Pete,
On the danger of starting the whole Hawk fx discussion here again: If you had immediate control over your account and were so opposed to down averaging, why didn’t you close those positions right after Mark opened them? Either you didn’t give full disclosure in the Hawk fx discussion (doing as if it was entirely Marks responsibility while you saw it happen and did nothing) or you didn’t have such a degree of control as you now suggest.
(Sorry if this sounds a little like an attack, but I don’t have the time for a more subtle formulation. I don’t mean it hostile)
Jules
No problem Jules. I didn’t revert control of the account back to myself until I received an (unsolicited) email from the broker saying that they had been unable to reach Mark by email or phone. Prior to that I just had anecdotal stories of subscribers sending him email and hearing nothing back (I had not tried to contact him myself). Given that notice from a trusted source I felt it prudent to get control back but that was long after Mark failed to hedge and allowed the trading losses to exceed what he promised (in writing).
But on to your larger point and more on-topic in this thread - you are correct, C2/TB allows a level of granularity for a subscriber to “interfere” with a system that no managed account could ever have. I doubt most managers would allow you to take control back every other day for instance - its probably a one shot deal (due in no small part to the fact that their compensation is tied to the performance of the account so its no wonder they wont want you screwing up their trades)
However that sounds like more a question of degree & timing and begs the fundamental question, when you are not taking an active role but instead allowing the system vendor to trade your account unfettered via C2/TB then is there really much a difference?
Does that speed at which you can get control of your account back (seconds vs minutes/hours) or the granularity on the control you have over individual trades (after they have already been placed automatically) @ C2 really distinguish the two enough to avoid running afoul of the SEC rule on autotrading?
I don’t know and really all I am saying is that it appears like a big grey area to me and not a black and white clear cut issue like some in this thread seem to believe.
Hans was kind enough in another thread to bring up a point that I think bears mentioned here.
When you are using C2 with TB your trade fills are sent back to C2 so C2 is in fact very aware of who is autotrading any given system using TB.
So that even further distinguishes C2 from the examples of published signals say from an RSS feed or an email newsletter. In this case C2 does not represent just a one-way broadcast of specific trades but instead is actually part of a 2-way integrated trading system that starts with the system vendor and goes all the way to the brokerage account (where the fill is recorded).
I know I’m way over my post limit for the day but I have a hypothetical.
Let’s say you had a managed account in which the account manager places trades for you but you still have full access to the account (to open and close trades). Let’s also say that on any given day you can tell the account manager not to place trades in your account, basically turn him on or off at your whim.
Let’s further say that because you may interfere with otherwise profitable trades instead of paying this person who manages your account based on the account performance (profits) you pay him a flat monthly fee.
Would such an arrangement still not require the account manager to be properly registered with the SEC? How is this fictious scenario different then C2/TB?
Well, If C2 where to be implicated in a lawsuit, their neck goes first on the chopping board before the vendors as they were the one who started this “Autotrading” idea and assured us all that it’s perfectly fine with the regulators. I would also think that the buck would start and stop with C2 more so if the regulators see that C2 is strongly encouraging the use of this kind of execution because of financial interests (kick backs from TB’s monthly recurring fees). Of course, I don’t know if that is actually taking place.
Wow, this thread really took off. I’ll try to review some of the posts later, but I offer this to Matthew…
Right now, the majority of subscribers and system providers would side with you. Why wouldn’t they? I guarantee that if the SEC would come knocking and lawsuits followed, EVERYONE would be pointing the finger at ONE person - Matthew.
As a system provider, they will say “your website specifically told me that I do not need to register”.
As a system subscriber, they will say "I lost money and you should have made these providers become registered, I want my money!"
Make no mistake about it. As soon as $$$$ is involved, you (Matthew) will be on an island by yourself and your lawyers.
The process of being registered isn’t that difficult, but does throw a monkey wrench in C2’s plans.
In response to some of your posts
CHRIS MORSE you are interesting fellow. Sorry that my posts upset you and you end up resorting to immature remarks. You did this on the other thread as well, very classy!
