.. and then applying sound risk management to that.. but still, things happen, what is the FCM doing to protect cust funds.

stating that the founders can place additional capital contributions and move funds from other businesses isnt really an answer, and though I am glad to know the founders can in fact do said action.. I would rather see greater reserves available to address the worst case scenarios..

thoughts?

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sysot1t View Post
not attacking velocity, nor AMP, not a personal attack either.. I am glad you understand that and we are on the same page on the debate.. now, your questions and reply still dont answer my questions...

Velocity is a business; so you are saying that velocity has lines of credit available that the founders can access in the event of bad risk management? or are you saying that the founders have plenty of cash to put personally back into the business to restitute any funds that are lost to bad trades?

saying that the clearing is just a part of the bigger "V" is not really all that reasuring to begin with... the clearing should have enough funds to address any possible challenges (specially with this volatility as of late) on its own, without having to recur to external sources or the founders; to me that would just be sound business practice, after all if I was a founder, do I really want the business liability to extend to my assets? that would be a no.

ALso, as to your LB.. you only have about 5-10 Very Large traders at best from the numbers shown... and yes, your risk control is good, but something might happen one day that will just eat through that, my question goes to the worst case scenario.. what are you doing to prevent against that besides risk control? I understand part of the risk control is not making all instruments and contracts available to most retail unless they have $3MM or $5MM.. and then applying sound risk management to that.. but still, things happen, what is the FCM doing to protect cust funds.

stating that the founders can place additional capital contributions and move funds from other businesses isnt really an answer, and though I am glad to know the founders can in fact do said action.. I would rather see greater reserves available to address the worst case scenarios..

thoughts?

I’m saying that we do not have the risk that other firms have and we are ABOVE the required amount. If more funds were required, more funds would be there. We do not do any proprietary trading at Velocity Futures. All proprietary trading is done via Velocity Merchant Energy.

I am not trying to reassure you at all. Velocity history speaks for itself. If our Excess Net Capital is a serious concern of yours, you’re free to move to another firm.

What are we doing to protect customer funds? What are we not doing? Do you have any idea how regulated an FCM is? Please tell me the last time a customer lost their seg funds do to an FCMs poor risk management.

If you have any questions about our services at Velocity Futures please send me a private message.
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Dale Box View Post
I’m saying that we do not have the risk that other firms have and we are ABOVE the required amount. If more funds were required, more funds would be there. We do not do any proprietary trading at Velocity Futures. All proprietary trading is done via Velocity Merchant Energy.

I am not trying to reassure you at all. Velocity history speaks for itself. If our Excess Net Capital is a serious concern of yours, you’re free to move to another firm.

What are we doing to protect customer funds? What are we not doing? Do you have any idea how regulated an FCM is? Please tell me the last time a customer lost their seg funds do to an FCMs poor risk management.

first, your response now sounds as if you are taking the debate personal vs. what it is, a curious customer asking questions that would require education from the sales person... you seem to have quickly changed your stance .. interesting...

secondly, I dont have all my funds at velocity, you are my backup trading... and to this date I have not had to use my backup.. my primary is crossland.. what most people here know as DDT (but I dont use any introducing broker)...

yes, you are above the "required" amount, but by a very, and I mean very, low margin.. actually, if I look at all the other FCMs (which I have done) you have one of the lowest... but at the same time, is not like you are a large FCM or you are driving lots of volumes, so I try to keep any comparison within peers of similar size...

I am quite familiar with FCM regulation as a matter of fact, which is why I am curious as to why elect to have such a just meeting regulatory requirements point of view in terms of firm capital for the clearing.. again, you are not the only one.. I picked on you because I believed you were willing to participate on a debate and educate me where I might be mistaken.. I sincerely hope my evaluation of you was not wrong when I made that assumption.. I am still waiting for the education part on your arguments..

as to Velocity history.. it is not that long, quite short actually... you've only been around since 2003... but I dont know it all and since you raise it, I have to do some research on your history then..I mean, besides looking at lawsuits, etc. which is part of my due diligence... but rather perhaps I should trend your reported numbers since inception vs. running 12 months.. search news articles about the founders, etc.. in other words, understand your history so that I can then understand your statement.

