Introducing Global Prime Forex

AusDoc

Well-Known Member
WARNING ::Re: Introducing Global Prime Forex

I issue a warning to members and readers of this thread, in two parts, as follow.

Part 1

Jemook is a very good marketer. He completely understands the basic psychology of selling. He gets the "know me, like me, trust me" mantra of modern marketing moguls. None of this is a bad thing. Jeremy communicates in a clear and direct fashion and thereby creates certain impressions about his actions and intentions. Again, nothing wrong with this, it is actually quite refreshing (and of course he knows this and uses it to great advantage). If you study his work at, or contribution to, the SteveHopwoodForex forum you will see how he connects with prospects, works them and no doubt 'closes' many deals as a result of his building a reputation and relationships. Again, all good, but remember, it is marketing. Jemook the trader, Jemook the forum member, Jemook the 'trader's-friend' broker, Jemook the all-round-good-guy is always Jemook the salesperson.

Part 2

Global Prime, for all of its transparency and directness and openness, is very clever at virtual sleight-of-hand. I don't know if it is spontaneously brilliant or studied and deliberate integration of psychology with legal drafting (an amazing thought!) but the result is very interesting indeed.

The legally required Global Prime (GP) Product Disclosure Statement (PDS) is a good place to see what I'm referring to. See if you can spot what is happening in that document.

On the surface it appears to be remarkably clear and straight forward. It avoids the usual overdose of legalese, opting instead for plain English. This feels good doesn't it - something you can understand. They are such good people. Straight away you may feel positive about them and open to what they say. After all, Jeremy is such a great guy, and this is just like him.

Make sure you are tuned in though. Be sure you understand what they are so plainly stating. If you think it is all good, then you are definitely not understanding. The PDS indicates that Global Prime strips you of the sort of protection ASIC recommends and the legislation attempts (fairly incompetently as it happens - Australian law is very inadequate in this area) to provide.

What is remarkable about the PDS is that it plainly and repeatedly spells out that GP strips clients of protection, maximises their risk exposure under certain circumstances and by warning of the dangers actually leads people to feel so positive about GP that they sign up for an account. A careful read of the document makes it obvious that for once in your life you had truly better be only funding your account with money you are quite prepared to lose. From the moment you complete the deposit in the required manner, your funds are no longer your funds. Oh but don't worry, they will keep an accounting record so they will know, in the event of any financial difficulties, who got screwed and by how much.

Make sure you fully understand everything and in particular the following PDS sections:

2.3 Key Risks of Global Prime Products

2.8 Benchmark Disclosure (Good sleight of hand in item 3. By my interpretation they fail item 4 but they give themselves a passing grade. The fact of their disclosure meets most of the requirements for item 5 but if you accept what they do you have rocks in your head. They accept that they fail item 7, and they are right, they do.)

3.13 Payments and Client Moneys (all of it, but key sections should jump out at you, like the Withdrawal Authority section, for instance.)

3.18 Your Counterparty Risk on Global Prime

Don't be fooled into thinking their "Security Trust" will keep your money safe. I would hate to have money in that trust in the event of any insolvency. You certainly wouldn't want to hold your breath while you waited for it to be repaid to you. This looks like a device to create an impression or a good marketing tool, but not really much more than that. It is not about protecting you as a client, it is about protecting GP from the risk you pose to them as a client. See Security Trust on page 23 where they state: "This is intended to reduce your credit risk on Global Prime ..."

GP are not perfect in their disclosures. They appear to be remarkably forthcoming but everything written in the PDS reflects a point of view and is designed to create an impression, while having to meet the ASIC requirements. On the surface it seems excellent but there are some traps.

In my opinion, and it is only that, but based on considerable non-lawyer knowledge and decades of experience with brokers, and the experience of significant personal losses due to a broker collapse, despite GP's apparent openness, they are one of the highest risk brokers. Given their structure and use and handling of client funds, I would not touch them with a barge pole.
 

jack

Administrator
Staff member
AusDoc said:
Jemook the trader, Jemook the forum member, Jemook the 'trader's-friend' broker, Jemook the all-round-good-guy is always Jemook the salesperson.
Yes, of course, that's why you will notice that vendor accounts are marked as such. The purpose of creating a vendor member's group is to make it clear to everyone that a given member is here to represent their company, regardless of how they come off in their posts.