PETE - I had a great conversation with the SEC rep. She is a nice lady. If you dont like my remarks please contact her yourself.
PAL I agree with Pete - sounds like more mumbo jumbo Pal-speak. It would be entertaining to read a forum thread exclusively for you and Chris Morse.
PAUL KING While the SEC may not have contacted you, that doesnt mean you are in compliance. The majority of SEC cases deal with them going after an individual or firm that has ALREADY violated the rules. Their view is, the rules are there easily accessible on our website. If you violate them, thats your problem.
JULES I dont need you or anyone to ask me to do something. If I want to contact the SEC, then I am going to.
MK comparing to what is offered on C2 to Money Magazine isnt even close. I cant call my broker and tell them whatever you read in Money Magazine, do it in my account! I can set up an account here and set it up so that my account does anything the system provider tells it to.
HANS if the person just provides a general email newsletter, they do not need to be registered, regardless of what you then do with that info. Once you allow that newsletter to be auto-traded, you are over the line.
RANDY MAY you said 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? IF it existed like that, with NO auto-trading, there is no need for registration.
PETE - good points on the disclaimers that are on this very website 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.
JULES just because you can interfere with the trades does not mean you are not auto-trading. Its your account and noone trumps your decision. Just because you have this ability, that does not mean you are not auto-trading.
Last post for tonight…
It can be said that C2 may not be violating the “letter of the law”, but this thread has shown that there are some serious implications to the “spirit of the law”.
"PETE - I had a great conversation with the SEC rep. She is a nice lady. If you dont like my remarks please contact her yourself. "
Ouch. I asked you if you explained to SEC how C2 really works or simply said that C2 offers “autotrading” without explaining what that means. I don’t understand why you can’t answer that simple question rather than throwing out a pointless jab like your last sentence.
Jim,
At least I applaud for your courtesy to respond to everyone individually.
I already admitted that you have the right to ask whatever you want. As I said, then I have the right to be unhappy with it. I still don’t see how your action would be of benefit for yourself - unless you want to become a system vendor or a concurrent for C2, but that seems unlikely given your opinion. So the only reason that I can imagine why you did this, is that you are trying to spoil our fun just because you enjoy to ruin parties of other people… Perhaps this is my lack of imagination, but I’m open for other explanations.
Perhaps you’re right that the ability to interfere is not relevant for the formal autotrading definition. However, this discussion between Pete and me was about the question whether there is practically a distinction between the two concepts of autotrading. A lack of distinction can eventually also have consequences for the legal matters. I think there is a practical distinction though.
Jules
Pete,
See the other thread. As I understand from the quote of the SEC there, the situation that you describe would qualify as SEC- autotrading, because you agreed with your broker that someone else has permission to trade on your behalf. C2-autotrading does not include such an agreement though.
Let me give another hypothetical example: Suppose that someone else has a computerprogram for trading and he is so kind to give me a copy of it. I install it and I start to trade accordingly. Who would need a SEC registration then? The computer program? The other person - oh, in the meanwhile he died. But this situation is also very similar to C2 autotrading.
In fact I think that many system vendors would be happy to sell or hire their program to run on the clients computer IF they could be sure that no one would violate their copyrights by making illegal copies or hacking the source code. In this view C2 transmissions are no more than a sophisticated way to protect their copyrights: you can use the program, just like you can use an online dictionary, without having the opportunity to steal their product.
Jules
Perhaps you’re right that the ability to interfere is not relevant for the formal autotrading definition. However, this discussion between Pete and me was about the question whether there is practically a distinction between the two concepts of autotrading. A lack of distinction can eventually also have consequences for the legal matters. I think there is a practical distinction though.
Jules - look at what you are writing - you are basially saying ‘there appears to be enough of a grey area here that for now the SEC may have trouble enforcing this publication’. Yet, in another thread, you basically said that the SEC stands up for the small guy and would probably enforce rules on C2.
