Are Your Funds Safe? NFA to Shut down small forex fcms

[WhipSawFX]

Originally Posted by forex savior

The lesson? Avoid unregulated Swiss Brokers. The following Swiss brokers, like Tradex Swiss Ag, are not regulated:

WestCapFX
ACM
MIG
DukasCopy
GFX Group (Forex.CH)
Crown Forex

Forget the fancy sales pitches. Forget the Acronyms of the anti-money laundering organizations they belong to. Forget the spreads or the rolls or the foreign currency bank accounts they have. Ask them a simple question: Are you regulated and if you are please provide me with your registration number and a link where I can go and independently verify that you are indeed regulated. Absent that stay far, far away from Swiss Forex Broker Dealers. It just isn't worth the risk.

Interesting, that you would recommend not to trade at these firms and highlite the fact that they are not regulated, since one of them ACM are actually one of the Sponsers here at babypips.

Would be interested to see whether you could start and maintain a thread over here, saying to stay away from ACM, and trade with the other companies that are regulated !!

[WhipSawFX]

Not that I'm saying that these companies should be avoided. Just because a company is regulated doesnt make it safe, Refco being a particular case in point. In anycase, I think its important to recognise that the forex market is only more recently recieving more regulatory intervention.

This article by Richard Olsen and Michael Stumm of Oanda, makes an interesting read :

Retail FX: the triumph of hope over experience

Retail FX: the triumph of hope over experience August FiX

I particularly like this quote on the result of the regulatory environment.


quote:
--------------------------------------------------------------------------------
If anything, regulatory action is working to limit inflows of new ideas and processes and the always necessary increased efficiencies.
--------------------------------------------------------------------------------

[WhipSawFX]

from :

OANDA FXMessage: NFA Forex Dealer Dead Pool

For those that are unaware this thread is being posted at the same time on every forum Im aware of, using the alias's forexfigure, forexscholar, forexsavior...

OANDA FXMessage: NFA Forex Dealer Dead Pool
NFA Forex Dealer Dead Pool - Forum - FXstreet.com
Proposed NFA Capital Requirement - Forex Trading
Forexnews.com
Proposed NFA Capital Requirement - Page 17
http://www.talkgold.com//forum/showthread.php?t=177822
NFA Forex Dealer Dead Pool - The NDD Forum - Savvy Traders Want to Know
NFA Forex Dealer Dead Pool - Forex Trading | MetaTrader Indicators and Expert Advisors
Forums - Proposed NFA Capital Requirement
PiPTrader Forum: NFA Forex Dealer Dead Pool
Are Your Funds Safe? NFA to Shut down small forex fcms
Proposed NFA Capital Requirement - Forex Trading

Now why do you think someone would register on every forex forum they can to promote the largest firms, and denegrate the smaller ones ? Scaring customers to the larger firms, when there is infact no problems trading at the smaller ones, well as long as they maintain the net capital requirements.

I particularly like Justin from the EFX Group in this thread, as I did the moderator

EFX/MB Trading Going Under? - Page 1 - The NDD Forum - Savvy Traders Want to Know

Moderator: Speaking of audits, it's interesting Forexscholar makes no mention of the NFA/CFTC sanctions against FXCM.MBTrading/EFX have yet to cited by the NFA or CFTC for anything yet FXCM suffered a CFTC injunction and twice been disciplined for its sales practices and general practices. To me integrity is everything and the latest disciplinary action, a repeat of the first, is a clear indication that the firm doesn't take the NFA findings or its ethical responsibilities seriously.

as is badass's closing comment for the thread

As the starter of this thread I think it appropriate by my ending it. I spoke with an EFX rep and their firm is in solid financial shape and, no, they are not going under. The rep directed me to their NFA link which shows they have a clean record (better than most firms actually). As far as I'm concerned, case closed.

[WhipSawFX]

Well well, whats even more interesting is that forexscholars location is just

Moderator: It's appropriate this thread be ended with "badass's" comment but it shouldn't dissuade members from reading the rest of the thread because I think it has been highly instructive. It's interesting that badass's IP address is only 12 miles West of Forexscholar's which is only 5.4 miles West of FXCM's Manhattan offices. Like badass, I'm sure the inner circle at FXCM wishes this fear campaign (whoever started it) hadn't gotten as much attention as it has.

