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Ray Robot II™ has now been running his live spread betting test comparing Alpari UK with GKFX for over a month.  We're rather obsessive here at the Trading Gurus, and we've noticed a variety of interesting differences between Ray's four experimental accounts during that time. Some observers have however suggested to us that all that matters in a trading account is "the bottom line". Whilst we humbly disagree with that assertion, Ray is nonetheless now proud to announce that there is at last a difference between the bottom line of his Alpari accounts (currently standing at £255.00) and his GKFX accounts (currently standing at £261.00).  There are any number of other (less significant?) differences also.

Let's first of all compare equity curves for Ray's live accounts. Here's how his Alpari UK spread betting account looks this morning:

Ray Robot's live equity curve on December 21st 2011 at Alpari UK

Ray Robot's live equity curve on December 21st 2011 at Alpari UK

According to myfxbook the bottom line of £255 can be characterised by a "Profit Factor" of 1.25 following a  "Drawdown" of 3.85%. Now here's Ray's GKFX equity curve:

Ray Robot's live equity curve on December 21st 2011 at GKFX

Ray Robot's live equity curve on December 21st 2011 at GKFX

According to myfxbook once more this time around Ray's profit factor is 1.58 after a drawdown of 3.46%. Here's a funny thing though. If you look at Ray's trading accounts at Forex Factory instead of at myfxbook the drawdown numbers are slightly different. Here's another funny thing too. This morning I ran some backtests on the same two accounts, on the same VPS, over the same period of time. Here's what the MetaTrader 4 strategy tester showed me, first for Alpari:

Ray Robot's backtest results on December 21st 2011 at Alpari UK

Ray Robot's backtest results on December 21st 2011 at Alpari UK

As you can see, in backtests Alpari's version of MetaTrader reports a profit factor of 2.81 following a drawdown of 2.92%. Taking a look at GKFX instead:

Ray Robot's backtest results on December 21st 2011 at GKFX

Ray Robot's backtest results on December 21st 2011 at GKFX

As you can see, we have yet another different equity curve, and another set of numbers. This time we're told the profit factor is 2.50 and the drawdown is 4.08%.

Here's an entertaining game for any interested readers to play over the Christmas holiday season. Which of all those different sets of results do you think best represents Ray's future performance trading cable in the New Year? Finally, if you should happen to have some spare cash left over after doing all your Xmas shopping, on the evidence Ray has accumulated so far in his testing would you prefer to open a spread betting account with Alpari UK or GKFX?

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Last weekend LMAX quietly announced to those of their customers carrying trades over the weekend that they were introducing what MetaTrader brokers refer to as micro-lots on their spot forex contracts. Whichever way you look at it, that title is something of a misnomer, but we'll explain what it means to a client of LMAX.

A "full lot" at LMAX is a mere 10,000 units of the underlying currency, compared to 100,000 at the average MetaTrader broker, or even 1 million at Dukascopy. From this week you can now enter a minimum size of 0.1 into an LMAX Trader order ticket, or 1,000 units. That's what MetaTrader brokers describe as a micro-lot for reasons known only to themselves, since anywhere else in the known universe apart from MetaTrader land micro means a millionth.

"Micro-lots" now available via LMAX Trader

"Micro-lots" now available via LMAX Trader

Be that as it may, there is a peculiarity about these new LMAX one tenth lots. You pay almost as much commission as you would on a full lot!  For example, on GBP/USD  a tenth lot trade will cost you 35 cents whereas a full lot will cost you 40. This is not really a very attractive option for traders wishing to start small by trading micro lots, but it does add extra granularity to position sizing for those traders happy to trade LMAX full lots and more.  The mass of MetaTrader micro brokers still don't have anything to fear from LMAX, for the moment at least.

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Just over a year ago we reported that "Microsoft Enters Retail Forex". It now seems as though what with one thing and another that little (ad)venture didn't turn out as originally hoped. At that time I opened an MSN Trader account of my very own, but yesterday I received an email from saxobank.com informing me that:

We write to inform you that the MSN Trader website will be de-commissioned very shortly and the normal log-in webpage will no longer be available.

As you are aware, your MSN Trader account is held and contracted with Saxo Bank A/S. Please be reassured that the services provided to you by Saxo Bank will remain unaffected. However, the log-in page to access your account will change. Going forward, the MSN Trader platform will adopt the Saxo Bank brand.

