How to handle an abnormal trader?
The very first things to know:
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The Sales team decides how to handle most of the abnormal traders.
For most of the abnormal traders, the final decision will be made by the Sales team, while we only provide suggestions on how to deal with them. If the sales team believes the clients are normal and wants to maintain the relationship with valuable clients, we will still follow the sales team's decision. Please do discuss with your supervisor about the decision on the abnormal traders before making any conclusions.
- We don't provide every detail, including the very specific standards, of how we determine the abnormal trades. The client can refer to the Client Agreement for the general description of suspicious training activity.
The purpose is not to let the clients have a chance to find any possible loophole in the words' context.
- If there is an abnormal profit amount (even if the position has not yet been closed), the account will first be added to NT (withdrawal blacklist).
To prevent the abnormal profit from being withdrawn. If the sales team discovers that an account has been added to NT but there is no confirmed amount of abnormal profit and they wish to remove the account from the blacklist in advance, we will also act according to the decision of the sales team.
- In the abnormal notification email sent to the Sales team, if the "Device" Column contains the texts "toxic" or "suspicious", it means that the client shares the same device CID with other abnormal traders.
Procedure:
Step 1
The Risk team will do the investigation, and the Trading team will send a notice (from trading.taipei@vtmarkets.com) to the Sales team with the following information:
- Abnormal behaviour
- Client information
- Actions already taken as precautions
- Suggested handling options from the Risk team. More than one option can be selected. If the Sales team wants to take additional options outside of the suggestions, please also discuss them with the supervisor first. The Sales team can choose multiple options.
Step 2
The Sales team decides how to handle the abnormal client and replies to the email from trading.taipei@vtmarkets.com.
Step 3
The Trading team will inform the Risk team and the OP team of the Sales team's decision on the abnormal traders to proceed with the actions.
Explanation of the terms and handling options (can choose multiple)
- Credit Blacklist: Cancellation of participation in Credit bonus (by OP team)
Deduct the credit and add the client to the credit blacklist.
1. NT: Withdrawal blacklist. The client's withdrawal request will be pending.
2. AT: Funds transfer between additional accounts blacklist. The client will not be able to internally transfer funds between the additional accounts.
3. RJ: Withdrawal application blacklist. The client will not be able to submit a withdrawal request.
4. RD: Deposit blacklist. The client will not be able to submit a deposit request.
5. RA: Account Leverage adjustment blacklist. The client will not be able to adjust the account leverage freely.
6. WO: Negative balance reset blacklist. The client will not be able to reset the negative balance.
7. CA: Close account. The client will not be able to log into the Client Portal.
8. Credit blacklist: The client's current credit will be deducted, and cannot claim any bonus credit in the future.
- Deduct abnormal profits (by Risk team)
Deduct the abnormal profits that are generated from the abnormal behaviour. Please refer to the "Suggested Deduction Amount". If the amount is $0, then no deduction is suggested. After discussing this with the supervisor, the sales team will determine whether to deduct abnormal profits. Clients with a Suggested Deduction Amount (>0) will be added to NT as a precaution.
To verify the client's identity and funds source based on AML. KCY procedure has 3 phases. The next phase will start 7 days after the client provides legitimate documents for the current phase. After the client has verified all 3 steps, it is suggested that NT can be removed, but the final decision is still on the Sales team. And if the Sales team wants to stop the KYC, we can do so anytime.
Phase 1. Provide a photo holding identification documents.
Phase 2. Provide the 2 documents to prove the source of funds:
- Financial documents proving the source of legal income:
a. Proof of income: payroll or tax return showing annual income.
b. Rental income: copy of the rental contract
c. Pension income: proof of pension payments or retirement income
d. Inheritance: acknowledgment of inheritance signed by attorney/trustee/executor
e. Other Income: bank statement clearly showing payments of income from identifiable sources
- The bank statement or the Crypto wallet transaction history for the account that the client used to deposit at VT Markets.
Phase 3. Record video clips following the instructions provided via email.
Abnormal behaviour definition and pattern:
- Suspicious External Hedging
This kind of trader generally uses credit to open hedge positions with another party, who is not at VT Markets. There's no absolute evidence to prove this behaviour, but we can tell if the client is "highly" possibly an external hedger by checking the following of a trading account:
1. Use credit for trading.
2. Crypto deposit/withdrawal.
3. Only made a few rounds of trade.
4. Immediately withdraw all profit after a few rounds of trade.
5. In the region where abnormal trading behaviours often occur.
6. A dummy account, which uses other people's identities for the registration.
7. Share the same device (CID) with other abnormal traders, which is considered toxic.
These conditions are for reference and help us to decide whether a client is a "suspicious" external hedger. If the sales team believes the client is normal and legitimate, we will still follow your decision. To avoid this kind of trading behaviour, the Sales team can consider not letting the client get "credit".
The client will open positions on purpose near the market close session, which might result in the remaining funds in the account not being enough to bear the market risk that might arise after the open session on the next day. Generally, the Used Margin will take over about 70% of the funds in the account, leading to a low Margin Level and a high possibility of either making high profits or huge losses. If the client wins, they gamble the right way. But if the client loses, we will be forced to pay the negative balance for the client, and the client will only lose the initial funds. The cost of a negative balance is then considered to be intentionally transferred from the client to the company.