AusDoc said:
Part 2
The legally required Global Prime (GP) Product Disclosure Statement (PDS) is a good place to see what I'm referring to. See if you can spot what is happening in that document.
Link for the lazy:
http://globalprime.com.au/forex/wp-content/uploads/Global-Prime-Product-Disclosure-Statement.pdf


AusDoc said:
Make sure you fully understand everything and in particular the following PDS sections:

2.3 Key Risks of Global Prime Products

2.8 Benchmark Disclosure (Good sleight of hand in item 3. By my interpretation they fail item 4 but they give themselves a passing grade. The fact of their disclosure meets most of the requirements for item 5 but if you accept what they do you have rocks in your head. They accept that they fail item 7, and they are right, they do.)

3.13 Payments and Client Moneys (all of it, but key sections should jump out at you, like the Withdrawal Authority section, for instance.)

3.18 Your Counterparty Risk on Global Prime
Like any terms of service, a new client should read through these agreements and understand them fully.

Having that said. I've read a few PDS' in my time, and I do see the differences you're talking about regarding the shift of funds out a client segregated account an into a trust where the client is, at best, an unsecured creditor should something go wrong.

I don't find this as alarming as you do, but I agree that GP could do a better job at disclosing this to prospective traders (as well as a better job explaining outside of their PDS statement.)

I'm actually curious to see if this is, in part, to help facilitate their A-book only model. A lot of other DMA brokers in Australia still define their relationship with the client as the sole counterparty (which sometimes can relate to their account pool structure.)

AusDoc said:
In my opinion, and it is only that, but based on considerable non-lawyer knowledge and decades of experience with brokers, and the experience of significant personal losses due to a broker collapse, despite GP's apparent openness, they are one of the highest risk brokers.
That right there is key. It might appear as if some of your arguments are trying, but you have experienced the downside of not being critical / cynical enough when selecting a broker.. so I hope Jemook and other readers have this line frame the context of your post...and any responses consider this accordingly.

Actually, the PDS says that GP will release an audited yearly financial statement upon request, maybe Jemook can start with that here, and then talk a bit about why things are structured the way they are at GP.

To be clear, I really don't think anything shady is afoot here.
 

Jemook

Official GlobalPrime Rep
rod178 said:
Jemook

Global's white label provider is Integal, correct?
Hi Rod,

Nope - we aren't a whitelabel. We use Integral for Liquidity Provider aggregation, FIX API connections etc and our pricing comes from direct relationships with Tier 1 banks.

AusDoc - thanks for the post - will respond tomorrow for ya. Just to clarify - I'm guessing you aren't the same AussieDoc from SHW ? (I don't think so as he is a happy client of ours).

Cheers,
Jeremy
 

AusDoc

Well-Known Member
Here is a standard to which you can aspire Jeremy. Whatever may be said against IG-Markets, they certainly understand the critical importance that should be given to protecting clients' money.

Our client money protection

IG only uses its own funds for hedging
IG does not pass segregated client money through to hedging counterparties
All client money is held in segregated client bank accounts in approved, AA-rated top-tier banks
IG also segregates net unrealised profits, which is above and beyond ASIC requirements
IG is not an investment bank
IG does not initiate speculative positions in the market
IG has no exposure to corporate debt
IG is regulated by ASIC
IG is owned by IG Group Holdings plc – a FTSE 250 company listed on the LSE, with a market capitalisation of A$3.5 billion (May 2013)
IG was founded 39 years ago, and was the first Australian CFD provider, established in 2002
Source: http://www.ig.com/au/client-money-protection

Look at those top two listed items. They are very important and they are there for a reason. GP does the opposite.

Note too, that rather than failing to meet even the ASIC RG 227 Benchmarks like GP, some brokers exceed the minimum requirements of the Regulations. Claiming ASIC regulation and being able to say you are licenced is a pretty low level to achieve.
 

