"Autotrading here just facilitates the entry of orders if a subscriber chooses to use the function, rather than choosing to enter the orders manually from identical ITM or email trade notices."
When C2/TB is configured properly, the subscriber has no opportunity to review a trade before it is placed. When the vendor enters the trade all autotrade subscribers have the trade placed in their accounts automatically.
It is true that the subscriber has a choice to use this function, just a person has a choice to setup a true autotrade account (where the broker directly places trades in client accounts) but in either case once that choice has been made the actual trades are out of their hands (and in the hands of the system vendor). Is there really that big a difference?
But, Pete, I don’t think you can say, "The difference between what C2 calls AutoTrading and what the SEC calls autotrading is a very small, minute, legalistic definition. Because it is such a small difference, it’s really no difference at all."
In fact, government regulation is all about small, legalistic definitions. It’s undeniable that C2 simply publishes non-individualized advice. Customers act on that advice however they want. Some choose to set up a piece of software to forward that advice to their brokers. (A piece of software that C2 doesn’t even provide, incidentally.)
That the result of setting up this software is effectively the same as having a vendor place trades directly in a customer’s account is not important. There are significant differences in the methodology of achieving those similar results. And those differences are what is important.
To see how your definition lead to strange results, let’s look at the following example. Yahoo publishes technical indicators (bullish and bearish flags, say) in RSS format. RSS format is specifically meant to be read by a machine. If a customer sets up a piece of software that reads that published information, and acts on it, has Yahoo become a financial advisor?
Obviously the example is a little extreme, but in my mind, it’s pretty much what you suggest.
MK wrote: [But, Pete, I don’t think you can say, "The difference between what C2 calls AutoTrading and what the SEC calls autotrading is a very small, minute, legalistic definition. Because it is such a small difference, it’s really no difference at all.]
I agree completely, my only point is that this is new and therefore I doubt that the SEC has determined yet how something like C2 fits with their existing definitions. To say at this point that it isnt a problem is premature until the SEC has ruled on it.
[There are significant differences in the methodology of achieving those similar results. And those differences are what is important.]
To be honest I have no idea what is or is not important to the SEC nor am I trying to act like I do. However if it were me I would think that it would be the end result and not the technical implementation that would matter most.
I knew an example like your Yahoo example would be thrown out sooner or later but lets be honest, the whole point of C2 is to provide traders with specific signals so that they can trade and make money. If you wrote or used some software that took Yahoo data and traded then it was the software that made the trading decisions, not Yahoo. Yahoo can honestly publish disclaimers that you should not rely on anything they publish - can C2 offer any such disclaimers when the whole point of C2/TB is to provide specific trade signals? I don’t see you claiming anywhere that this whole site is for entertainment purposes only.
Anyway, thanks for the thoughtful discussion.
Maybe a better example would be something like “Money” magazine, or “Smart Investing.” These are magazines that very specifically do publish financial advice.
I don’t know for certain, but I bet at least one publication like this does publish RSS feeds, which are easily actionable by computer software.
The point of the magazine is to give advice. Just because that advice is packaged in a way that makes it tradable by someone, if they choose, doesn’t make Money magazine a financial advisor. It makes it a useful magazine.
MK
In the future the SEC may try to bend the rules such that they apply to C2. So far I agree with Pete. But I think they’ll have to do quite some bending before they succeed. Moreover, they are restricted by the constitution and can’t just change the rules as they wish.
It is obvious that under the 1st amendment everyone may publish the opinion “stock XYZ will go up” in a paper magazine. Now I can build a computer configuration that scans this magazine and sends a corresponding trading signal to my broker. Would me building that machine make the publishing of that opinion illegal? I don’t think so.
Now suppose that it is not a paper magazine but a website on which someone publishes his opinion about stock XYZ. It would even be easier for my to build a program that reads this website and that trades accordingly. Would this change very much in comparison to a paper magazine? Again, I don’t think so.
Now suppose the opinion is not published via a website but via e-mail or some other internet signal. Would that really make a legal difference? Again, I cannot see why.
Due to my own effort, however, I cannot prevent the buying or selling of a stock once I’ve turned the trading machine ‘on’. On the other hand, if I really don’t like a trade, I can immediately sell whatever the machine has bought, or buy back whatever the machine sold. I will only lose the commissions and spread, but these are minor quantities.