We thought we'd take one last look at the MSN Trader platform before it disappears forever. The good old MSN Trader home page is still there at the moment:

The MSN Trader home page will be disappearing real soon now

The MSN Trader home page will be disappearing real soon now

The "Investor Platform of the Future", always was "Powered by Saxo Bank", and soon the MSN Trader brand will be no more. Once logged in there is a noticeable absence of anything Microsoft. Instead there is an exhortation to try out the "new Saxo WebTrader docking system":

MSN Trader morphs into Saxo WebTrader

MSN Trader morphs into Saxo WebTrader

At the time MSN Trader was launched we also speculated about why Steve Ballmer had just sold $1.3bn worth of shares. This seemed like a perfect opportunity to check out what Microsoft shares have been up to over the last 12 months, and here's what the Saxo WebTrader Quick Chart for MSFT looks like:

Microsoft's share price for the year to November 18th 2011

Microsoft's share price for the year to November 18th 2011

As you can see, following a bit of drop this week it seems MSFT are back to almost exactly where they were a year ago. Maybe Steve really did decide that forex trading is more profitable than investing in Microsoft stock!

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We reported at the beginning of November on the abrupt downfall of Jon Corzine.  If you recall Mr. Corzine is an ex "Democratic" governor and senator, and now ex CEO of MF Global Inc. as well as an ex CEO of Goldman Sachs. He has just presided over the seventh largest bankruptcy in U.S. history.  The Commodity Futures Trading Commission, one of the regulators supposedly keeping an eye on dodgy dealings on Wall Street on behalf of U.S. taxpayers, has released a long statement about the affair. Amongst other things CFTC Commisioner Scott D. O’Malia has this to say:

Segregation of customer funds is fundamental to our markets. The Commodity Exchange Act expressly prohibits intermediaries like MF Global from (i) commingling customer and proprietary funds (i.e., house funds) and (ii) using customer funds to support proprietary transactions. It appears that MF Global failed this fundamental responsibility.

In fact it seems as though the CFTC were failing in one of their fundamental responsibilities also, since what the law they are supposed to uphold "expressly prohibits" has happened anyway. Touching on that issue Mr. O’Malia has this to say:
More on The CFTC Finally Realize That MF Global "Has Shaken Public Confidence"!

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Another day dawns, and all four of Ray Robot's MetaTrader spread betting accounts have suffered another small loss overnight. Another cable short, another -10.0 pips, Ray's bottom line down to £246.00 at both GKFX and Alpari UK.  This "false breakout" was however longer lasting than the previous ones.  It took 3 hours and 21 minutes on both GKFX and Alpari for Ray's (overly tight?) stops to get taken out this morning.

Since yesterday's initial report our logs have revealed many more apparently delayed quotes from both GKFX and Alpari. Sticking with just the live accounts for the moment, here's an extract from Alpari's log this morning:

Delayed quotes overnight on November 16/17th 2011 from Alpari UK's spread bet feed.

Delayed quotes overnight on November 16/17th 2011 from Alpari UK's spread bet feed.

Alpari's worst case delay was 82 seconds at 14:57:12 yesterday afternoon. Now lets have a look at the competition:

Delayed quotes overnight on November 16/17th 2011 from GKFX's spread bet feed.

Delayed quotes overnight on November 16/17th 2011 from GKFX's spread bet feed.

GKFX's worst case delay was 40 seconds at 07:50:04 this morning.  Since these long delays occur at different times on different brokers it doesn't seem as though they could be caused by a problem with the internet connection to our VPS, does it? Just for the record the ping time from our virtual private server to Alpari's servers averages 1 millisecond, whereas for GKFX's server it averages 2 milliseconds.

Whatever the ultimate cause, can you imagine the effect such delays might have if you were trading manually at the time? A member of the Trading Gurus community tried that thought experiment recently, and here is their conclusion:

I wouldn't be able to get the results I was expecting. The delay means the price would have already changed.

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I've just received an email which says it's from "Todd Crosland, President, IBFX Australia Pty. Ltd.". The email starts off by saying that:

As you may have already seen in the recently issued press release, IBFX Holdings, LLC has been acquired by TradeStation Group, Inc., a recognized leader in online trading and winner of Barron's 2011 "Best Online Broker" award. TradeStation is part of Monex Group, a leading Japanese online brokerage firm.

According to the TradeStation press release that Todd mentioned in his email:

Under the terms of the acquisition, which has been unanimously approved by the Boards of both companies, TradeStation Technologies, Inc., a wholly-owned subsidiary of TSG, acquired from Interbank FX, LLC, a Utah corporation and one of the wholly-owned operating subsidiaries of IBFX, the proprietary risk-management software of Interbank FX, LLC, and immediately thereafter TSG acquired all of the ownership interests of IBFX from its members. Within the next 30 days, Interbank FX, LLC (the primary Forex operating company of the IBFX group) will be merged into TradeStation Forex, Inc., a Retail Foreign Exchange Dealer registered with the Commodity Futures Trading Commission and a member of the National Futures Association, and, as a result, all of Interbank FX, LLC's accounts will be transferred to TradeStation Forex and it will be operated as the "IBFX Division" of TradeStation Forex. IBFX Australia Pty. Ltd. ("IBFXAU"), an Australian company regulated as a member of the Australia Securities and Investments Commission ("ASIC"), will also operate as a subsidiary of TSG.