AusDoc

Well-Known Member
Here is another approach to handling clients' funds. Note that these too completely blow GP out of the game.

Client Money

How is client money held and invested by Saxo Capital Markets?

Saxo Capital Markets holds client money in a ‘pooled’ client segregated trust account, a portion of the client money is invested in a term deposit which is also designated as a client segregated trust account. All Saxo Capital Markets’ client segregated trust accounts are held at an Australian ADI (Authorised Deposit-taking Institution), and are in compliance with Australian client money laws and regulations.

Will Saxo Capital Markets use Client A’s profits sitting in the client segregated trust account, to cover the margin obligations or deficit balances of Client B?

No, Saxo Capital Markets will not use Client A’s profits held in the client segregated trust account, to meet the margin obligation of Client B, or even the deficit balance of Client C. To ensure this, daily reconciliation is performed by back office to verify adequate funds always remain in client segregated trust accounts.

Does Saxo Capital Markets use client money held in the client segregated trust account to hedge its own positions?

No, Saxo Capital Markets does not use client money held in the client segregated trust account to hedge clients positions.

Does Saxo Capital Markets withdraw required margin deposit out of the client segregated trust account while a client maintains his/her open position?

Required margin deposited by clients, physically remain in the client segregated trust account while clients maintain their existing margined positions. Certain brokers may be entitled to withdrawal required margin deposits funded by clients, into their ‘house’ account, while clients hold their existing margined positions, funds should be returned once the client has exited out of their existing margined positions.

At what point is Saxo Capital Markets entitled to move funds held or invested in the client segregated trust accounts to their own Saxo Capital Markets ‘house’ bank account?

Situations when funds are withdrawn from the client segregated trust account and transferred to Saxo Capital Markets ‘house’ account, are situations when those funds are no longer considered client money. This may include, but not limited to situations where the client realises his/her losses; is charged commission, interest and/or financing rates; other similar fees and charges; or as permitted under the Corporations Act (Cth) 2001.

Further Info:

Saxo Capital Markets does not at any point associate or mingle its own funds with client money held or invested in client segregated trust accounts, and vice-versa.
Saxo Capital Markets client segregated trust accounts are all held and maintained in Australia, at no point does client money leave the Australian jurisdiction.
Saxo Capital Markets parent company, Saxo Bank A/S headquartered and regulated in Denmark, do not have the power, access and control to withdraw client money out of client segregated trust accounts.
To understand the counterparty risk associated with client money, refer to Saxo Capital Markets Combined FSG & PDS under counterparty risks for client money. ​

TOCM (Transparency of Client Money)

What is TOCM?

TOCM is a quarterly review on aggregated client money statements and client segregated trust accounts held with Saxo Capital Markets, conducted by a ‘Big 4’ audit firm, and delivered to all of Saxo Capital Markets’ clients.

The scope of the auditors review is based on the following;

​Audit of internal controls and procedures in respect to Saxo Capital Markets’ handling of client monies;
Audit of physical cash deposited with Australian Authorised Deposit-taking Institutional (ADI);
Reconciliation of balance in clients’ trading accounts and the segregated trust bank accounts.

The report provided by Saxo Capital Markets auditors will include an overview of Saxo Capital Markets’ responsibilities for client money, the auditors responsibilities and inherent limitations and last but not least a very clear and concise conclusion of the review. The report is delivered to Saxo Capital Markets clients on a quarterly basis.

What is Saxo Capital Markets’ motive behind TOCM, and why is it important?

Integrity and honesty are Saxo Capital Markets' core organisational values. TOCM is simply another step towards providing its clients comfort, and confidence in their preferred online broker. Saxo Capital Markets believe investors are entitled to know that their funds are where they say they are; TOCM empowers Saxo Capital Markets clients with this advantage.

By offering TOCM, a regular and independent 3rd party opinion on the transparency and visibility of client funds, Saxo Capital Markets aim to give its clients the confidence and assurance that no other Australian Financial Services License (AFSL) holder currently offers.

