FXCM says Gain Capital Holdings to purchase its US accounts
WASHINGTON (MarketWatch) – FXCM has been banned from operating in the U.S. after the Commodity Futures Trading Commission found the retail currency broker had an undisclosed interest in the market maker that consistently “won” the largest share of FXCM’s trading volume - and thus was taking positions opposite its retail customers.
More to come on this no doubt
Ohhhh no… Say it isn’t so… a retail Broker playing its clients… I’m in shock…
[I]This should rock some of the true believers[/I].
Hi Everyone,
Below is the statement we posted on the FXCM website.
FXCM US Reaches Settlement with NFA and CFTC
FXCM to Exit the U.S.
Sells Accounts to GAIN
FXCM to Pay down Loan
NEW YORK, February 6, 2017-- FXCM Inc. (NASDAQ:FXCM) (“FXCM”) today announced simultaneous regulatory settlements with the National Futures Association (“NFA”) and the Commodity Futures Trading Commission (“CFTC”) against its U.S. subsidiary, Forex Capital Markets LLC and certain of its principals. FXCM Holdings, LLC was also named in the CFTC settlement. The named FXCM entities and principals neither admit nor deny the allegations associated with the settlements. The NFA settlement has no monetary fine, and the CFTC settlement has a $7 million fine.
FXCM will be withdrawing from business in the U.S. and has signed a non-binding letter of intent with GAIN Capital Holdings, Inc. (“GAIN”) under which GAIN would purchase FXCM’s U.S. customer accounts. The transaction is subject to regulatory approval and a definitive agreement. FXCM and GAIN are working to determine the timing for the account transfer and expect to provide further information in that regard in the coming days. In 2016, FXCM’s U.S. business had unaudited net revenues of approximately $48 million and generated an EBITDA loss, but the costs associated with the business will not be transferring to GAIN. There will be no changes to FXCM customers outside of the United States.
Withdrawing from this business will free approximately $52 million in capital. Proceeds from the account sale and the release of capital will go toward the further repaying of FXCM’s loan from Leucadia National Corporation.
FXCM will for the interim period continue to service its U.S. customers and to provide top quality trade execution pending the customer-account sale and business withdrawal. FXCM will also be working diligently to be sure that an account transition to GAIN’s retail brand, FOREX.com, will be orderly, expeditious and seamless. FXCM wants to express its most sincere thanks to those U.S. customers who have been with FXCM over the years and wish you all the best of luck following this transition.
FXCM wants to stress that these settlements have no impact on any customer of FXCM’s global businesses. FXCM and its global subsidiaries will continue to provide excellent execution and competitive pricing to its customers overseas through its award-winning technology, customer service and trading tools.
Disclosure Regarding Forward-Looking Statements
In addition to historical information, this release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and/or the Private Securities Litigation Reform Act of 1995, which reflect FXCM’s current views with respect to, among other things, its operations and financial performance in the future. These forward-looking statements are not historical facts and are based on current expectations, estimates and projections about FXCM’s industry, business plans, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict including, without limitation, risks associated with FXCM’s plans to shut down its US subsidiary and a potential sale of its US customer accounts, risks associated with FXCM’s strategy to focus on its operations outside the United States, risks associated with the events that took place in the currency markets on January 15, 2015 and their impact on FXCM’s capital structure, risks associated with FXCM’s ability to recover all or a portion of any capital losses, risks relating to the ability of FXCM to satisfy the terms and conditions of or make payments pursuant to the terms of the finance agreements with Leucadia, as well as risks associated with FXCM’s obligations under its other financing agreements, risks related to FXCM’s dependence on FX market makers, market conditions, risks associated with FXCM’s litigation with the National Futures Association or any other potential litigation or regulatory inquiries to which FXCM may become subject, risks associated with potential reputational damage to FXCM resulting from FXCM’s plans to shut down its US subsidiary, and those other risks described under “Risk Factors” in FXCM Inc.'s Annual Report on Form 10-K, FXCM Inc.'s latest Quarterly Report on Form 10-Q, and other reports or documents FXCM files with, or furnishes to, the SEC from time to time, which are accessible on the SEC website at sec.gov. This information should also be read in conjunction with FXCM’s Consolidated Financial Statements and the Notes thereto contained in FXCM’s Annual Report on Form 10-K, FXCM Inc.'s latest Quarterly Report on Form 10-Q, and in other reports or documents FXCM files with, or furnishes to, the SEC from time to time, which are accessible on the SEC website at sec.gov.
