Saxo chasing negative balances

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www.andersen-partners.dk/en/content/645

It's not only the requotes. Saxo's clients got screwed every which way:

1. clients who executed trades on the platform and got confirmations at good prices
2. clients who had stop losses executed and got confirmations at good prices
3. clients whose margins were decent but due to system crash had forced stop losses executed at levels at least 10 big figures lower than where the market really traded.

All these clients had their fill rates revised to worse levels.

Take note any client who is still with Saxo - the same could happen to you anytime. Go to a more honest and ethical broker.

This is à big


That is a big problem


I dont dare to make any transaction with Saxo Bank again
I really do not dare
Nobody can be sure that confirmed transactions are right. In stocks everything is possible, always
Nobody cCAN be sure that hours later the account is not empty even more than empty
How can any body trust? I do not. It never can do this again.
And I cannot read the any thing in the gen. Buissinees Terms that it is possible or legal to requote a few thousend pips

I cant find the link
Website is not found
BR 

There is a Bloomberg news follow-up, but the comments below that news on GARP is worthwhile to read.

www.garp.org/risk-news-and-resources/risk-headlines/story.aspx?newsId=129462


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Ada Reynolds 3/2/2015 9:17:13 PM Report abuse

Fellow GARPs, this Saxo Bank crisis should be well documented as a case study. From risk management prospective, Saxo Bank committed a big mistake. 1. In its FX business, Saxo Bank makes prices to clients on FX spot, forward and options. That means Saxo Bank is having a principal-to-principal relationship with clients. On their trading platform, the prices are all tradable, and it forms an "offer". Once the trade is executed on the trading platform, via clients' action, or orders triggered, that constitutes an "acceptance". With "offer" and "acceptance", that is a contract sealed. For whatever reason that one side manipulate the details of the transaction (here it is price), it is a breach of contract. The new price of the contract has no legal power to be enforced because the content is not mutually agreed. 2. In its letter explaining the methodology of the “re-pricing”, Saxo Bank is confusing itself as an agent. In this business, Saxo Bank is actually the sole market maker from clients’ perspective. There are no other markets. If Saxo Bank explains its methodology with reference to EBS, the client agreements have to be re-written that Saxo Bannk acts as an agent and all trade flows (spot and forward) goes to EBS (and Saxo Bank bears no responsibility on the fills), and each and every trade confirmation with EBS has to be sent to clients. However, it still cannot solve Saxo Bank’s problems in options because it cannot find a sizable marketplace for options similar to EBS. 3. The key problem of Saxo Bank is its risk control on pricing. As a market maker, Saxo Bank has full discretion to quote a price on its trading platform. The bid price it quote to clients is the price Saxo Bank willing to buy from clients, and the ask price it quote to clients is the price Saxo Bank willing to sell to clients. Therefore, always, Saxo Bank should display a price that it is willing to do buy and sell (for this part the Trading department takes the blame, then the Risk Management department). It cannot first quote clients a price and then twelve hours later tell clients that, sorry, we are going to change your transacted price to another price blah blah blah. 4. Another highlight of the incidence, from a risk management perspective, is how Saxo Bank manages its FX exposure. If clients are selling CHF, to avoid depreciation of the CHF, Saxo Bank should have shorted a certain amount of CHF with its own trading counterparties. Did Saxo Bank get out of its hedge positions before it cut clients’ margin positions? Would it be possible that Saxo Bank got hit by betting bigger than clients and then transferred the losses to clients by manipulating clients’ positions?

Ada Reynolds 3/2/2015 9:35:14 PM Report abuse

Another key study in the Saxo Bank crisis is how we look at Counterparty risk. Saxo Bank does trade with another entity in order to hedge its exposure from clients. Is Saxo Bank evaluating its trading counterparties sufficiently? Would anyone of them dishonored trades with them (same way as they do to clients)? Is the contract terms able to protect Saxo Bank from being dishonored on trades which they can profit from? Besides counterparty risk, how about liquidity risk? Did Saxo Bank has a too big concentration exposure on CHF (compare to the potential liquidity that is available) such that it cannot hedge its own exposure in good prices? With Saxo Bank claiming low liquidity in the EURCHF pair, do they have a plan to trade USDCHF and EURUSD separately?

regulators all around the world make big banks, the likes of barclays, deutsche, etc.. pay multibillion USD in fines for allegedly rigging fx fixings.. (i.e. squeezing EURUSD by 1pip for 1min.),... does saxo really believe they ll be let off the hook for repricing client trades by 15-20%

www.bloomberg.com/news/articles/2015-03-08/saxo-bank-may-reverse-decision-to-raise-margins-on-currency-bets

“We still expect firm volatilities over the coming months,” Nielsen said. “It is not that we have a crystal ball, but investors should be made aware of the risks.” Saxo responded to the market chaos that followed Switzerland’s decision to abandon its exchange-rate cap by repricing a number of franc trades. Chief Financial Officer Steen Blaafalk said in January Saxo faces legal action as a result of its decision.
Client Complaints

Retail investors have been pouring into foreign exchange, the world’s largest financial market.

Average daily volumes traded as a percent of the total spot market almost doubled in five years to 20 percent, or $400 billion, in 2012, according to a January 2014 presentation by Citigroup Inc. Saxo had an 8 percent share of the market, sharing fourth place with Alpari Ltd., it said.

The bank has received complaints from clients challenging its decision to revise prices on Swiss franc trades made Jan. 15. In a letter to the Danish regulator dated Feb. 9, Saxo said it was trying to avoid being sued when it continued accepting Swiss franc orders after the market froze.

The bank then told clients in e-mails seen by Bloomberg it would execute their trades at less favorable prices than those initially shown. The bank published a list of those prices some 12 hours later.

Legal Challenge?

Soeren Hansen, a partner with Andersen and Partners, said the Danish law firm has sent Saxo a letter demanding that it reverse its decision to reprice franc trades or face a legal challenge. The law firm represents about 30 clients with a combined 100 million kroner ($15 million) in claims.

Saxo says it has worked hard to ensure customers are treated fairly. Since Jan. 15, the bank has been “liaising with each client on an individual basis to clarify what is possible with respect to each client’s situation and agreeing to an individual plan of action for the repayment,” Blaafalk said in a Jan. 27 interview.

The bank said in January it stands to lose as much as $107 million on bad franc trades, or about a third of its equity capital.

Saxo increased margins on foreign currency pairs as much as fivefold in January and February as volatility surged. The bank said on Friday it’s attracting new customers even as it deals with complaints. Saxo “has seen a fresh inflow of clients, and clients’ collateral deposits for trading are at a record-high,” Nielsen said.

The number of new clients rose 24 percent in January and February from a year earlier, Saxo said. Collateral deposits reached $11.1 billion in February, versus $8.7 billion a year earlier. That compares with a high of $11.4 billion in November, according to Saxo data.

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net

To contact the editors responsible for this story: Veronica Ek at vek@bloomberg.net Tasneem Hanfi Brogger, Christian Wienberg