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Or perhaps this customer was a cash cow for AMP with commissions, yet was rendering AMP non compliant with regulation.
This one customer flipping 400 contracts across 2 accounts could take the entire customer base under water easily with AMP not having the kind of cash necessary to back up margin requirements or a blow out of sorts.
AMP may have let it go on for years (customer states 4 years) knowingly, raking in the commissions but they appear to suddenly have had a change of heart. Why the sudden action with no explanation offered to the customer one must ask? Maybe the CFTC is poking around and an explanation would reveal their lack of innocence?
With leaving all the drama out of it. I’m going to ask a simple question that only requires a simple answer. Is your money safe there? Or is it better to close your account and go somewhere else?
For me the guy in the Elitetrader's thread just got too big with his business. What I understand his total concurrent open positions on ES & NQ were eye popping 800 contracts on only $3 mil account so this started to be just too much risk for the house.
I see your money is more safe when this kind of risky business is not allowed. So this is a good thing.
But we can ask why did't they (AMP) give any instructions or warnings about the situation. They just closed the account and then silence. This is what I don't understand. It's just silly and bad for any business in any industry if you don't communicate with your customers. So in this they failed badly and I hope they will do some changes in their future policies how to manage this kind of situations.
I think you have to ask yourself that question and only you can answer it. Ask yourself in the light of all that has been revealed about Dan Culp, the principal of AMP, it is his LLC and he calls the shots. When the heat turns up or things go sideways, are you confident this gentleman is going to do what is best for you and the customers of AMP?
The customer who was forced out stated he had 3 million at AMP. AMP has 63 million in customer segregated accounts with 4 million in excess net capital. Was his 3 million safe? I think you'll find that most folks here would say AMP did him a favor by closing hos accounts.
Something just seems off to me. Why would someone keep "3mill" at a discount broker? Something about the story doesn't add up? With that kind of capitalization, it doesn't make sense to me. Plus, if your account had that much liquidity I highly doubt that anyone would be posting on forums to air their gripes about a broker.
If my understanding is correct about the rules, the CFTC does daily audits on seg accts to insure all is safe and not being commingled and that bank statements are no sufficient.
I'm not picking sides, just logically the story doesn't seem to be real to me. But I do agree that it's for the better for all customers that risky business is not condoned and that they closed the account (for whatever reason).
Regarding the debacle with crude that happened recently and the brokers going after customers. IMHO they should, they are not credit agents. People who were foolish enough to be trading an expiring contract on the last day got what they deserved. Unless, your taking delivery you don't belong trading an expiring contract on the last day. Whether or not the broker allows it, is not the point. Trading is a business and these were bad business decisions that had terrible consequences, but they were decisions made nonetheless. No one forced anyone to push a button, they did it all to themselves. People saw a ridiculously low price and thought they were smarter then the market. A broker has every right to go after customers in deficit. Whether or not system failures had a part is up for debate, but in the end people made bad business decisions. You can't blame a system failure for that.
What we know, AMP stated it was due to compliance. So what made AMP decide to be compliant this past week, yet let the accounts be non compliant for 4 years? What were they complicit with for all that time and why the sudden change of heart? Would you still feel the same way about AMP if it was revealed that they were willfully non compliant?
Believe what you want about the 3 mil story, but what motive would exist to fabricate this story and go public with it? Why would AMP engage in the conversation in a public forum validating it's accuracy if it were false?
Regarding the oil incident. It goes beyond a technical failure, though that was certainly a part of it. FCM's were forewarned by CME advisories to have all technologies tested and proven capable of handling negative pricing. If you are an FCM and failed to do so, you don't get a free pass.
Have you read the CFTC advisory that was released on 5/13/20 outlining all the points where FCM's failed on 4/20/20 (see attached)? There are very specific risk management regulations that FCM's must follow. Rather than restating it all here, have a read. Why do you think Interactive Brokers took responsibility for 110 million in losses? Because they are kind hearted? Or, did they realize they failed to uphold their obligations and decided it would be better to make it right with customers than await the outcome of a CFTC investigation?
I think the change in policy is a result of the market events happened lately. It's normal to adapt. But in this case it's a question of how do you communicate.
The trader might have been an AMP client for 4 years, but that does not mean he was holding $3m with AMP and trading the way he was at termination of account for the whole 4 years.
For instance if you look at AMP's filings with CFTC they had a huge jump in Customer Segregated Funds from approx $57m in February to approx $63m in March. So it may be this trader loaded the bulk of his $3m into his account post 28 February and started trading in a different & particular way (eg spoofing/wash trades , whatever - we don't know) that has come to the attention of AMP Compliance and/or CFTC during March/April.
Prediction is very difficult, especially about the future - Niels Bohr, Danish Physicist
One thing I especially like about AMP (aside from the obvious benefits) is that they only hold Customer Funds with banks and some government securities. This is unlike some other brokers (including most of the ones who failed) who actually used Customer Funds to invest/take positions with the profit accruing to the broker.
In other words AMP only makes money from the commission earned on trades you place. And I can be comfortable that my funds are sitting in a customer segregated account with a bank so my only real risk to my account (aside from my own trading) is if the bank fails or AMP's risk management system is so poor that they end up with a huge exposure to customers in deficit that can't be recovered fully for some reason (as the Customer Segregated account at the bank is just a pooled account of all AMP's customers account balances in one bank account).