It seems like recent speculation that Interbank FX was about to be sold was at least half right! Going back to Todd's email, he reassures IBFX Australia customers such as myself that:

You will naturally have some questions about how this announcement will affect you. We do not expect there will be any material changes to our products, services, management, spreads, fees, operations, systems or methods of doing business. In fact, we believe the acquisition will directly benefit every IBFX customer by combining our innovative approach to the FX industry with TradeStation's cutting-edge forex trading technology and support services.

So that's all OK then, and everbody's happy? As TradeStation put it:

This is a win-win for IBFX and TradeStation clients and makes TradeStation a global leader in forex trading, dramatically expanding our customer relationships and creating a global operating presence. IBFX's proprietary forex tools and services and its focus on customer care will now be backed by the financial stability and trading technology leadership of TradeStation. In time, TradeStation forex clients will benefit from technology offered by IBFX using TradeStation's award-winning, market analysis and trading platform.

A win-win situation for everyone concerned then, apart possibly from those investors in IBFX who for some reason aren't mentioned in any of the above announcements about win-win situations, but are mentioned in a document translated from the original Japanese on the website of the Monex Group, who themselves acquired TradeStation Group earlier this year?

Those investors would seem to be "Todd B. Crosland & Family (59%)  and Spectrum Private Equity Fund (40%)". I wonder what they make of all this continued consolidation in global FX?

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Ray Robot II™ has been automatically spreadbetting on four different accounts for 3 days now, two of which are live accounts with real money in them, and two of which are solely for demonstration purposes. The trades themselves have been fairly uneventful so far, although I'm sure much more excitement is waiting just around the corner! Today the live and demo accounts at both GKFX and Alpari UK all suffered their third 10 pip loss in a row. They all shorted GBP/USD just below the previous day's low yet again, and they all lost once more. Some sort of a pattern does seem to be developing however. Just like yesterday, it took longer for Ray's stop loss to get taken out at GKFX than it did at Alpari UK. 6 minutes at GKFX versus 5 mins at Alpari UK on this morning's trade.

There is some rather more interesting news to report however! To alleviate the boredom engendered by continuous repetition of one small losing trade per day we loaded our GuruLogger™ indicator on all four test accounts yesterday. This morning three of Ray's MetaTrader accounts had logged nothing of interest. However the live GKFX spread bet account was showing a number of alerts relating to delayed prices:

More on Our MetaTrader 4 Spread Betting Live Test Suffers Some Delays

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We were just gearing ourselves up to gently launch Ray Robot II™ onto an unsuspecting world when Alpari UK announced that they had started offering MetaTrader 4 spread betting accounts. In contrast to some reports elsewhere on the web, here at the Trading Gurus we are well aware that automated spread betting via MT4 has been available for well over a year from another broker – the recently renamed GKFX. We figured we'd kill several birds with one stone by running RR2 in identical fashion on live accounts from both MT4 spread bet brokers. While we're at it we thought we'd also try him out on demo accounts from both brokers, to see if there is any noticeable difference between automated live trading and pretend trading at our small sample of MetaTrader brokers. Whilst we're at that we thought we'd also compare some backtest results with all those forward test results, to see whether that made any difference to the outcome(s).

Here's the experimental setup. The minimum deposit for an Alpari spread bet account is £250, so we're starting off with 4 different accounts, all funded with £250, although of course only 2 accounts are using real live cash.  To start with we're trading the minimum possible size, which (coincidentally?) is 10 pence per pip at both brokers. We set four identical clones of the son of Ray the Random Robot™ trading daily bars of cable using his default settings. Here's how things looked earlier on this morning on Ray's two live accounts. Can you spot the difference?
More on Ray Robot II™ Spread Betting Live Test – Alpari UK versus GKFX

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It's been quite a long wait, but Alpari UK have announced today that they are now the second broker to offer automated spread betting using the MetaTrader 4 platform to UK residents. According to their news release:

Tax free* Forex trading is now available on the MetaTrader 4 platform with Alpari (UK). Financial spread betting allows traders to bet on whether the price of an asset will rise or fall with additional benefits including the exemption of income tax, capital gains tax and stamp duty*.

The asterisk leads to the usual disclaimer about how:

Any profits you make from spread betting are completely free of capital gains tax, stamp duty and income tax (for UK residents). UK tax laws are subject to change and individual circumstances may vary.

Alpari are thus now in competition with the recently rechristened GKFX (formerly Smart Live Markets) for the business of UK residents who like the idea of automatically generating tax free profits using MT4 expert advisors, not to mention the likes of larger brokers such as GFT and FXCM who currently offer automated spread betting using their proprietary APIs rather than via MetaTrader.

