Forex Capital Markets (FXCM) has agreed to pay $14.2 million to the US Commodity Futures Trading Commission to settle claims that it failed to properly oversee the handling of more than 57,000 accounts that used its trading platform.
The $6 million fine and $8.2 million in restitution to customers comes on top of a $2 million fine in August imposed by industry group, National Futures Association (P&L’s Squawkbox, 15 August 2011). While the latest restitution works out to be about $17 per affected customer, according to FXCM, the total settlement is relatively large for the CFTC and among the biggest ever for the NFA.
In a statement, the CFTC says the foreign exchange broker and futures commission merchant deprived customers of “positive price slippage” – advantageous price changes that occurred after the clients placed an order and before the transaction was executed. However, it did change the price if the movement benefited the company.
FXCM failed to supervise the handling of more than 57,000 customer accounts that traded on the company’s trading platform from June 2008 until December 2010, CFTC says, and failed to promptly provide requested records to the CFTC’s Division of Enforcement during its investigation.
The CFTC order requires FXCM to retain, at its own expense, a monitor to review for three years its trade execution practices and policies that relate to the change in price between the time the customer places the order and the time the order is executed by FXCM, and its compliance with its restitution obligation.
In a statement, Drew Niv, FXCM’s chief executive officer says, “FXCM has previously enhanced its execution system to pass along all price improvements on every order type and remains committed to providing the most robust forex trading platform available. We are happy to have settled all our regulatory matters in the US, to have this behind us and to see this come to an end.”