“At Saxo Capital Markets, we believe that we have an obligation to demonstrate that we actually “walk the talk” by applying the legislation and exercise consistent care with our clients’ funds” – Anthony Griffin, CEO.

Finally, Saxo Capital Markets is the ‘first mover’ on Transparency of Client Money. Saxo Capital Markets hope that other brokers will join in on this initiative to restore and improve investors’ general confidence to the industry.
Source: http://au.saxomarkets.com/tocm
 

foreigner

Est. 12480 Hours and Counting
Did God just make come back! lol

"I strike down upon thee with great vengeance and furious anger, those that try to poison my brothers"

Ausdoc you are the proverbial whirlwind with the grace of an act of God.
 

Jemook

Official GlobalPrime Rep
Re: WARNING ::Re: Introducing Global Prime Forex

AusDoc said:
I issue a warning to members and readers of this thread, in two parts, as follow.

Part 1

Jemook is a very good marketer. He completely understands the basic psychology of selling. He gets the "know me, like me, trust me" mantra of modern marketing moguls. None of this is a bad thing. Jeremy communicates in a clear and direct fashion and thereby creates certain impressions about his actions and intentions. Again, nothing wrong with this, it is actually quite refreshing (and of course he knows this and uses it to great advantage). If you study his work at, or contribution to, the SteveHopwoodForex forum you will see how he connects with prospects, works them and no doubt 'closes' many deals as a result of his building a reputation and relationships. Again, all good, but remember, it is marketing. Jemook the trader, Jemook the forum member, Jemook the 'trader's-friend' broker, Jemook the all-round-good-guy is always Jemook the salesperson.
Hi AusDoc,

Thanks.. I think? :)

As you said on Steve Hopwoods forum (and Forex Factory) you can go through my first posts when I was teaching other members strategies that I came up with for a couple of years. I developed a nice following, and I earned the respect of Steve and fellow members.

During this time myself and my colleagues were trading with Global Prime as our broker and GP asked us if we wanted to come in and take over the FX side of things. The relationships I had from before definitely helped to bring a couple of clients on board in the beginning days but the only reason we've kept growing is by word of mouth due to our reputation.

It's definitely been a wild ride and an amazing learning experience jumping into the broker side of things and getting a firm understanding of what's happening on the other side of MT4. There was also a lot of things that needed fixing with GP which took time to implement.

When it comes to marketing I don't think my method of communicating and interacting with people has changed at all since before I came across to GP. I'm passionate about FX, I'm passionate about our clients and I really enjoy this gig.

FX Traders in general are skeptical of brokers and so they should be. It took us a while to prove ourselves and what we bring to the table and our business now sells itself by the good word going around via forums, and glowing Forex Peace Army reviews.

Of course one of the hats I wear is 'Jemook the salesperson' however the relationships I've made along the way are genuine. I'm not trained in marketing, I just speak to others how I'd like to be spoken to.

Anyway thanks for the nice things you said.. I agree with Part 1. Our marketing ideas boil down to staying away from traditional advertising and instead investing time in building long term relationships with honesty, integrity and passion.

Will come back on Part 2 soon.

Cheers,
Jeremy
 

jack

Administrator
Staff member
Jem, to be fair you didn't quite address the capital/fund structure concern of his..
 

Jemook

Official GlobalPrime Rep
Jack said:
Jem, to be fair you didn't quite address the capital/fund structure concern of his..
Hi Jack,

See the end of my post "Will come back on Part 2 soon." Lots on at the moment, will reply when I can find a chunk of time to give it the response it deserves as safety of client funds is a very important topic.

Cheers,
Jeremy
 

AusDoc

Well-Known Member
Re: WARNING ::Re: Introducing Global Prime Forex

Hi Jeremy,

Jemook said:
Thanks.. I think? :)
I understand. ;D

I have no problem complimenting Jeremy the person. You are straight-talking and polite.

However, I have big problems with GP's structure and handling of clients' funds and the purpose of Part 1 is just as it appears. You have joined FXGears as a sales rep and I am highlighting this for the members for the simple reason that you are indeed so different when compared with most brokers' sales reps that some may quickly forget.

