FINMA warns that Crown Forex may be not the only Swiss Forex broker to fall, bankrupt

Trading Discussion
1

As it was extensively reported in the past few weeks Crown Forex is being liquidated and today a Swiss court had declared it bankrupt, as expected. Crown Forex’s assets will be liquidated after the company’s appeal against an earlier ruling was rejected.

FINMA then went ahead and warned that more Forex brokers could follow given the new Swiss regulations. While these regulations are not as stringent on the technical side (no Anti-Hedging or Anti-Pricing yet) they still require almost 5 times more Net Capital than the NFA requires, making it extremely difficult for some Forex brokers to comply.

Currently there are only 5 approved Swiss Forex brokers, but there are still several more pending an approval.

Full report by Reuters:

  • Company under FINMA control since December
  • Forex shops required to have license since April
  • New rules will leave 20 forex providers or fewer

By Martin de Sa’Pinto ZURICH, May 29 (Reuters) - A Swiss court has declared foreign exchange brokerage Crown Forex bankrupt, the Swiss financial regulator said on Friday, warning that others could follow, given new requirements for forex providers. Financial regulator FINMA posted a statement on its website saying Crown Forex was declared bankrupt on Friday.

FINMA spokesman Alain Bichsel said Crown’s assets would be liquidated after the company’s appeal against an earlier ruling was rejected. FINMA took control of Crown Forex on Dec. 9 after the regulator identified potential liquidity issues at the company.

New Swiss rules have made operating more onerous for foreign exchange providers since April 1, when they were required to obtain a license from the regulator and to hold some 100 million Swiss francs ($92.6 million) in liquidity. Bichsel said companies were given a year’s notice to comply with license requirements.
Prior to April, forex shops did not require a license provided they were registered with a self-regulatory body. “We had a lot of complaints from a lot of forex traders all around the world, these providers were not under supervision. The license requirement gives more stability and legitimacy to the whole system,” said Bichsel. “Crown had time to prepare to get the license, but the problems there were too big.”

A spokesman at self-regulatory body ARIF, the association of financial intermediaries in Switzerland’s French-speaking region, said companies need a lot of capital to be registered and some forex providers simply do not have enough. Crown Forex, based in Bassecourt, was previously a member of ARIF. When Reuters approached Crown Forex for comment, nobody was available from the company. The liquidators Notter Megevand & Partners declined to comment on the liquidation.

Prior to the new rules there were several dozen such platforms operating from Switzerland. Only around five of have been registered to date, although Bichsel said he thought there would be about 20 “once we have checked all current requests.” “Clients can feel more secure because the new rules mean these companies have more solidity,” he said. “But it’s possible there will be more liquidations of this kind.” (Editing by Rupert Winchester) ($1=1.080 Swiss Franc)

Michael
Forex Magnates - the home of Forex Elite

2

Are Swiss brokers more reliable than other countries brokers?

Wich are the most reknown ones?

Thanks for that info.

3

Hello,

Until recently Swiss brokers were just like any other brokers - see what happened to Crown Forex. FINMA started regulating Forex entities from beginning of this year only.
I would recommend working with the larger ones: ACM, MIG or Dukascopy.

Best,
Michael

4

Thanks! Actually I’m considering changing my broker from Gft to Dukascopy.

Thanks for the info.

5

Forexmagnates is 100% correct regarding new regulation under FINMA in switzerland, he is also correct (I think from what I have read!) that the only brokers who have made it that far are MIG, Dukascopy and AC-markets (ACM). So, If you want to go Swiss (and still hedge!) this may be of interest:

[B]MIG[/B] Requires $5,000 minimum to open - only offers MT4 - no fractional pips but 70 currency pairs - Funding by CC available

[B]Dukascopy[/B] Requires $50,000 minimum to open - propriatory platform - no MT4 - no advertised spreads or currency pairs on website - no CC funding available

[B]ac-markets (ACM)[/B] Requires $2,000 minimum to open - propriatory platform and soon also MT4 - 50 currency pairs and an advertised “as low as 0.5” - Funding by CC available

6

I trade with acm and I think they r a dam good broker. Great spreads and since they own their software there is hardly any problems with the platforms. Very recommendable option�

7

“Michael”?, [U][I]THE[/I][/U] Michael Greenberg? If so, I just want to say how great your site is. For those of you that don’t know it yet, you gonna have to take a butcher’s (sorry,“look”) at Forex Magnates - Home of the Forex Elite it really is an excellent site! You been here also speaks volumes about BP!

Just one little bone to pick with you, and I know it’s not your direct fault.

[I]New Swiss rules have made operating more onerous for foreign exchange providers since April 1, when they were required to obtain a license from the regulator and to hold some 100 million Swiss francs ($92.6 million) in liquidity.[/I]

I checked with my broker ac-markets and this is in fact not true, apparently the requirement is for (if I remember) CHF 15 or 20 million. I would imagine that for CHF 100 million there would be no brokers left in Switzerland!

A friend of mine form Credit Suisse told me that Dukascopy may have problems. 1) is that FINMA are not too sure accepting how their capital is made up of (shares of their platform and not cash) and 2) it seems that the owner is getting divorced…the wife wants half of all his assets…ergo 1/2 the company!

Get your detective hat on Michael, see if this is true!

8

Hi Aussie,

Thank you for your kind words.

I would check with ACM if they are not facing any issues themselves as well if I were you :wink: Dukascopy might face a few hurdles but I’m sure that FINMA won’t shut down its largest client. Dukascopy is not just another Forex broker but is also more importantly the most recognizable Swiss Forex brand.

I’d say that MIG, ACM and Dukascopy shouldn’t face any problem with FINMA, others will gradually disappear = traders are the ones to suffer as usual, as competition between brokers for quality of service and various promotions is diminishing, just like in any monopoly/oligopoly.

Michael
Forex Magnates

9

An honour Michael.

Yes, I am well aware of the events, to be honest I have been trading with them for quite a while now and have never had problems, personally speaking, and I am not a small account holder. Again, this whole thing smells weird…I won’t get into it as I don’t wish to start a forum war!

Many big brokers have so much negativity and complaints about them written that if you believed it all, they would go under for lack of new clients. My belief is that as the FX market is really a “people’s” market, I would imagine that at least 85% come in with no idea and no experience, this results in bad trades, which in turn results in bed forum press, your thoughts?

Like I said big boys get spanked as well, take FXCM, just go on the NFA site and see 4 yourselves, yet they manage to expand and buy out competitors, they even get voted “Forex Broker of the month” on certain reputable websites…

10

[I]Like I said big boys get spanked as well, take FXCM, just go on the NFA site and see 4 yourselves, yet they manage to expand and buy out competitors[/I]

FXCM
search.futures.org/search?q=fxcm&site=default_collection&client=my_frontend&proxystylesheet=my_frontend&output=xml_no_dtd

Gain Capital
nfa.futures.org/basicnet/Details.aspx?entityid=0339826&rn=Y

there are more, you just need to look at the NFA site.

11

True, but I would consider bankruptcy a more frightening prospect than a spanking. The new FINMA requirements will give more transperancy for traders overseas.

12

a little correction: dukascopy since about 2 months has lowered the minimum liquidity to open an ECN account to 1000 USD

best regards,
Marco Pagani
Dukascopy IA

13

Not trying to counter the previous post from Dukascopy (love you guys but get your banking license already;) ) but MIG has similarly changed their policy with a $2,000 minimum deposit. Which is odd because I have been trading with $1,000 for almost a week now…

Hopefully this competition will continue after the upcoming possible changes.