FXCM fined $2 million by NFA

FXCM have been fined $2 million by NFA for their slippage practices. They have been ordered to refund all
customers that were affected.

NFA levies $2,000,000 monetary sanction against FXCM and orders refunds to customers | Trade2Win Forums

Apparently customers are owed $8 million, anyone get a refund yet?

NFA fines FXCM $2 million for slippage malpractices, FXCM will credit clients back | Forex Magnates

Hi Maltapb,

Friday’s action from the NFA primarily concerns positive slippage, and I would like to shed more light on how positive slippage with FXCM’s NDD forex execution system used to work prior to August 2010 and how it has worked since then.

FXCM’s platforms display the best bid/ask spread streamed from the firm’s liquidity providers plus FXCM’s mark-up. Every FXCM NDD forex trade is automatically offset in a two-step process, designed to ensure that FXCM does not profit from a trader’s losses. In the first step of the execution process, a trader clicks on the price and the order is sent to FXCM. In the second step, FXCM automatically sends the client’s order to one of its liquidity providers to offset the trade.

FXCM’s execution system prior to August 2010 only offered price improvements to clients in the first step of the process. If a better price became available on FXCM’s platform in the fraction of a second after the client submitted the order but before the order was received by FXCM, the client would benefit from the price improvement. However, FXCM’s previous execution system did not provide clients with price improvements in the second step of the execution process, even if FXCM was able to offset the order at a better price, excluding FXCM’s markup. FXCM enhanced the execution system in 2010 so that clients now benefit from price improvements in both steps of a transaction for all order types.

It is important to note: By the end of 2010 FXCM enhanced its execution system to offer price improvements on all trades. You may remember from my forum posts last August that I announced positive slippage for limit and limit entry orders on this thread. All orders now eligible to receive positive slippage, and all price improvements are subject to available liquidity.

The settlement amount and the client price improvement credit will have no negative impact on FXCM’s financial balance sheet because several founding partners of FXCM have reimbursed the company for the credit and the fines. As of June 30, 2011, FXCM Inc. had over $200 million in cash and no debt.

FXCM’s goal is to have a fair and transparent system, and we are proud to offer an execution system that passes on any price improvements. FXCM has compiled statistics from July 1, 2010 until now to display the percentage of orders positive slipped and negatively slipped, and which orders most frequently experience each. The percentage of orders between positive and negative slippage has been roughly equal.

And we have broken this down even further to display the number of orders on a monthly basis positively and negatively slipped:

Limit and limit entry orders are the most likely to experience positive slippage which is why we highlight using limit and limit entry orders in the execution center on our website. You can find even more data on slippage broken down per order type in the complete report here: Slippage Statistics

Please let me know if you have any additional questions. I will do my best to answer them as thoroughly as possible.

Jason
FXCM

I would be interested in seeing the data presented in FXCM’s table in absolute dollar terms, rather than the number or percentage of orders. That data is pretty much meaningless as orders vary in size surely 500,000 instances of positive slippage on small orders does not equal 500,000 instances of negative slippage on larger orders

Surely the dollar amounts are what people actually need to see ?

Any chance of FXCM publishing that ?

I would say the data is far from meaningless. The data shows that traders using FXCM’s NDD forex execution can receive positive slippage, and positive slippage occurs about as frequently as negative slippage. This level of transparency in our execution is far beyond what other brokers offer in terms of slippage data, and whether other brokers actually offer positive slippage to begin with is questionable in my opinion.

You are correct that order size can vary, but so can market volatility, and during which market conditions traders choose to create orders, and what orders they use to enter and exit the market, and what size, and which currency pair being traded, etc. I’m afraid that no amount of data other than complete access to the raw data would satisfy your question. What’s important here is that traders looking to take advantage of getting the most out of positive slippage should use limit and limit entry orders which have the highest likelihood of receiving positive slippage, and positive slippage is available on all order types with FXCM’s NDD forex execution.

I agree that more transparency is always better, and we will do our best to continue adding this type of data to our forex execution center. Our complete slippage statistics report can be found attached to this post.

-Jason

FXCM Slippage Statistics.pdf (122 KB)

Seems to me choosing a forex broker is as important as knowing how to trade. How often are Forex brokers fined these days?, i.e. is the frequency similar to big insurance companies being sued and paying huge settlements?

Absolute nonsense and dont be so presumptious. I would be completely satisfied seeing you publish the dollar amounts, we all know that its the only meaningful metric. You are simply dodging the question and I can only conclude that publication of actual dollar amounts would show FXCM in a very bad light. If those figures are fair and equitable, why wouldnt FXCM wish to publish them ?

J, normally I would say something rude, about due dilligence etc. But I like the cut of your Jib, soooooo without further adoo

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Put in a name and see how many fines, reparations and whippings CERTAIN firms, ahem, cough cough, have recieved, and have a good night.