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our SEC filings. FXCM Inc. undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
About FXCM Inc.
FXCM Inc. (NASDAQ:FXCM) is a publicly traded company which owns 50.1% of FXCM Group, LLC (FXCM Group).
FXCM Group is a holding company of Forex Capital Markets LLC, (FXCM US), Forex Capital Markets Limited, inclusive of all EU branches (FXCM UK), FXCM Australia Pty. Limited, (FXCM AU), and all affiliates of aforementioned firms, or other firms under the FXCM group of companies [collectively “FXCM”]. FXCM Group is owned and operated by FXCM Inc. (NASDAQ:FXCM) and Leucadia National Corporation (NYSE:LUK). Leucadia National Corporation is a multi-billion dollar diversified holding company engaged through its consolidated subsidiaries in a variety of businesses.
FXCM is a leading provider of online foreign exchange (FX) trading, CFD trading, spread betting and related services. The company’s mission is to provide global traders with access to the world’s largest and most liquid market by offering innovative trading tools, hiring excellent trading educators, meeting strict financial standards and striving for the best online trading experience in the market. Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. In addition, FXCM offers educational courses on FX trading and provides trading tools proprietary data and premium resources. FXCM Pro provides retail brokers, small hedge funds and emerging market banks access to wholesale execution and liquidity, while providing high and medium frequency funds access to prime brokerage services via FXCM Prime.
Trading foreign exchange and CFDs on margin carries a high level of risk, which may result in losses that could exceed your deposits, therefore may not be suitable for all investors.
Jaclyn Sales, 646-432-2463
Vice-President, Corporate Communications
Hello, Jason
Now that the CFTC’s war against off-exchange forex trading
has claimed FXCM as its highest-profile casualty
— and presumably FXCM will cease to exist as a U.S. broker,
and therefore will have absolutely no involvement with the CFTC —
will U.S. customers of FXCM now be free to move their accounts to FXCM (UK)?
.
So will Trading Station cease to work for users after the transition?
Also what is the future for Trading Station, will their be continue developments and support for this software?
The dominos continue to fall - online social trading platform and broker Darwinex announced on yesterday it has terminated its relationship with the newly-delicensed US arm of forex broker Forex Capital Markets and will no longer serve it as an introducing broker.
“Needless to say – our relationship with FXCM is terminated effective immediately, and had we known that their “No Dealing Desk” model was anything but, that they were going to great lengths to trade against their clients (as cited by the CFTC lawsuit), such a deal would never have come into existence to begin with,” Darwinex said in a statement.
Where this puts FXCM? I mean how we can trust it after such news. If I was the client, I would really want to get my funds out at first go, as I won’t want to take any chances. It has been seen in past how broker went zero in no time, so got to be sharp with these things.
Why do you want to do this ? If this was my broker I would cancel my account ASAP and place my funds somewhere else.
I initiated my FXCM withdrawal today. So the question now is, being a US Forex trader, does one go with Gain or Oanda? Or is there another option?
On top of everything else FXCM will also be paying a $650,000 settlement because of its US subsidiary’s undercapitalization at the time of the Swiss Franc (CHF)-related crisis from January 2015.
The CFTC charged Forex Capital Markets with undercapitalization, failure to timely report its undercapitalization violation, and guaranteeing against customer losses on 18 August, 2016, some 19 months after FXCM did the said misconduct.
As a result of the unpegging of the CHF from the Euro (EUR) in January 2015, when the markets went crazy and many brokers fell deep in trouble, FXCM had liabilities that exceeded its assets by some $175 million. The broker admitted to the gap only after it was contacted by the relevant US regulators.
Hi Clint,
US law prohibits anyone but CFTC-regulated brokers from offering forex to traders in the US. Since FXCM UK is regulated by the FCA, we are cannot offer forex trading to US residents through this entity.
Hi Twi5tr,
To clarify what you have heard about FXCM, part of our settlement with the NFA and CFTC was to close our US subsidiary, but there will be no changes for FXCM clients outside the US*. That means traders will continue to have access to our Trading Station platform.
