Tag: Retail Fx

Retail Fx

Questions, Questions, Questions

FXCM has known its share of controversy in recent years and now the firm has been barred from operating in the US. Profit and Loss staff report on an issue that has triggered another round of introspection in the FX industry.

Just over two years after staving off bankruptcy due to losses resulting from the Swiss National Bank’s decision to unpeg the Swiss franc, FXCM has been forced to withdraw from operating in the US, changed its name and seen its two principals step down from the business.

The unravelling of FXCM has impacted across the FX industry with questions being asked around the effectiveness of self-regulation, how the Global Code of Conduct could deal with a repeat offence, and how the industry moves forward in an atmosphere of mistrust?

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.

And Finally…

OTC versus the exchange. It’s a debate in foreign exchange that is almost as old as this oldest of markets. You’ve read the arguments and listened to the debates where the argument is driven by people passionate about their preferred mechanism, and still you can’t make up your mind who makes the most sense.
So what should be the important drivers of this debate? What should our end goals be? Profit & Loss’s deputy editor Galen Stops may have found the answer…in Cuba.

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.

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.

Australia Moves into Line Over Client Funds

The Australian government has announced it is proceeding with reforms regarding the use of client funds by OTC derivatives brokers. The move will bring the country into line with other jurisdictions such as the US and Canada and mean client funds held by retail brokers will have to be held in trust.
Australian-domiciled retail brokers can currently use money held on behalf of their clients for a wide range of purposes, including for working capital. Use of client money for these purposes is either not permitted, or is more heavily regulated, in a number of other G20 economies. This means Australian retail clients are at a greater risk of loss in the event of a broker’s insolvency.

And Finally…

Sometimes you just hear things that make you shake your head. More specifically, the sheer arrogance of some people that loudly proclaim to be in the client service business but who are wantonly and deliberately acting against their clients’ best interest is staggering. It appals and angers me that these people still exist in the FX industry – and that some jurisdictions seemingly are content to let them operate within their borders. We should all be worried though because, sadly, the industry is broadly judged by the standards of the lowest.