Last Men Standing

FXCM’s forced exit from the US leaves only two major retail OTC FX-focused brokerages in the market. Galen Stops talks to the CEOs of these firms about what this means for the industry.

“The retail foreign exchange market has suffered a less than exemplary reputation for some time now,” concedes Vatsa Narasimha, CEO of Oanda.

The latest blow to the industry’s reputation comes as the US Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) concluded that FXCM had defrauded its US customers, ordering it to withdraw from doing business in the country and fining the firm and its founding partners a total of $7 million.

FXCM: The Other Side of the Story

The FX industry has, by and large, been swift and united in its condemnation of the actions of FXCM, for which the firm was banned from the US and fined $7 million for defrauding FX customers.

But, as they say, there are always two sides to every story and so Profit & Loss has been talking to various market sources that provide different perspectives on this case. This is challenging because as part of the legal agreements between FXCM and the Commodity Futures Trading Commission (CFTC), the firm neither denied nor admitted the allegations against it, and therefore cannot speak to the press about the issue.

FXCM Changes Name, Leadership Following US Scandal

FXCM is changing its name and its leadership following the recent scandal which saw the firm and its co-founders, William Ahdout and Drew Niv, fined $7 million and the firm banned from operating in the US.

In response to this, the company has changed its name to Global Brokerage, Inc. and the trading ticker symbol will change to “GLBR” expected to be effective at the opening of trading on February 27, 2017.

Niv has submitted his resignation to FXCM from his positions serving as a director and chairman of the board, effective immediately. He is also resigning as CEO, but will remain at the company in an advisory role “to assure an orderly transition”, says FXCM in a statement issued today.

And Another Thing…

Last week’s diatribe following the FXCM fine and banning in the US triggered a fair amount of feedback – thankfully all of it supportive – and I think it is fair to say that the consensus is that if people continue to deal with the firm then they should be warned now they will have no recompense if things go wrong. This week I would like to look deeper into a worrying aspect of this episode – the broader FX industry’s failure to heed the warning given three years prior.

CFTC Hits FXCM with Another Fine

FXCM has agreed a settlement for $650,000 with the US Commodity Futures Trading Commission (CFTC), relating to allegations that the firm was under-capitalised following the volatility caused by the Swiss National Bank’s (SNB) decision to abandon its peg to the euro.

The CFTC originally filed the civil action against FXCM’s US subsidiary in the Southern District Court of New York on August 18, 2016.

The action alleges that FXCM US was briefly under-capitalised as a result of the SNB’s unexpected announcement on January 15, 2015, that it was abandoning its historical policy of pegging the Swiss franc to a fixed exchange rate of 1.2000 Swiss francs per euro.

And Another Thing…

FXCM has been fined and banned from trading in the US retail FX market, but there are so many other questions to be asked regarding this whole mess – not least what should we do about the market maker named in the complaint? This case highlights the problems with the blurred line between retail and institutional because here we have a scandal that spans both segments and while at the retail end we can do something about it apparently, there are questions as to what, if anything, can be done about the institutional abuse.

FastMatch Makes Board Changes Following FXCM Scandal

FastMatch, has announced today that Brian Friedman, president, and Jimmy Hallac, managing director, of Leucadia National Corporation, have joined its board of directors.

They have replaced former directors Drew Niv and William Ahdout, who were fined $7 million alongside FXCM, as it was ordered to withdraw from doing business in the US for defrauding retail FX customers yesterday.

FXCM is a passive minority owner of FastMatch. FastMatch operates as a completely independent entity of FXCM with no operational dependencies between two firms.

CFTC Forces FXCM to Exit US Market, Issues $7m Fine

The US Commodity Futures Trading Commission (CFTC) has fined FXCM and its founding partners $7 million and ordered the firm to withdraw from doing business in the US for defrauding retail FX customers.

In an order issued today the Commission settled charges against FXCM, its parent company, FXCM Holdings, and two founding partners, Dror (“Drew”) Niv, and William Ahdout, who are the CEO and managing director of FXCM, respectively.

“The Order requires Respondents jointly and severally to pay a $7 million civil monetary penalty and to cease and desist from further violations of the Commodity Exchange Act and CFTC Regulations, as charged.

P&L Talks Series with Brandon Mulvihill

Brandon Mulvihill, managing director, head of FXCM Pro, explains that there is still not enough clarity about the different prime-of-prime services being offered in the FX market, and warns that it is a mistake to believe that these firms are currently ready to fill the gap left by the tier one prime brokers.

Profit & Loss: Since “SNB Day” there have been a lot of firms touting prime-of-prime (PoP) services to the FX market. Many of them actually provide very different services. Two years on from SNB, do you feel like these differences are better understood by market participants?

FXCM Sells Research Website for $40m

FXCM has agreed to sell DailyFX, its news and research website to IG Group for $40 million.

Subject to IG final approval and customary closing conditions, the transaction is expected to close by the end of October.

Upon completion, IG will receive the entire DailyFX business including all international and domestic web domains, source code and content.

The 34 employees currently working on DailyFX domains will also transfer to IG in the transaction. FXCM will continue to be an advertiser to US and Canadian residents on the DailyFX English version of the website.

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