So our US clients can continue trading uninterrupted, FXCM and GAIN have entered into a definitive agreement for GAIN to acquire the client base of FXCM’s US operations. The transfer is scheduled to occur on February 24, 2017, after 5 PM New York Time. We will for the interim period continue to service our US customers and to provide top quality trade execution pending the customer-account sale and business withdrawal. FXCM will also be working diligently to be sure that an account transition to GAIN’s retail brand, FOREX.com, will be orderly, expeditious and seamless.
On behalf of all my colleagues at FXCM, I want to express our most sincere thanks to all our US customers who have been with us over the years and wish you all the best following this transition.
With this exit, FXCM will be in a better position to service our international customers and focus on our profitable subsidiaries: http://ir.fxcm.com/releasedetail.cfm?ReleaseID=1011502
Hi Everyone,
While the nature of FXCM’s settlement with the US regulators prohibits me from commenting on the specifics, I want you to know we continue to stand by the quality of our trade execution in general and our No Dealing Desk (NDD) forex pricing in particular.
Consider what happened on January 15, 2015 with the SNB flash crash:
The majority of retail forex traders were long EUR/CHF when the Swiss National Bank made their surprise announcement to abandon the 1.2000 exchange rate floor they had established for the pair. Had FXCM been on the other side of client trades, we would have made money when EUR/CHF dropped and retail traders took massive losses on their long positions.
The moved wiped out those clients’ account equity as well as generated negative equity balances owed to FXCM of over $225 million. The caveat of our NDD model is that traders are offset one for one with a liquidity provider. When a client entered a EUR/CHF trade with FXCM, FXCM Inc. had an identical trade with our liquidity providers. During the historic move, liquidity became extremely scarce and shallow, which affected execution prices. This liquidity issue resulted in some clients having a negative balance.
While clients using NDD forex execution did not cover their margin call with us we still had to cover the same margin call with our liquidity providers. As a result, FXCM ended with a regulatory capital shortfall. Accordingly, FXCM needed to get a loan to cover this balance, which we did. For anyone that still thinks FXCM is running an FX dealing desk on our NDD model, the SNB event demonstrated that is not the case.
How does our NDD model work?
FXCM uses 16 liquidity providers to create a best bid best offer price stream for clients. LPs selected to price retail clients are forced to adhere to an extremely high standard of execution beyond just price including consistently low rejection rates, low latency, minimum quote sizes and high fill ratios even during market events.
We discuss in our UK execution study the criteria we use to rank our liquidity providers which you can see listed in question 13 of the FAQ. FXCM’s liquidity providers are ranked based on compliance to these standards which we identify as providing the best customer experience possible. Being a top ranked liquidity provider is important. Liquidity providers with the best pricing according to these rules may gain an advantage over other liquidity providers which could result in a large increase in orders captured. Poorly performing liquidity providers are ranked lower for order flow and ultimately could be removed from our platform until they return to compliance.
Also, the results of this study show FXCM UK retail client order prices to be better for FX than futures prices (74.97% of the time) and interbank prices(91.56% of the time).*
[I]* The study does not in away way attempt to represent that FXCM maintains a particular capacity or performance level. The figures in this study are provided for information purposes only, and are not intended for trading purposes or advice. FXCM is not liable for any information errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Past results are not indicative of future performance.
Material Assumptions
FXCM’s Retail Clients are defined as individual, joint, and corporate accounts trading on our retail price stream.
The comparison to each of the Futures and Interbank data is made at the time that the FXCM client order is executed. Normal market slippage and slippage due to rejections by liquidity providers are already included by the time the FXCM client order is executed. However, there is an assumption that there is no slippage on the Futures or Interbank market data.
In order to maintain consistency, Futures Market data and Interbank data used the same acceptable ranges in market trades. The summary of findings is based on the assumption that the maximum acceptable difference between the FXCM price and the Interbank/Futures market price is 5 pips in either direction.
Fees that a participant would pay on the Futures or Interbank market, such as CME Exchange Fees, NFA Fees, FCM Fees, Clearing Fees, and other commissions, were excluded from the study. Similarly, FXCM Commissions are excluded from the study.[/I]