[WhipSawFX]

NFA Forex Dealer Dead Pool - The NDD Forum - Savvy Traders Want to Know

Moderator: It has been determined that the source of this post may well have come from a one of the dealing desk brokers shown as one of so-called "Healthy Forex Firms" on the list below. Be sure to take the time to read the related discussion before you jump to any conclusions. It interesting to note that Forexscholar disappeared from the scene when it was pointed out that his motivations were suspect and that the identical post appearing below has been published by the same individual on numerous forex forums.

[forex savior]

Originally Posted by WhipSawFX

from :

OANDA FXMessage: NFA Forex Dealer Dead Pool

For those that are unaware this thread is being posted at the same time on every forum Im aware of, using the alias's forexfigure, forexscholar, forexsavior...

What's up with you WhipSaw? You taking the same steroids as Barry Bonds? Like others who cannot effectively rebut my arguments you instead resort to smearing the messenger. It didn't work before, it won't work now.

[forex savior]

A few months ago the NFA filed a complaint against One World Forex that stated among other things, "One World lacked an understanding of, or was inattentive to, regulatory requirements and was ill prepared to accept customer business as either an FDM or an FCM. The firm had not established adequate systems to enable it to handle customer funds or comply with customer reporting requirements."
BASIC Case Summary

Well, with each passing day One World appears to be vindicating the NFA’s assessment as they continue their death spiral downward. The last few weeks I have been flooded with tips about One World Forex. No other firm in the Dead Pool has generated more feedback. And all that feedback has been overwhelmingly negative. But I have been holding back waiting for a clearer picture to emerge. However, this thread at an obscure bulletin board has provided me with the Smoking Gun on One World:
GoldenMoneyTree.com :: View topic - 1world-forex.com

First my sources combined with the users on this thread indicate that One World is having severe problems with customer transfers/withdrawals. The reason why is unclear. It could be due to One World’s changing bank accounts from Citi to Bank of America. Or it could be that One World’s books are such a shambles that we may have another CFG on our hands. There is no way to tell right now. However this customer of One World said the following:

“Day 21: Still haven't granted my redemption request. I am so angry now that I don't know if I should still expect to get my money. Last week Jack Walsh said they are having problems or that they still cannot accomplish international wires and blamed it on bank of america. They said hopefully they could do it within the next 40 minutes but until today, it still hasn't been deducted from my account. I don't know why they singled me out to do this to me. Is it because I'm far away and won't sue them because it would be more expensive than my $18,950 that I'm trying to withdraw? I called the NFA and the guy I spoke to states that it is no guarantee that I would get my money back, he says it depends on the agreement with one world that I signed. Well, there's an expensive lesson for not reading the fine print. In my country $18,950 is roughly 900,000 pesos. And that wasn't my entire account with them, I still have $2,756 that I don't know if they'll give back to me. It's my entire savings since I was a child. Although it won't hurt my lifestyle since I still live at home, IT SURE HURTS!
Am I just supposed to sit back and lose my money? I thought I was safe with an american nfa registered broker. The guy from the NFA said he would send a team over to one world but again, he says, there is no guarantee. He said I could file a complaint or he could send me an arbitration kit. This is so sad news for me, and a sad realization. Suddenly, my dreams of having time freedom and doing this full time comes shattering. How do I really know which broker to trust? Will I ever get my savings back?

Day 22: My boyfriend called one world again. They said to wait until next week because they are having management problems and that almost all accounts are under review and that my account is one of those under review. I'm guessing that next week, they'll tell me to wait until next month, and then until next year...I wonder what went wrong and wonder if this is finally the truth. the NFA hasn't gotten back to me yet.

Other traders have sent me private messages confirming the rough shape One World is in. The word on the street is that the situation at One World has become so dire that a large chunk of their sales force resigned because they hadn’t been paid for two months. Other traders are reporting non-responsive customer service, emails that go unanswered and phones that keep on ringing. All the signs of a firm in its last death throes…

The bottom line is when you can’t return a customer’s money when they ask for it you are finished in this business. One World may be able to limp on indefinitely but it is hard to see this firm making a comeback to respectability. Barring a fat sugar daddy willing to pump in ten million dollars this firm’s days appear to be numbered.

