| Posted by: Slaughtermeyer at October 4, 2007, 9:32 am | | Topic: Possible lawsuit against Intrade Forum: Casino Meister |
Here's the email that I received from Intrade which basically confirms the way that I allege the margin calculation software operates. Emphasis added. I believe the section in red is erroneous because I was actually increasing risk and not reducing it. Remember, a worst case loss scenario can theoretically happen even if the margin requirements are not set to worst case loss.
In response to your question we would offer the following additional explanation, but would remind you that this email is for informational purposes only and for specific information you should refer to the Exchange Rules that you have agreed to.
By way of attempting to paraphrase what is contained elsewhere we would point out that if your account has a zero or negative available funds balance you cannot place an order if it will increase your margin requirements and thereby increase the negative balance in your account even further. Our rules state “On entering an order, if you have insufficient funds to cover the initial margin requirement, your order will be rejected.”
As I mentioned in my email below we change the amount of margin frozen on a single position or group of positions at different times and when these changes result in a negative balance you are obligated to “meet” the margin call within 2 working days.
As per the Rules initial margin is calculated and frozen funds amended each time you enter/cancel an order or execute a trade and at the end of each trading day.
Before markets are margined on a worst case loss basis, the amount of margin frozen is based on the margin rates set for each individual contract.
When contracts are margined on a worst-case loss basis the amount of margin frozen is the maximum amount a member can possibly lose across all positions in the group.
The change from freezing funds based on published margin rates at the individual contract level before the market moves to worst case loss to freezing funds based on the worst case loss at the group level is the reason why you have been able to buy a contract one day (i.e. you were reducing risk) when trading on margin and then unable to sell (i.e. increasing risk) the same contract when trading on worst-case loss.
This is how the margin system operates now and has operated for the last five or so years. There is no system error and no deception.
I hope this helps explain how our margining system, and please let us know if you have any further questions or comments.
Kind regards,
Carl Wolfenden
Exchange Manager
Intrade Exchange Operations
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