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much appreciated- exactly what I was looking for.

Hmm, them are not the only bucket shop in the world. I recognized, after almost 2 years of trading with a major UK broker, slippings, gaps, etc. are almost anytime to the advantage to the bucket shop. Last week I tried to liquidate a profitable order. Price was going strong in my way. After 20 attempts or so and 2 minutes around (to me it was more like a decade), finally, huh, I got the trade liquidated. What was the response from them after an inquiry? Execution times in [U]normal market conditions[/U] can be 15 seconds or longer. Unfortunately that’s not what they have big banners of at their website. The banners just show how many $$$ you can win, lol. Withdrawing all my money now. Fortunately, I made a nice profit. Plus I will let some peanuts in there to play with them every now and then. Some grands here and there would be nice for withdrawal. Paritcular with free money now in there. :smiley:

So, watch out! It’s a shark basin. I have another broker and ecn, execution times below a second, but even there I wouldn’t be surprised if that would change. The issue with metatrader is that after 5 seconds you need a new attempt, because it is rejected. So, if the execution time is above 5 seconds, it can go on and on and you can’t liquidate an order. So far regarding people using mental stops, lol.

great stuff buckscoder. Speaking of bucketshops, do you have a top 5 (to avoid)perhaps? or are there just too many to mention?

Hi Simba,

I understand there will always be calls to publish as much information as possible, and between the execution stats on our website and the information available as a publicly traded company, I would say we have far more stats publicly available than any other broker. The release of this much detail displays that all orders on FXCM’s NDD forex execution can receive positive slippage and the data is segmented as far as order type . I appreciate your suggestion about additional data to release, but to be completely honest there is a limit to how much we can release especially from a business competition standpoint. We will be providing more trading statistics on our forex execution center in the months ahead, going far beyond what our peers are releasing, and I will certainly pass along any suggestions about stats to include on the website. I can’t make any guarantees, but the suggestions are always welcome.

-Jason

FXCM Slippage Statistics.pdf (122 KB)

I guess there are too many. Plus then I have only experience with two brokers. What I can see now, I would avoid in the future all brokers with big banners on their website what big $$$ you can win, by just depositing money. That’s unfair practice anyways, because if you read in the small prints, you have not just to deposit, but also to trade a lot and fulfill several other conditions where if you do that, the risk is very high to get that prize. I never believed in that, because I can trade and don’t need prizes, but even if I see now such a banner, that broker is a “no no” now. Plus if I see it looks like a casino there, no no.

What is left is due diligence and reading comments of other forum users or at forex peace army or other sites. If there are too many complaints, that is a warning flag. I wouldn’t mind 10% or so, but if it is all full of ppl who complain, say 25% and more, warning flag.

If you find a broker which doesn’t fit into the filter rules above, I guess the only thing is you can try it with a broker with a small amount. Then make some profits and look how it goes. If there is an issue, withdraw your money and try it elsewhere.

Nothing to complain with my other broker so far.

Regarding FXCM I have no experience, but such a fine speaks for itself. Good luck all people who have to get money back. I guess they will face a lot of traders leaving. That could go to the point where them are ready for chapter eleven. If I’d be a trader there I’d withdraw my money asap.

Take care everbody! :53::53:

Also just thinking about this some more after discussing with another trader, and something I should have spoken further to in my previous post…

Your question about whether the figures are fair and equitable leads one to assume that FXCM has control over the dollar amount of slippage on a given trade. This is incorrect. FXCM does not control the amount of slippage that occurs on a trade because we use NDD forex execution. Orders are filled based on liquidity available from the liquidity provider when orders are executed. If all of our traders decide to add a stop order to their trade before NFP and are slipped 20 pips because the order was executed during an illiquid market condition, then of course this will increase the dollar amount of slippage. However, this doesn’t mean that FXCM somehow has control over what is fair or equitable slippage. An order is slipped based on available liquidity from the 10+ liquidity providers against which trades are directly offset.

-Jason

The fine relates to you passing on negative slippage and not passing on positive slippage, matters entirely under your control.

The question that wont go away is what happened to all the customers outside the US. Were they similarly affected? You’d have to suspect they were, however they are not being compensated as a result of this decision. My guess is that there is more bad news to come for FXCM as other regulators get involved.

I have seen this matter raised on several boards but it has been completely ignored by FXCM.

Hi Malta,

The question has been answered on other boards which you have probably seen, but in case you haven’t:

While I wish I could answer every question for you, I’m only able to discuss what is listed in the FAQ found through the press release http://ir.fxcm.com/phoenix.zhtml?c=2…037&highlight= . Any questions beyond this, and you will need to email compliance@FXCM.com

-Jason

One way or another, this is an unprecedented fine and a huge scandal. Why do I never hear of MBTrading or Oanda being fined for slippage?