[WhipSawFX]

Originally Posted by forex savior

What's up with you WhipSaw? You taking the same steroids as Barry Bonds? Like others who cannot effectively rebut my arguments you instead resort to smearing the messenger. It didn't work before, it won't work now.

Smear campaign, you've got that wrong. I've just posted quotes to interesting material I found on other forums which you have posted the exact same preprepared material on. Aparently trying to smear the smaller firms with the false suggestions / allegations that they are close to insolvency/bankruptcy.

Steroids ? Well, its funny you should say that because you sure are putting a lot of effort into your smear campaign against all the small forex companies.

I have made some very good points with reference to Refco on the OANDA forum. The net capital requirements wouldnt have helped in the case of the only significant bankruptcie to hit the forex market in its entire history, so how is tightening the net capital requirements going to help it now ... Thats right, its not, its simply going to move funds to the bigger operators who infact are more likely to be hit by insolvency if Refco is anything to go by.

In anycase, I also raised another important point by pointing out your posting the same material on every available forum:

Whats your motivation or payoff for your 'smear' campaign against the smaller firms all over the internet ?

Are you paid to do this ?

Why have you never posted before under these identities on these forums ?

You have made a number of mistakes, in your posts where you suggest that these smaller firms are going bankrupt. Case in point, particularly being "I TRADE FX" - Your first post stated that they were close to bankruptcy with a -$3M net capital, now they have +$4M net capital. Your posts have no doubt cost them business, when they are clearly experiencing dynamic growth.

I also pointed out on the OANDA forum that the Net capital requirements have historically been very dynamic, with OANDA's number fluctuating by over $30M over the past year. When they are clearly not in any way concievable having any problems. I'll put the post from OANDA in the next post of mine here.

[WhipSawFX]

From :
OANDA FXMessage: NFA Forex Dealer Dead Pool

Originally posted by forexfigure:

thank you for pointing out the article whipsaw. It is excellent. However I would argue regulated firms are certainly safer than unregulated firms. RefcoFX was not regulated. And neither are these Swiss firms. And that is an added level of risk traders should be very wary of.

no doubt regulation can be a hindrance if implemented in a haphazard manner. But overall if the industry wants to mature like futures and equities it needs rules and regulations and a fair arbiter to ensure its healthy growth.

Its irrelevant whether RefcoFX was regulated or not, as it wasn't RefcoFX which went bankrupt, but Refco which was a regulated organisation infact here's a post I did on the increase in the net capital before Refco went belly up :

OANDA FXMessage: OANDA lost half capital? -- Serious

net capital / req / excess
434,396,953 149,538,068 284,858,885 OCT 31 2005
443,361,067 324,470,436 118,890,631 SEP
376,425,713 239,244,825 137,180,888 AUG
380,089,511 183,889,783 196,199,728 JUL
337,758,112 188,122,845 149,635,267 JUN
354,518,630 186,819,750 167,698,880 MAY
323,842,068 196,599,538 127,242,530 APR
342,308,408 184,949,611 157,358,797 MAR
283,860,286 171,702,919 112,157,367 FEB
286,674,439 156,901,955 129,772,484 JAN

Refco went under in a similar fashion as worldcom, bad accountants and shuffling debt. In the case of Refco it was a bad receivable, money which was due to Refco from clients adversely affected by the Asian financial crisis of the late 1990's.

Here's a nice article from bloomberg :

Bloomberg.com: News & Commentary

Its the principal risk for most firms you put your money with in my opinion, and what ever your doing your money's at risk, unless its segregated.

In anycase, I would agree that a firm which is regulated, and is in constant compliance, and is proactively so like OANDA is a good company to place your money. But, not to the exclusion of all others. I think due dilligence is the most important thing to do when you are investing money with any firm.

The net capital requirement is something that these firms will adapt to rather than go out of business. And for that matter its not an issue of bankruptcy but, not being solvent enough to do buisness as deamed by the CFTC. If they can't meet the requirements they consolidate with the larger firms.

There had been concern about OANDA's net capital which fell most of last year, and reached a low of $11M last december. it has risen as high as $42M this year, and appears to be quite a dynamic number. Here are some of the threads :

OANDA FXMessage: Another large drop in Oanda's Capital...

