EFT fraud? Specialist question.

masonic

debaura12 said:

Well I would like to see a better informed KIDD scenario - Perhaps you will entertain 

debaura buys ETF at 129, debaura places stop loss at 121, trade executes same day at 93 (despite share price never going under 129),  debaura looses £10,000.  Don’t be a putz like debaura and invest in an ETF unless you have a Phd in finance. 

It's not ETFs in general that are the problem. It's leveraged ETFs that are the problem. Out of interest, on which date and time did the trade execute?

debaura12

30/03. 13:14 

GeoffTF

Malthusian said:

GeoffTF said:

Malthusian said:

Although the KID contains this gem:

Scenarios: One (1) day (Recommended holding period)

Unfavorable Scenario - What you might get back after costs - $10,158
Moderate Scenario - What you might get back after costs - $10,138
Favourable Scenario - What you might get back after costs - $9,685

Conclusion: Nobody who understands how leveraged ETFs work would bother reading the KIID, which is required by European regulations to print complete gibberish.

I think you will find that is the UK interpretation of the EU directive.

Potato pomme de terre. PRIIPs and KIDs are a creation of MIFID, aka "the world's worst regulation", not (for all its faults) the FCA.

They would not exist if it wasn't for ludicrous notions of creating a single market for financial products across the EU. Creating a single market for financial products across multiple jurisdictions with wildly differing tax rules is of course impossible, but creating silly rules to standardise disclosure documents is not. The result is the badly spelled gibberish I quoted above. ("Unfavorable" lol)

Anyway, that wasn't meant to be a Faragist rant about bendy bananas. It was illustration of what happens when you try to force a very complicated and arcane investment product to produce a document explaining how it works to retail investors in Janet and John terms, using a template designed for the French equivalent of Vanguard LifeStrategy.

What it should say is "See daily leveraged ETF. John buys ETF. John loses his shirt. Run, John, run."

I have not got a link to hand, but I have looked at the directive. It certainly does not mandate the incorrect information quoted above or the bad spelling. There are lots of get out clauses. Some member states will accept just about anything in their own language. There is a strong financial services lobby, and I expect that is why the information provided is of so little value. The financial services industry has always fought against full disclosure.

k6chris

debaura12 said:

30/03. 13:14 

That was when US ADP Non-Farm Employment Change was announced, which could have caused a pricing blip / spreads to widen.  In Forex, brokers often widen spreads to protect their books prior to major news, which can trigger stop losses without a fundimental move in the price. I don't know where HL get their ETF price feed from?  I have no idea how a triple ETF moves, but I'm guessing the cause could be something similar??

Thrugelmir

k6chris said:

debaura12 said:

30/03. 13:14 

That was when US ADP Non-Farm Employment Change was announced, which could have caused a pricing blip / spreads to widen.  In Forex, brokers often widen spreads to protect their books prior to major news, which can trigger stop losses without a fundimental move in the price. I don't know where HL get their ETF price feed from?  I have no idea how a triple ETF moves, but I'm guessing the cause could be something similar??

Our Price Improvement Service polls up to thirty different market makers to get the best price for your share deals.

The trade will trigger automatically when the price limit is breached. 

In 2020. HL used

Tick size liquidity band 1 and 2 (shares that trade between 0 to 79 times per day)

Top 5 venues ranked in terms of volume (descending order)	Proportion of volume traded as a percentage of total in that class	Proportion of orders traded as a percentage of total in that class	Percentage of Aggressive Orders
Winterflood Securities Ltd	35.04%	32.15%	100%
Peel Hunt LLP	24.28%	40.28%	100%
Shore Capital Stockbrokers Limited	13.35%	7.83%	100%
Cantor Fitzgerald Europe	9.46%	2.97%	100%
Berenberg	7.77%	2.99%	100%

Prism

k6chris said:

debaura12 said:

30/03. 13:14 

That was when US ADP Non-Farm Employment Change was announced, which could have caused a pricing blip / spreads to widen.  In Forex, brokers often widen spreads to protect their books prior to major news, which can trigger stop losses without a fundimental move in the price. I don't know where HL get their ETF price feed from?  I have no idea how a triple ETF moves, but I'm guessing the cause could be something similar??

Add to that, there were only 13 trades of this ETF on that date and all for small amounts. This looks like a very small and illiquid fund. It could well be the case that there were no buyers when the stop-loss was triggered.

Malthusian

According to Yahoo Finance, £212,000 of that share was traded on that day, which is peanuts. It appears that this was an illiquid market and Hargreaves Lansdown were under orders to sell for whatever price they could get. That was the price they could get. If you had been placing a conventional trade you would probably have rejected it and waited for normality to be restored, but there we are.

This may not make you feel any better, but a 22% loss for a lesson about leveraged ETFs is getting off relatively lightly. People who dabble with leveraged financial products that they don't understand can easily lose their entire shirt or worse.

debaura12

masonic said:

debaura12 said:

Well I would like to see a better informed KIDD scenario - Perhaps you will entertain 

debaura buys ETF at 129, debaura places stop loss at 121, trade executes same day at 93 (despite share price never going under 129),  debaura looses £10,000.  Don’t be a putz like debaura and invest in an ETF unless you have a Phd in finance. 

It's not ETFs in general that are the problem. It's leveraged ETFs that are the problem. Out of interest, on which date and time did the trade execute?

I doubled my stake in it anyway 

Prism

debaura12 said:

masonic said:

debaura12 said:

Well I would like to see a better informed KIDD scenario - Perhaps you will entertain 

debaura buys ETF at 129, debaura places stop loss at 121, trade executes same day at 93 (despite share price never going under 129),  debaura looses £10,000.  Don’t be a putz like debaura and invest in an ETF unless you have a Phd in finance. 

It's not ETFs in general that are the problem. It's leveraged ETFs that are the problem. Out of interest, on which date and time did the trade execute?

I doubled my stake in it anyway 

Why risk it happening again? And surely you don't want to be trading it when the US markets are not open?

masonic

Seems pretty clear then this is a case of investor error. Your trade coincided with a market moving event and accounted for a quarter of the total shares traded that entire day. Of course you got a bad price. With a ~£50k original stake (£10k loss = 22%), now apparently doubled to £100k, I hope for your sake £100k is small change for you and you have a few million invested in more sensible things.

Wouldn't a spread bet make more sense, as then you could set a guaranteed stop loss? Stop losses when share trading will always carry the risk of slippage