Alpari tell me their new spread bet accounts work rather like an FX only version of their existing Classic accounts, but with the additional benefit of "micro-lots". In spread bet parlance the "minimum bet" on the new Alpari accounts is 10 pence per pip (which is the same as GKFX), but with no upper limit on bet size.  Currently it seems there is no way to transfer cash from an existing account to a new spread bet account, so if the idea of tax free trading with Alpari appeals to you then you'll have to stump up the minimum deposit of £250 from your credit card before you make your first trade. Note that the only "assets" Alpari spread bet accounts cater for, for the moment at least, are 34 forex pairs.  If you want to trade indices or commodities tax free then you'll need to look elsewhere.  One other significant difference from a GKFX spread bet account is that Alpari are offering their usual floating spreads instead of GKFX's (mostly) fixed spreads.

Following today's announcement there's finally a bit of competition in the UK MetaTrader spread betting marketplace. Now I'm wondering if GFT or FXCM will be tempted to join in the fun anytime soon?

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The global financial crisis took yet another turn for the worse on Monday. According to Yahoo! Finance:

MF Global's meltdown in less than a week made it the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.

The chief executive of MF Global Holdings Ltd. is Jon Corzine. According to The Economist recently, Mr. Corzine is:

Another former head of Goldman Sachs [potentially] running America’s Treasury, Mr Corzine (who is also a former governor of New Jersey) is seen as a long-shot candidate for the job when Tim Geithner steps down, or as a possible future White House economic adviser.

The Economist also mentions what it refers to as "The Corzine put". This cunningly constructed derivative means that MF Global:

Is offering an extra percentage point of interest to investors in its latest bond issue, should Jon Corzine, MF’s chief executive, quit to take a government job before July 2013.

I wonder what MF Global bond holders make of that extra percentage point now? I also wonder what valuation MF shareholders are putting on their holdings today? In view of the current news it seems unlikely Mr. Corzine will ever achieve that position in government, although I suppose stranger things have happened. According to Reuters, ex Democratic New Jersey Governor Jon Corzine:

Has been a major fundraiser for Obama, having donated the maximum of $5,000 that an individual can give for a presidential campaign.  He also held a lavish $35,800-a-head fundraising dinner for Obama at his home in April and raised or "bundled" donations of at least $500,000 so far for Obama's 2012 re-election effort.

Maybe in return Mr. Obama will send some of his own "political capital" in Mr. Corzine's direction one day, when memories have faded a little? Or there again perhaps not. According to The Economist once more:

It is unlikely that Mr Corzine will stage another comeback. On October 31st MF Global filed for bankruptcy after frantic efforts to sell assets or find a buyer failed. The cause of the firm’s demise were trades and strategies driven by Mr Corzine—not least disastrous bets in the market for European sovereign debt, making MF Global the largest American casualty of the euro-zone crisis so far.

The US regulators that are supposed to be keeping a close eye on this sort of thing have issued a statement on the MF Global fiasco. According to the U.S. Commodity Futures Trading Commission:

For several days, the SEC, CFTC and other regulators had been closely monitoring developments affecting MF Global, Inc., a jointly registered futures commission merchant and broker-dealer, in anticipation of a transaction that would include the transfer of customer accounts to another firm. Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm. The SEC and CFTC have determined that a SIPC-led bankruptcy proceeding would be the safest and most prudent course of action to protect customer accounts and assets. SIPC announced today that it is initiating the liquidation of MF Global under the Securities Investor Protection Act (SIPA).

It sounds a lot like it's not just MF Global shareholders who will be forced to undergo a haircut. It sounds like there are some deficiencies in the supposedly segregated accounts of MF Global's customers too.  According to the New York Times:

Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said.

For a closer look at the many billions of dollars involved in the latest Wall Street crash let's turn for assistance to Michael Bloomberg, who is an expert in such matters. According to Bloomberg Businessweek:

MF Global Holdings Ltd., the holding company for the broker-dealer run by ex-Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy protection as it seeks to reorganize after making bets on European sovereign debt. Its broker-dealer unit, MF Global Inc., faces liquidation. The firm listed debt of $39.7 billion and assets of $41 billion in Chapter 11 papers filed yesterday in U.S. Bankruptcy Court in Manhattan.

Once upon a time Jon Corzine looked very closely at the causes of the downfall of Long Term Capital Management, according to Roger Lowenstein in another article on Bloomberg. However it doesn't seem as though he learned very much from that particular piece of financial history. This time around it looks like he's not only thoroughly cooked his own goose, but he's also burned considerable amounts of MF Global Inc.'s customers' money, supposedly safely protected from such abuse in "segregated" accounts. Losing money on the deal is a risk MF Global's shareholders and bondholders were presumably prepared to take. MF Global's customers believed they were taking no such risk. It now seems as though that belief was mistaken.

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