If the client is doing Gap Trading for the "first time"
- Profit: Will be NT first. The sales team can evaluate whether to give the client an opportunity, evaluate whether to deduct the improper profits generated by this behaviour, and warn the client not to engage in similar trading behaviour again.
- Loss: Warn the client from engaging in similar trading behavior again.
If the client is doing Gap Trading "non-first time"
- Profit: Will be NT first. It is recommended that abnormal profits be deducted and the client be terminated.
- Loss: It is recommended that the client should be terminated.
The Sales team is responsible for educating and warning the client not to do Gap trading in the future. The following content can be used as a reference:
It has been identified that your trading behaviour is suspicious, and/or high-risk trading taking place on your trading account with the Company.
We have reason to believe that this suspicious trading activity amounts to the intentional abuse of our Negative Balance Protection policy, which is a clear violation of the terms and conditions to which you agreed to adhere to when you opened your VT Markets account. Pursuant to the said Terms and Conditions the Company, at its discretion, is entitled to take any necessary action as deemed appropriate as such practices are not welcomed and/or tolerated.
You are hereby notified, that should we identify any future violations of a similar nature, it will result in the instant termination of your trading account without any further notice and the cancellation of any accrued profits.
If the Used Margin of the position takes "approximately over 70%", it is possible for the client to be determined as a News trader during the news release period. Of course, the final investigation result still depends on a case-by-case basis because we will also consider the client's equity, PnL, and even the market condition when the news is released. Similar to Gap trading, if the client wins, they gamble the right way. But if the client loses, we will be forced to pay the negative balance for the client, and the client will only lose the initial funds. The cost of a negative balance is then considered to be intentionally transferred from the client to the company.
- Swap Abuser/Swap-Free Abuse Issue
The client tends to hold positions either after the 3-day swap day or for a long period of time to take advantage of our swap-free environment and arbitrage. The client's main income source is from earning positive Swap (from other platforms), not from their PnL (Profit and Loss) on trades. Their order PnL is less relevant because profits in one account offset losses in another. By using a general account with other brokers, they can collect Swap, even if their orders break even.
When discussing with the client, avoid focusing on PnL since they know we lack evidence of their trades on other platforms. The essence of Swap Abuse is about exploiting Swap benefits, not PnL. Their unusual trading behaviour can be identified even without perfect evidence. If we labeled the client as a Swap Abuser after observation, it's because we don't make such judgments lightly. It required time to confirm their consistent behaviour. Identifying someone as a Swap Abuser just for holding a position past a 3-day Swap date would be an overreaction by the broker.
- Negative Balance Protection
The client will either go negative balance or make money and then withdraw for each round of trades. Such a trading pattern is clearly abusing our negative balance protection, while in fact, the negative balance is a cost to the broker but an additional service to the client provided by the broker.
The client will somehow foresee the market movement from a very micro perspective and make profits from every rise and fall of the price. Each of the trades is opened accurately just prior to each of the price favourable price movements. Most trades will be closed profitably resulting in an overall win ratio close to 100%, which is obviously not a normal trader or even an experienced trader can achieve in such a precise way. The Risk Team will flag the client's trading behaviour as suspicious due to the following patterns:
1. Abnormal volatility in the product's market during the observed period.
2. Trading activity occurs during a period of low liquidity, where such volatility is unusual.
3. A clear pattern of high-frequency trades being accurately opened and closed just before major price movements.
Internal monitoring tools suggest possible market manipulation, with evidence showing the client trading just before rapid market shifts.
The client identifies time delays in price updates between the different brokers and makes profits from quickly taking advantage of the price gaps by adjusting positions. The patterns are as follows:
1. Trade at the second-scale timeframe.
2. Multiple and continuous tickets placed and closed within latency periods.
3. Obvious change in trading behavior and increase in lot size and frequency.
4. Extremely high win ratio during the price latency period.
- High-Frequency Trading (HFT)/Abnormal Scalping
The client's trades tend to be held within 10-15 minutes. The client will scalp by entering into orders or a combination of orders to exploit wider-than-usual spreads during abnormal periods of thin liquidity by scalping with market/limit orders. Not all scalping traders are considered abnormal scalpers (HFT), it still depends on the investigation into the market condition and determines whether the client is doing abnormal HFT.
The client preferred to use limit orders to open and close their positions when the market was thin in liquidity. Each symbol may have a different period that has thin liquidity. Due to the rollover and market opening, the market price may form a thin liquidity environment. The client’s limit order will be triggered during a spike down/up. Then when the price resumes to the normal level, the client can close the trade and take profit from the difference. Furthermore, it is also called “pin bar trading” as the thin liquidity scalping going forward.
Clients under the CPA make random trades just to help the CPA trigger the CPA commission, which is considered abusing CPA commission benefits. Sometimes, the CPA may even use fake accounts to register at VT Markets under their CPA number.