Phillip Capital Inc (PCI) has been forced to shelve its nascent retail FX business after the Securities and Exchange Commission (SEC) prohibited any SEC registered broker-dealer from offering retail FX services to customers, effective July 31.
Subsequently the firm, which is a Chicago-based subsidiary of the PhillipCapital Group, has ceased offering retail FX trading to customers as of June 1.
“The SEC’s decision is a big disappointment for us, as we had recently begun the soft launch of our forex offering,” says Lynette Lim, co-CEO and director of PCI. “With the financial stability and resources of the PhillipCapital Group, we had all the criteria to be a strong player in the forex market, where there has only been a handful of incumbents in the last six years.”
Speaking to Profit & Loss, Lim said that the lack of competition in the US retail FX market is likely to be to the detriment of end users.
“It’s potentially bad for the end user because the three incumbents in this market are very comfortable, they’re not doing much at all. If you look at their financial reports, 80% of their growth is coming from overseas and so they’re focusing their efforts there – just like everyone else,” she says.
PCI had approval from the Commodity Futures Trading Commission (CFTC) to operate a retail forex business, but with this latest blow Lim says that the firm is now considering whether to set up a separate US entity in order to continue with its plans in this market or simply focus on the other asset classes in which it offers services.
When it was launched in 2010, PCI initially offered clearing futures before adding retail FX and equities to its line-up of approved asset classes.
PCI is the first US foray for the PhillipCapital Group. The group says that it will continue to offer retail forex trading through its operations in London, Turkey, Hong Kong, Singapore and Australia.