If you need to sit there and try to defend how C2 is not technically ‘auto-trading’ by the literal definition on the SEC’s website, that should give you a hint. How about that there is a forum section on here called “Auto Trade Forum”? I mean, come on, look at what is right here in front of you! Now look at it from an SEC investigator’s standpoint… “They are telling me this is not auto-trading, yet the site I am looking at says Auto Trade Forum. How is this not auto-trading?” lol.
"you basically said that the SEC stands up for the small guy and would probably enforce rules on C2"
No, I said that IF there are many complaints, the SEC will try to bend the rules IN the future. I don’t think that the present rules already are such. In terms of colors, I say that the situation is now white and may become grey and even black, Pete says that it is already grey and you say that it is already black.
So I said that it may become a problem while you say that it is already a problem.
The fact that C2 uses the word autotrade may indeed rise confusion. However, that someone in the SEC gets this impression after first reading doesn’t mean that they still think so after thorough analysis by lawyers. But perhaps it would be wiser if C2 adopted another word, say ‘robotrading’.
Jules
Jules - I agree with you there, it may be best to remove the term of auto trading from the site completely. Maybe MK can have a drawing - rename auto trading to something else and get the auto trading software, I mean XYZ software, free for 1 month!
Jules, from your other post:
"I’m not a US citizen, but it is my understanding that the SEC will primarily try to protect individual non-professional traders (like me) against themselves with all kind of annoying regulations. Then the C2 autotrade concept is practically not very different from the SEC autotrade concept."
Has your view changed?
No, it hasn’t changed. They can try, but that doesn’t mean that they will succeed immediately. Then they will try to bend the rules and eventually they may succeed. So I agree with you that this may become a legal problem in the future, but not with your claim that it is already a problem now.
I also mentioned the condition that there are complaints. Without complaints I don’t think that they will do anything. See also the SEC site about the Terry Tips case. There there were complaints, a power of attorney, false promisses, etc., all very different from the C2 case.
Jules
PS the fact that I’m a afraid that this may become a problem is why I’m not happy with you calling the SEC. If there was nothing to worry then I wouldn’t mind, and if it was already a problem then it wouldn’t make a difference either. I’m afraid that calls like this can increase the probability that it becomes a problem in the future. Perhaps I over-reacted - a call is not a complaint. But I still don’t understand what your interest is in this.
Jules
In fact I think that many system vendors would be happy to sell or hire their program to run on the clients computer IF they could be sure that no one would violate their copyrights by making illegal copies or hacking the source code. In this view C2 transmissions are no more than a sophisticated way to protect their copyrights: you can use the program, just like you can use an online dictionary, without having the opportunity to steal their product.
The above is a good point. There are some definite shifts in the way system developers/vendors think and act.
The trend has gone from selling the source code of a trading method to a limited number of people; to leasing the code to a limited number; to giving the code to brokers to trade for their clients; to publishing the trades to a larger number of traders who may choose to manual trade or auto-trade (done by the subscriber himself or by his broker); to finding potentially unlimited number of people and trade for them taking a good cut of the profits and give the source code to no one which would be the same as starting a hedge fund and managing the trades for an unlimited number of people including their own funds and not give the source code to anyone, except for not giving the trade details (for at least 3 months) to anyone also (because of the need to hide it from competitors, floor traders, specialists etc), potentially benefitting an unlimited number of people who have neither the time nor the energy nor the motivation to trade.
The fact that a hedge fund may choose to subscribe to a method at C2 makes it an invaluable source of information indirectly benefitting an unlimited number of people. The hedge fund may even choose to auto-trade a particular method or different markets from different methods. Even the system vendor (who is a subscriber to his own method) may be auto-trading his own account. The system vendor has no idea who is trading what or when or how (auto-trade or manual trade) other than the fact that some entity (a human including himself, a corporation or a limited partnership, an ET alien from a distant galaxy, etc.) has subcribed.
Leasing via a contract and or the developer not letting his code out to anyone also gets around the issue of too many people trading a method making it practically useless in the market place.
People stealing intellectual property (source code, trade details etc.,) is the driving force in this trend of increasing complexity. It is man’s rights to his life, liberty and pursuit of happiness that makes this transition possible. It is freedom that makes this benefit available to an unlimited number of people with no ones sacrifice or loss raising the productive capacity of whatever they perform. This is mutual trade to mutual advantage; the interests of the mind are one, no matter what the degree of intelligence, among men who desire to work together and don’t seek or expect the unearned.
