When it Comes to Trading, Trust But Verify

03/07/2014 6:00 am EST


Don Miller

Author, Chronicles of a Million Dollar Trader

In order to protect your assets, Don Miller says you should manage your own risk and not rely on regulators, because any control can be beat.

SPEAKER 1:  My guest today is Don Miller.  We’re talking about the trading industry and the futures trading industry specifically.  A lot of things have gone on in the past couple of years in terms of firms going under.  Don has got a lot to say about that.  Don, you kind of were, I don’t want to say victim if that’s the right word in this.

DON:  I was a victim, as were many.

SPEAKER 1:  Talk about this and how you got through this.  What’s the status of your accounts at this point, and what do you think is going to happen going forward here?

DON:  It’s been a very interesting and sad chapter in the trading industries of the timeline and I think what we have learned through this exercise is that first of all we all have to be individual stewards or our own capital.  We can certainly trust.  I think there was an old phrase years ago – trust but verify by a still-famous president, and I think that’s the case with our business as well.  We have to be on top of monitoring who has our assets.  We can’t always rely on regulators and regulatory agencies and the controls that should be in place to do the work for us.  We’ve got to be actively engaged in that process.  We’ve got to spread our assets around a little bit more to manage our risk that way and that’s I think one huge takeaway from what’s happened.  The other takeaway is we do need better controls in this industry so that this doesn’t happen, so that if someone has gone  with our money that they should continue and will continue to provide a fiduciary role for our assets so that we can focus on what we need to focus on, which is our business of trading.

SPEAKER 1:  The trouble is that this can happen again, and may happen again because we can call our broker and get our paper statements to see the balance, but unless we can have access to their bank accounts we never will truly know, and what’s the answer here?

DON:  Agree, and I think, again, that’s where we have to take some initiative.  For example, I’ve reduced my capital balance which is on hand with a futures broker for that reason so that I can maintain control and diversify a little bit in that.  Any fraud can get around any control and I’m not saying there was fraud involved here, but any control can be beat and that’s the way it’s always going to be.  People are always going to try outsmart what’s out there and so to the extent that we will always have that degree of activity in life, as well as in the markets.  That’s something we’re just going to have to deal with. 

SPEAKER 1:  Do you see a day perhaps when if we have one more big company that this happens to that the government will have to step in and do some sort of FDIC type of thing with that because if this happens again I can see a real shaking of the confidence in people not wanting to open accounts. 

DON:  If it didn’t happen with MF Global I don’t think it’s ever going to happen frankly because MF Global when you think about it is one of the largest, if not the largest, clearing firms in the world.  At least it was, which is why so many of us even as larger traders had our assets with them and I think as we look through this process I’d still like to say that the prime ministry can regulate itself and govern itself, but we see that that’s not always the case.  I think that we may need to see a little bit of that and we’re going to see some increased costs as a result of that, but what we cannot do is we cannot put the lives at risk or the businesses at risk of all the small businesses and the hedgers and the ranchers and the farmers and small business traders.  It’s just ridiculous, so I’m hoping that this has been enough of a wake-up call because if this doesn’t do it, Tim, I don’t think anything’s going to do it.

SPEAKER 1:  You’ve written about this and you continue to write about things that are important to you in trading.  Talk about your website.

DON:  I do.  Donmillerblog.com is the site I started several years ago to start off as my trading diary actually, which has morphed a little bit into a motivational educational outreach tool.  Donmillereducation.com is the formal educational training that we work with and then the book that recently came out through Wiley Publishing, “Chronicles of a Million Dollar Trader”.  We’re working with the industry on that in terms of giving back.  Giving back, my personal profits go to charity and we’re going to continue to step-up our efforts there, so it’s a win/win for everybody.

SPEAKER 1:  Don thanks for your time.

DON:  You’re very welcome.

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