Your claimed passion for FX is fine. We can relate to that. It would be an asset to your sales role and make work more enjoyable for you. That's great.

Good FPA reviews for GP is definitely a worthwhile achievement, since most would know how easily anyone can fall into disrepute there. It doubtless speaks well of your customer support.

However, the greatest risk to your clients comes from significant events that clearly have not yet happened and perhaps smaller ones that have been adequately handled so far. Those reviews will mean nothing when people realise their position following an adverse event.
 

Jemook

Official GlobalPrime Rep
Re: WARNING ::Re: Introducing Global Prime Forex

AusDoc said:
Hi Jeremy,

I understand. ;D

I have no problem complimenting Jeremy the person. You are straight-talking and polite.

However, I have big problems with GP's structure and handling of clients' funds and the purpose of Part 1 is just as it appears. You have joined FXGears as a sales rep and I am highlighting this for the members for the simple reason that you are indeed so different when compared with most brokers' sales reps that some may quickly forget.

Your claimed passion for FX is fine. We can relate to that. It would be an asset to your sales role and make work more enjoyable for you. That's great.

Good FPA reviews for GP is definitely a worthwhile achievement, since most would know how easily anyone can fall into disrepute there. It doubtless speaks well of your customer support.

However, the greatest risk to your clients comes from significant events that clearly have not yet happened and perhaps smaller ones that have been adequately handled so far. Those reviews will mean nothing when people realise their position following an adverse event.
The truth is there has been plenty of situations in the past where clients were not happy about things - GMT time, funding options, requiring certified docs, no livechat support, having our own servers, removing suffixes, adding IB and MAM technology, offering different denominations.. the list goes on. For each of these issues we had to fix up processes and implement changes and each time it's added greatly to our reputation when clients can see us changing things here and implementing reforms at their requests.

The way GP handles client funds is extremely important however there haven't been many requests or red flags raised to change things. If I can see there is an issue we can work together to change things however I want to sit down with our compliance manager and go through your points together to see his understanding of the structure.

So if there's anything more you'd like to add or specific questions you want answered on the security of client funds let me know and I can make sure I bring you back the correct answer rather than just my interpretation of it.

BTW I've been poking around and I'm really liking this forum. So far I've only seen smart, mature banter and discussion. Keep it up.

Cheers,
Jeremy
 

AusDoc

Well-Known Member
Re: WARNING ::Re: Introducing Global Prime Forex

Jemook said:
The truth is there has been plenty of situations in the past where clients were not happy about things - GMT time, funding options, requiring certified docs, no livechat support, having our own servers, removing suffixes, adding IB and MAM technology, offering different denominations.. the list goes on. For each of these issues we had to fix up processes and implement changes and each time it's added greatly to our reputation when clients can see us changing things here and implementing reforms at their requests.
Yes, I know. I am always happy to give credit where it is due. You can see here that I acknowledged GP's responsiveness to traders:

http://fxgears.com/forum/index.php/topic,326.msg5613.html#msg5613

Jemook said:
The way GP handles client funds is extremely important however there haven't been many requests or red flags raised to change things. If I can see there is an issue we can work together to change things however I want to sit down with our compliance manager and go through your points together to see his understanding of the structure.

So if there's anything more you'd like to add or specific questions you want answered on the security of client funds let me know and I can make sure I bring you back the correct answer rather than just my interpretation of it.
That's a great response Jeremy. Along with many others I have pressed many brokers over the last couple of years to go beyond the minimum requirements set by ASIC and to provide the sorts of things you can see your competitors are now offering. My observation is that it is the larger, well funded and longer established ones that have responded (and they were clearly reluctant at first). They now see that it is in their best interest to act this way, for two reasons at least. It helps to keep the regulators from intervening and forcing the changes and it gives them some competitive advantage right now.