OANDA FXMessage: OANDA's financial health

OANDA FXMessage: CFTC OANDA FIgure Dropped again

However, as I have posted in the other threads, OANDA's platform, business model, quality of client customer service, innovation, and their progressive developement of their platform and tools demonstrates their financial health whatever was going on with the 'net capital'.

Michael Stumm has made a couple of posts on the forum about this very matter :

OANDA FXMessage: OANDA lost half capital? -- Serious

Originally posted by Michael Stumm:
Unfortunately, it is not a warning sign. This is an issue that comes up periodically. For example, please see OANDA FXMessage: Another large drop in Oanda's Capital...

The situation is the same now as it was then: the CFTC requires us to deduct amounts from OANDA's capital that depend on our clients' positions. In some cases, we are required to deduct 20% of individual client nominal position size (the so-called "concentration charge"), which can cause large swings in the reported Net Capital. I can assure you that OANDA is continuing to operate profitably with positive earnings each month for several years now without exception, and as a result, OANDA's own capital has been only increasing, the Net Capital numbers published notwithstanding.

OANDA FXMessage: CFTC OANDA FIgure Dropped again

Originally posted by Michael Stumm:
For what it is worth, I just posted this: OANDA FXMessage: OANDA lost half capital? -- Serious on another thread with the same topic.

The bottom line:

OANDA is profitable each month and has been for years.
as a result, OANDA's own capital has only been increasing.
the Net Capital published on the CFTC Web site is equal to OANDA's own capital minus various haircuts and charges. The concentration charge, in particular, requires us to deduct in some cases 20% of nominal client position sizes, which can cause huge swings in the published Net Capial

This is reminiscent of the variation seen at "I TRADE FX" which you listed as -$3M and close to bankruptcy, and now has $4m Net capital ...

http://www.cftc.gov/files/tm/fcm/tmfcmdata0706.pdf

I TRADE FX LLC N NFA 06/30/2007 3,957,357 1,000,000 2,957,357 0 0

Thats an $8M turnaround in a couple of months, similar to that of OANDA. I think this thread, should be recalled NFA forex Dealer consolidation, cause thats all its about.
If the firms can't maintain these levels of net capital they will have to move clients to the larger firms, which all in all is not good for the average guy on the street. Since there is
less competition, and innovation and the posibility of spreading your funds around to protect from potential Refco's is greatly reduced. It would seem to me there is a big potential Refco in that list of healthy firms of yours, which this whole thread seems to promote and are the very companies which your funds are most at risk with. I so think the quote of Richard Olsen and Michael Stumm I posted earlier is to the point :

If anything, regulatory action is working to limit inflows of new ideas and processes and the always necessary increased efficiencies.

I would strongly agree and think this degree and type of regulation is probably more unhealthy for the forex market. The major bankruptcy to affect a forex broker was Refco, who I mentioned before had nothing to do with the net capital requirements. Infact, the net capital requirements would suggest Refco would be the place to trade. What is the new net capital Requirements going to have on the OANDA's of the future, or is the future your big 2 or 3 firms.

[forex savior]

Originally Posted by WhipSawFX

I have made some very good points with reference to Refco on the OANDA forum. The net capital requirements wouldnt have helped in the case of the only significant bankruptcie to hit the forex market in its entire history, so how is tightening the net capital requirements going to help it now ... Thats right, its not, its simply going to move funds to the bigger operators who infact are more likely to be hit by insolvency if Refco is anything to go by.

I also pointed out on the OANDA forum that the Net capital requirements have historically been very dynamic, with OANDA's number fluctuating by over $30M over the past year. When they are clearly not in any way concievable having any problems.

Well looks like I have made a new friend. Let me correct you on a couple points.

1) RefcoFX was not regulated. Refco LLC was regulated and the customers got their money back. Regulation matters. That's why the customers of RefcoFX in Hong Kong and Canada also got their money back. The Refco case is very complicated and since you don't know too much about it I suggest you not use them to "build your case" since you don't know too much about it.

2) The issue is not "dynamic capital numbers" the issue is firms that don't have enough money to properly run a forex operation. The NFA is saying they don't believe firms under $5 million are properly equipped to do so. Thus they want to raise the requirement. The record, as I have shown on this thread, backs their assertion up.