So in the C2 autotrading concept I’m still in full and immediate control of my account if I wish. That I perhaps prefer to go skiing instead of watching the account, is my freedom.
Furthermore, as I said before, the SEC will primarily try to protect naive individual investors. However, in the present set up there at least 73 barriers that one should take before C2 autotrading works, and at each of them it is easier to bail out then to continue. So practically I don’t think that the SEC has much reason to interfere.
Jules
Sorry, my post was unnecessary, MK wrote essentially the same while I was breeding out this one.
Jules
Come on MK, does any magazine say buy ESM6 @ 1317 limit at 11:30am 3/17/06? And again I bet if you look hard you will find plenty of disclaimers in those magazines that nothing they publish is intended to be taken as specific financial advice.
C2 can’t use any such disclaiming wiggle words because the whole point of C2 is to give very specific trading instructions, so specific that they can be transmitted directly to a broker to be acted on without any changes or user intervention.
It is possible to use an RSS feed from a magazine to generate specific trades however that is a far cry from C2 which not only offers it (a feed of specific trades) but specifically touts that as a feature/point of the site.
First, the SEC DID go after newsletter writers a couple of decades ago. In particular, I believe it was Bob Gross of Professional Investor that was told to register. He told them to pound sand. In the end, he won.
To extend Matthew’s example a bit, and to, hopefully, rebut Pete, let me try another example. I get some newsletters - previously by mail, but in this modern age they’re delivered by email. A few of them offer specific recommendations, but not individually tailored. Now, because the format of these newsletters is consistent, it would be trivial to write some software to parse them and “autotrade” the recommendations. Would the newsletter writer now be required to be registered? What if I gave or sold this parsing/autotrading software to the public?
Hans.
Pete,
That C2 transmits usually more specific signals doesn’t change the fact that these signals are opinions. They are more specific because the publishing process is much faster than a paper magazine. However, the 1st amendment is not confined to slow or broad opinions.
C2 does in fact have a lot of disclaimers.
Jules
Oops. Several similar posts appeared while I was typing mine…
As Emily Latella would say, “Never mind”.
Jules wrote: [In the future the SEC may try to bend the rules such that they apply to C2. So far I agree with Pete. But I think they’ll have to do quite some bending before they succeed. Moreover, they are restricted by the constitution and can’t just change the rules as they wish. ]
Jules, I have no idea how much power/authority/scope the SEC has but I do not see this as being as constitutional issue nor do I think they would need an act of congress to extend their authority to make an unfavorable ruling vis a vis C2 and autotrading. We may not like it but it doesn’t make it unconsistutional.
[So in the C2 autotrading concept I’m still in full and immediate control of my account if I wish]
You example of bailing on a C2/TB position that you don’t like after the fact is no different then what someone who had a true broker autotrade account or managed account. It may be more work to revoke the power of attorney but I’m sure as the legal owner of the account you can call the broker and tell them to close out any trade you don’t like.
In terms of your publishes magazine example (like MK’s), I see where you are going but I think there is still a big difference between generic published advice (which is often heavily disclaimed) and the “published advice” from a C2 system. C2 doesnt sell advice, it sells very specific trade instructions. I do think its a difference that matters.
Anyway, I hope I’m not coming across as being argumentative, I’m a little bored today so I’m killing time in the forums here and elsewhere 
Jules, I guess we are going to have to agree to disagree because it seems we are coming down to semantics. I don’t consider C2’s trade signals to be opinions and although no one has presented specific examples of newsletters or magazines I bet that if they did I could point to disclaimers that provide CYA for the writers/publishers. I think the specificity of the recommendations (e.g. comparing a buy rating on IBM as opposed to a C2 trade on IBM) does matter as well although I agree its arguable.
C2 may have disclaimers but there is no way they can ever say that the signals are not intended to be taken as specific trade recommendations when the whole point of C2/TB is to take the trades generated automatically without an vetting or review by the subscriber.
Pete … what if C2 existed exactly as it does now, but did not allow an interface with Tradebullet (or any similar software) and only made the vendor trade suggestions available via ITM and email? I don’t see how the addition of “autotrading” through Tradebullet changes anything at all with respect to vendors or C2 and the SEC definition of autotrading.