Among those dragging the chain, there seems to be a general reluctance to change or do anything they don't have to do, according to law. Then come the gripes about increased costs. Then the scrutiny of competitors to see if indeed anyone else is changing. The whole thing is pretty sad. It reveals an absence of leadership, lack of vision and resistance to customers rather than responsiveness.

Evidence of GP's previous willingness to find out what customers really want and then sell it to them (provide it to them if you prefer) with good grace is certainly to your credit. However, the issues we are now talking about are definitely core business issues, not peripheral, not veneer. These I expect will be more difficult to change, but you are certainly right, they are very important issues.

The current situation with GP is about as bad as it gets. These things involve core structures and operations.

1. You use client funds for margining
2. You do this in a pooled sense, exposing each client to 'any and all' client risk
3. You immediately change the status of received deposits, taking them from a trust account and handing them to a third party
4. Clients have no direct relationship with that third party and little or no effective protection from them (the issue isn't about when things work, but when they fail)

The more time clients' funds are out of a secure trust account, the greater the risk. Clients' deposits should be handled in the same or similar way to how the brokers in my above posts now provide.

Brokers need to be sufficiently capitalised to cover margins. Using clients' money creates an environment of excessive counterparty risk.

Pooling of clients' funds such that you make all clients accept the risk belonging to other clients is completely unacceptable. It is the biggest anomaly in the current legal framework and simply cannot be justified. Traders are in the business of taking on risk, but some risks that they are forced to take by brokers are unconscionable.

The gold standard, that I think should be mandatory, is provision of individual trust accounts. These are already available and in operation at other brokerages so it can be done. Among MT4 brokers, ThinkForex for example, provides some degree of individualisation for accounts greater than $160,000. They need to do better, but it's a start.

Finally, while I'm at it, why can you not provide a technological solution based on account monitoring that ensures, short of a truly catastrophic failure, that open trades will be closed at some (possibly elective) threshold account balance? You can't guarantee an exact exit price but you can certainly terminate trades. Many brokers do this, one way or another. If a trade fails and losses ensue, that's trading. But I see no good reason why trades could not be closed to protect an account, avoiding the situation of it going out backwards. This makes a broker a supportive partner in a trading business and does not, or should not, put them into any conflict of interest.

I am happy to elaborate on anything if you like but I think the above should provide a useful agenda for your discussion.
 

rod178

Well-Known Member
My attitude to 'segregated accounts' with Brokers is that it is 'money at risk' , hence always keep the minimum funding required to fund three losing trades in a row plus margin, using the maximum possible leverage.

Follows is a quote from another Broker's PDS, which at least states it (ie the risk') in a straightforward manner -

"...It is important to note that our holding your moneys in one or more trust accounts may not afford you absolute protection. The purpose of trust accounts is to segregate our lients’ money, including your moneys, from our own funds. However, an individual client’s money is co-mingled into one or more segregated customer accounts.
Furthermore, segregated trust accounts may not protect your moneys from a default in the segregated customer accounts.
Should there be a deficit in the segregated trust accounts and in the unlikely event that we become insolvent before the topping up of the segregated trust accounts in deficit, you will be an unsecured creditor in relation to the balance of the moneys owing to you...."



Just remember
1) One large default in the 'pooled' segregated account may wipe out all the pooled funds.
2) that in an insolvency unsecured creditors are at the bottom of the food chain and usually getting little, if anything at all.
3) that the Broker quote above is merely following ASIC Regulatory Guide 227 Disclosure Benchmarks
 

Jemook

Official GlobalPrime Rep
Rod, AusDoc.. Cheers for the follow up posts. Please bear with me while I come back to you - we've got some new team members on board this week that we are training up so a bit busy but I will endeavour to come back as quick as I can on this.


Cheers,
Jeremy
 

AusDoc

Well-Known Member
No problem Jeremy. You'll notice I had margins on the brain, a fatigued one at that, yesterday. Just reinterpret in terms of hedging where appropriate please! :D

Thanks
 

Jemook

Official GlobalPrime Rep
Just a quick message to say I haven't forgotten about you guys. Apologies for the delay in coming back but I'll get there soon, hope that's okay.

Cheers,
Jeremy
 

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