To have the SEC or CFTC interfere in the system vendors auto-trading would be a violation of his rights.
A “right” is a moral principle defining and sanctioning a man’s freedom of action in a social context. A right is a sanction to independent action; the opposite of acting by right is acting by permission. If someone borrows your pen, you set the terms of its use. When he returns it, no one can set the terms for you; you use it by right.
A right is a prerogative that cannot be morally infringed or alienated. Factually, criminals are possible; innocent men can be robbed or enslaved. In such cases, however, the victim’s rights are still inalienable: the right remains on the side of the victim; the criminal is wrong.
If a man lived on a desert island, there would be no question of defining his proper relationship to others. Even if men interacted on some island but did so at random, without establishing a social system, the issue of rights would be premature. There would not yet be any context for the concept or, therefore, any means of implementing it; there would be no agency to interpret, apply, enforce it. When men do decide to form (or reform) an organized society, however, when they decide to pursue systematically the advantages of living together, then they need the guidance of principle. That is the context in which the principle of rights arises. If your society is to be moral (and therefore practical), it declares, you must begin by recognizing, the moral requirements of man in a social context; i.e., you must define the sphere of sovereignty mandated for every individual by the laws of morality. Within this sphere, the individual acts without needing any agreement or approval from others, nor may any others interfere.
In content, there is one fundamental right, which has several major derivatives. The fundamental right is the right to life. Its major derivatives are the right to liberty, property, and the pursuit of happiness.
The right to life means the right to sustain and protect one’s life. It means the right to take all the actions required by the nature of a rational being for the preservation of his life. To sustain his life, man needs a method of survival - he must use his rational faculty to gain knowledge and choose values, then act to achieve his values. The right to liberty is the right to this method; it is the right to think and choose, then to act in accordance with one’s judgment. To sustain his life, man needs to create the material means of his survival. The right to property, including intellectual property is the right to this process: it is the right to gain, to keep, to use and to dispose of material values. To sustain his life, man needs to be governed by a certain motive - his purpose must be his own welfare even if his welfare indirectly depends on the welfare of others who depend on him. The right to the pursuit of happiness is the right to this motive; it is the right to live for one’s own sake and fulfillment.
Rights form a logical unity. In the words of Samual Adams, all are “evident branches of, rather than deductions from the duty of self-preservation, commonly calles the first law of nature.” It would be a crude contradiction to tell a man: you have a right to life, but you need the permission of others to think or act. Or: you have a right to life, but you need the permission of others to produce or consume. Or: you have a right to life, but don’t dare pursue any personal motive without the approval of the government.
Just as man can’t exist without his body, so no rights can exist without the right to translate one’s rights into reality - to think, to work and to keep the results - which means: the right of property. The modern mystics of muscle who offer you the fraudulent alternative of “human rights” vs. “property rights,” as if one could exist without the other, are making a last, grotesque attempt to revive the doctrine of soul vs. body. Only a ghost can exist without material property; only a slave can work with no right to the product of his effort. The doctrine that “human rights” are superior to “property rights” simply means that some human beings have the right to make property out of others; since the competent have nothing to gain from the incompetent, it means the right of the incompetent to own their betters and to use them as productive cattle. Whoever regards this as human and right, has no right to the title of “human.”
I guess you were really in the mood again…
Pal,
My goodness, where do you come up with such writing?? Seriously, you should start a website called Collective Wisdom.com . People would subscribe to it and you would create a piece of software called AutoWisdom. People would then link their minds to it via a cable similar to the one used in the Matrix movie and then you would charge $59/month for unlimited downloads to cleanse their brain from all the harmful thoughts humans get exposed to on a day to day basis and replace them with powerful and moving thoughts. You’ll be rich beyond your wildest dreams and then you would no longer have to rely on creating all these systems on C2 . MK would not be happy of course for the loss of revenue and he’ll miss you dearly.