Here’s another situation. I had a brief subscription to Prosignal, a vendor who does offer specific trade recommendations via email signals, as well as notations on their charting program (forex). I paid a monthly fee for their service, and with a little help from a friend developed a simple Perl program to check my email every 15 s, look for a Prosignal trade email, parse the contents, write a Tradebullet order file into a directory on my PC, and TB executed the order in my IB account without my intervention. Is Prosignal in this case any different from a C2 + vendor combination? The fact that I automated the trade entries with a Perl program should not change the status of the vendor, who has no idea that I am “autotrading” their advice.
Pete: Here’s an example of a recommendation from an email newsletter that I receive:
April Gold Futures investors sell short on a stop at $540.40 with $548.80 ops. Target: $500-$520.
I think this is quite specific, and could easily be parsed by software and autotraded. (To avoid potential problems with the publisher, I grabbed an email from a couple of weeks ago, so the advice is stale…)
Hans.
To extend the concept of Randy’s first paragraph -
If Tradebullet were banned, couldn’t someone parse the C2 emails/ITM and autotrade it as well? What if someone distributed such software? Could it be called Tradebullet 2? (jk on that last part.)
Hans.
I wrote [C2 may have disclaimers but there is no way they can ever say that the signals are not intended to be taken as specific trade recommendations when the whole point of C2/TB is to take the trades generated automatically without an vetting or review by the subscriber. ]
Actually after I wrote that I decided to see what the C2 disclaimers were and was kind of surprised to find this in the TOS:
"19. SPECIAL ADMONITION FOR PEOPLE RELYING ON THE TRADING ADVICE OF OTHERS
The phrase “Let the investor beware” is important to remember. The Service is provided for informational purposes only, and no Content included in the Service is intended to be the sole or primary means of making decisions for trading or investing purposes. Collective2 shall not be responsible or liable for the accuracy, usefulness or availability of any information transmitted or made available via the Service, and shall not be responsible or liable for any trading or investment decisions made based on such information."
Errr, “informational purposes only” & “no Content included in the Service is intended to be the sole or primary means of making decisions for trading or investing purposes” ?!? Exactly how can that be when the whole point of autotrading with C2 is to make trades without user intervention. Can’t have it both ways MK.
Pete,
You don’t sound argumentative to me. I think it’s just a good discussion.
I believe MK, and a few minutes ago Hans, cited cases where the SEC lost because of the 1st amendment. The SEC can try to ignore consitutional matters, but as I said, then the SEC won’t have the last word on it.
In a managed account you can close a trade, but it may take a long time with all kind of paper work. So you don’t have immediate control. I used this word in my previous post because I think it is important. Whithout immediate control you may be way too late, and have a serious loss before you can close. With C2 autotrading on the other hand, you can interfere within a second by two mouse clicks. That is practically a huge difference.
With respect to C2 giving more specific advice: But why would that fall outside the 1st amendment?
Jules
[If Tradebullet were banned, couldn’t someone parse the C2 emails/ITM and autotrade it as well? What if someone distributed such software? Could it be called Tradebullet 2? (jk on that last part.) ]
Don’t you think that autotrading and specifically TradeBullet being linked/described and supported here makes the situation different then someone who writes some software to parse some feed and turn it into an automated trading system.
C2 is waiving a big flag saying “come here and autotrade our systems”. I can’t see how you can comapre that to someone jury-rigging some software to cull trades out of a feed that was not intended nor advertised to be used for that purpose.
[In a managed account you can close a trade, but it may take a long time with all kind of paper work. So you don’t have immediate control.]
Actually I have first hand experience with this (thanks Hawk-FX) and I can tell you that all it took was a fax and I had full control of my account. It may not have been immediate (perhaps an hour,took them some time to create a new account for me and transfer the positions over) but in my specific situation I wasnt pressed about it and don’t know if I could have gotten it down to minutes if I had started screaming on the phone that I wanted those positions closed immediately.
[With respect to C2 giving more specific advice: But why would that fall outside the 1st amendment? ]
The SEC has a specific role, if the SEC decides that what C2 falls within its province then it has the right to regulate it. There are many things that are covered by the 1st amendment that are still regulated. Ever try yelling “fire” in a crowded theatre and then later claim first amendment rights? Of course if anyone thinks the SEC is overstepping their bounds they can take legal action against them too.
This thread is developing to fast for me, I’m getting replies before I finish my own post… I have to go now.
Jules
