76West - Matthew please explain what happened

Hi Matthew,

I received the following message from the vendor of 76West:

"Karl,

I am sending this email to announce that I will cease trading the 76West Auto Trade Strategy and end my relationship with Collective2 effective immediately.

On June 3, 2016 I placed one trade through the Collective2 platform that entered short 4 ES contracts at 10:34 EST at 2087.75 with a protective stop loss order placed. The trade was executed and exited on a stop loss at 11:34 EST at 2092.25. The position was closed in all accounts.

This was the only order I placed that day. At 1:03 EST a trade was executed on behalf of the 76West trading system that was not authorized or consented to or known by me. I had no knowledge of this trade being placed. Due to this I believe the trading statistics and auto trade data are incorrect for that date that are showing on the Collective2 site under the 76West strategy. It should show only the trade listed above.

Some accounts may have been negatively impacted by this, please check your brokerage statements. There should be only one transaction for the 76West Auto Trade Strategy as outlined above that was closed out at approximately 11:34 EST on 6/3/2016.

It is sad to see a great trader - probably the best discretionary day trader on C2 - go under these circumstances. What happened, whos fault was it? I lost a great deal of money in this instance. Unfortunately Leslie did not follow my advise to get TOS certified and not leave the trading desk before closing, especially on a Friday, then this thing would have never happened in my opinion.

I am not following her to her new broker, I do not want to spread and dilute my trading capital among various brokers, in addition IB seems to be by far the safest and best capitalized broker - who knows how many other brokers will go bust during the next financial crisis. But please, please try to correct the fault if it was indeed C2’s fault.

Thanks,
Karl

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I looked at her history only saw a single trade that day short at 2087.75 exit at 2095.75 and 2096.75 instead of 2092 - as she claims - . Whatever happened here a real trader shouldnt lose his shirt because of extra handles loss . It is very clear she is touting for bussiness outside c2 to collect fees based on trades size .

Hi, Karl -

While I’d prefer not to use public forums to conduct a debate, I can say the following: The strategy creator blames C2 for an unprofitable trade, and asked me to change her track record to remove the trade, which I refused. My careful response is that a strategy developer has a responsibility to monitor her own strategy, and be aware of positions and trades within it. It’s easy to blame C2 for your own actions, or lack of action.

After I refused to change her track record to remove the losing trade, the strategy developer in question has begun soliciting C2 customers to leave C2, which is a violation of our legal terms of service. The whole incident is a little disheartening. I wish it could have ended better.

But I’ll stand by our policy of not adjusting track records to remove trades at the request of strategy creators.

Matthew

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The problem is that C2 is probably not meant to be an execution engine for fast trading systems like the 76 WEST that open/close a trade (sometimes) in the range of few minutes.(because of the delay / latency between the signal provider and the broker of the investor . Then you can add the aggravation when limit orders are employed :

  • mismatch that happens when hypothetical fills are not filled in the real world
  • slippages when limits order are converted to market orders.

C2 use the assumption that limit orders are always filled when touched which is not what happens (always) in the real world. I am not surprised of your mismatch unfortunately.

+1 on that policy.

what would happen if C2 start to accept to remove trades because of claim from developers?

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Hi, Lutjens -

I don’t agree that the issue is one of latency (i.e. delay between signal entry time and broker execution) which is typically minimal.

The issue typically is one of market liquidity. The typical pattern I see is that a strategy developer may have a very good strategy that he is able to trade in his own personal account very successfully, which makes a couple of ticks here, and a couple of ticks there. The strategy relies on picking up little pockets of liquidity at the bid or ask using limit orders.

But once that strategy developer begins to get followers, the available liquidity isn’t enough to fill the entire population of traders. And then you have the case where some subscribers get filled at the limit order, but others (the unlucky ones) don’t.

In these cases, incidentally, C2 publishes the volume-weighted-average-price (VWAP) of all the traders, both lucky and unlucky, averaged together.

This isn’t really a C2-specific issue; it’s a reality-specific issue.

By the way, I’m not suggesting this is related to the strategy in question in this thread. This is just a general observation sparked by your last comment.

MK

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