I am a curious being by nature, so please dont take anything personal at all... I am truly only after knowledge and learning, nothing more... not trying to put your firm on the spot.

you are welcome to argue your points of views and address my points of views if they are mistaken, but let's do so with facts vs. opinions if I may request so...


Last edited by sysot1t; August 13th, 2011 at 01:49 PM.
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Data

since I am all about the data... and a statement was made about the inflow of funds into AMP being a sign of a healthy FCM, here are some numbers comparing the reported customer funds, the required min regulatory firm capital, and the excess firm capital for Velocity, AMP, Crossland and IronBean... why IronBean? simple, AMP is a new clearing and I wanted to compare another new Clearing to AMP...

There are some subtle differences on the comparison between AMP and IronBean.. which you should be aware of.. and it comes down to how they were formed and how the customer funds were acquired... as you all know, AMP rolled over anything under AMP Trading that was housed at their prior FCM's... we have no idea what percentage made it over, but we do know that $21.5M in customer funds either disregarded their notice or chose to flip over... IronBean purchased all the assets of FARR (another FCM) .. so they had from day one $42.2M... on the comparison I merged the numbers from FARR and IronBean to understand the trend and turn over from the accounts purchase.

also, customer funds to gauge growth of an FCM is extremly tricky... it has to do with a lot of different variables exerting pressure over those funds, and they are not all related to customer or account acquisition... first, if the FCM does business on overseas markets, they are exposed to currency risk.. so there you have the first variable... second, gains and losses and account blow outs... third... redemptions from account closings and from people just withdrawing for whatever purposes... fourth, volatility and fluctuation assuming long term holdings within client accounts... and who knows what other variables, but to me those are the main ones..

without having insight into an FCM book, it is hard to really tell what is happening, but at least the reported data can give you a glance if you trend it and take into assumption net gains or losses over time while looking at market conditions..

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sysot1t View Post
first, your response now sounds as if you are taking the debate personal vs. what it is, a curious customer asking questions that would require education from the sales person... you seem to have quickly changed your stance .. interesting...

secondly, I dont have all my funds at velocity, you are my backup trading... and to this date I have not had to use my backup.. my primary is crossland.. what most people here know as DDT (but I dont use any introducing broker)...

yes, you are above the "required" amount, but by a very, and I mean very, low margin.. actually, if I look at all the other FCMs (which I have done) you have one of the lowest... but at the same time, is not like you are a large FCM or you are driving lots of volumes, so I try to keep any comparison within peers of similar size...

I am quite familiar with FCM regulation as a matter of fact, which is why I am curious as to why elect to have such a just meeting regulatory requirements point of view in terms of firm capital for the clearing.. again, you are not the only one.. I picked on you because I believed you were willing to participate on a debate and educate me where I might be mistaken.. I sincerely hope my evaluation of you was not wrong when I made that assumption.. I am still waiting for the education part on your arguments..

as to Velocity history.. it is not that long, quite short actually... you've only been around since 2003... but I dont know it all and since you raise it, I have to do some research on your history then..I mean, besides looking at lawsuits, etc. which is part of my due diligence... but rather perhaps I should trend your reported numbers since inception vs. running 12 months.. search news articles about the founders, etc.. in other words, understand your history so that I can then understand your statement.

I am a curious being by nature, so please dont take anything personal at all... I am truly only after knowledge and learning, nothing more... not trying to put your firm on the spot.

you are welcome to argue your points of views and address my points of views if they are mistaken, but let's do so with facts vs. opinions if I may request so...

I am not taking this personally at all. We do only clearing in regards to the capital. Most other firms do not. I can’t provide you with any more information than I already have. By Velocity history I meant, has any customer ever lost money because of our Excess Net Capital? Never…

We (and Farr) we’re affected by the Sentinel bankruptcy of 2007. Did a single customer lose a dime? Was a single wire not released when everyone panicked? Absolutely not…

We aren’t driving a lot of volume? Velocity Futures Surpasses 400 Million Contracts | Business Wire

I don’t wish to argue anything on an internet forum and I respect your concerns. That’s exactly why I said, ‘’you’re free to move the account.’’ I’m sorry you feel your questions aren’t being answered. I will now leave this thread as I’ve said all I can say.

If you have any questions about our services at Velocity Futures please send me a private message.
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