Recently, we got hit with a string of losses due to some major negligence on the part of one of our liquidity providers. We do not suspect foul play.
What happened was that the bank attempted a leverage adjustment without checking on the fact that we had open trades.
ALICE perceived this as an attack on our systems and acted appropriately to protect our capital by cutting losses quickly. In the process it closed out trades that did not need to be closed out, and other trades were not placed to hedge our positions.
The result was that we racked up a significant number of losing trades.
All Diamonds who are invested in BAs will be able to see this once we post the reports in our skype rooms after this update goes out. This will answer questions before they are asked once we post the reports.
We do not see this as 'catastrophic'. But, it is certainly a bit of a setback.
Keep in mind that on all our BAs, most of the lost profits were gained in a reasonably SHORT period of time with much of the profits accruing over about 45 trading days. So, we have every expectation of ALICE pulling these accounts back to where they were pretty fast and is, in fact, doing so. ALICE is already starting to rack up a string of winning trades and we should be doing well over the next few months.
MAKING A CLAIM
There is no guarantee we can be successful, but we are compiling data to make a claim of negligence and hopefully get these accounts restored. There are indications that they are aware of their mistake already.
In order to compile this data, our systems are not running on full capacity. However, this should all be up to speed very shortly, like in a week or two, all things going as planned.
Once we submit a report we will have to wait for the bank's response. We are not holding our breath on this and we are just assuming the loss. Any restoration of funds or leverage (like perhaps getting them to adjust the fee NOW to atone for their negligence) will be welcomed.
We are sure that we have a strong case. So, we will do our best to make this all turn around into our favour, even IF the money is not restored to the accounts (as has happened in the past with previous errors).
IF the bank restores our balances this will be a BONUS. But, we cannot hold our breath on this or expect they will take action, let alone swift action. If it happens, we will just be that much better off. At this point, we have no idea about how they will respond to our claims.
AMFX/CTC IMPACTS
Yes, the CTC accounts were also impacted, but in much less dramatically.
The higher risk pools were, of course, hit a little harder than the lower pools. This will just mean that the value of CTC units in AMFX 2.0 may be less than would normally be case. Performance fees adjustments will also pull back the CTC pool balances somewhat and this will all be reflected in the AMFX Back Office once AMFX 2.0 launches.
Again, we expect these balances to recover quite quickly even without the bank taking full responsibility. This is because most of the bigger gains made were recent as indicated by this line chart shows just before the bank's careless moves were made.
This is why we see it as a serious setback. But, given all we have been through, nothing near a catastrophe.
We do not expect to go back to the 'warm up' phase here as shown on this chart in the early CTC days. We expect to 'carry on' with good profits accruing as we go.
