The Commodity Futures Trading Commission has taken
further action against FX DirectDealer (FXDD).
According to CFTC, between November 2010 and December
2012, FXDD, a CFTC-registered Retail Foreign Exchange Dealer
(RFED) and Futures Commission Merchant (FCM)
headquartered in New York, failed to comply with minimum
financial requirements for RFEDs and FCMs. FXDD has been
registered with the CFTC as an FCM since December 10, 2009
and as an RFED since September 2, 2010.
Effective October 18, 2010, the CFTC adopted comprehensive
rules to protect members of the public that trade FX contracts.
Under these rules, RFEDs and FCMs that offer or engage in
retail FX transactions must at all times maintain adjusted net
capital of $20 million, or more in certain circumstances.
According to the CFTC Order, FXDD is alleged to have not
maintained its required adjusted net capital during at least 18
separate months between November 2010 and December 2012,
with month-end adjusted net capital computations showing that
FXDD was undercapitalised by more than $7.5 million at one
point. Because FXDD reported its adjusted net capital on a
consolidated basis with its subsidiary, FXDD apparently did not realise that, on the required stand-alone basis, it failed to satisfy
its adjusted net capital requirements throughout most of this
period, the Order finds.
The Order imposes a $275,000 civil monetary penalty and a
cease and desist order against FXDD for its violations and notes
that in settling this matter, the CFTC took into account FXDD’s
co-operation and the corrective action it undertook after the
deficiencies were discovered.
The action follows CFTC enforcement action against FXDD
for asymetric slippage practices and its chief compliance officer
James Green (Profit & Loss, October).