As reported by CNBC, all is not lost for FXCM. It looks like Luecadia National and FXCM have come to terms on a $300 million loan to help FXCM continue operations.
Some more information on Luecadia National from the folks over at Seekingalpha.
FXCM’s CEO, Drew Niv, stated that, “Leucadia’s support and this financing are by far the best alternative for FXCM, our customers, our shareholders, and all other relevant constituencies”.
Wow.
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Pipstradamus
So, staying with FXCM is safe for now ? I was thinking about withdraw my money. It’s not necessary now I think. What’s your opinion ?
I have a small account with FXCM and this worries me greatly.
What will FXCM/Luecadia do to the small trader? Will they cut off leverage options from here on out to prevent further disasters like the one that took place Thursday?
I also like to make small Lua indicator programs for Tradestation (FXCM exclusive trading platform). Does this mean I should run for the hills and start programming in MetaTrader 4.0+ now? I’d hate to learn a whole new language at this point.
This EUR/CHF incident with FXCM was a tragedy. I’m sad to see it happen and I only hope it doesn’t drastically change the trading landscape to a far more restrictive one for small mom-and-pop traders.
Lot of IF’s there. Just wait and see. FXCM have done the right thing by customers so far. They have had no trouble it would seem in securing finance on short notice and this should indicate that the lender sees value and security in the borrower. As for the lender having a controlling interest, I don’t think this is the case at this time from the little I read on it. It may be on the table at the end of the 2 yrs if certain things are not meet but I can’t see anything that is not manageable from FXCM’s end.
Sure there might be some changes about leverage but after hearing that certain other companies had foresaw the increased risk on EUR/CHF some months back and changed the leverage available to all clients on that pair alone on their platform, I think it would be a great idea to carry over for FXCM. They should be controlling risk at a company level and if FXCM are not trading against customers they should be watching out for us all when there are high risks identified with certain currencies. I certainly would not have had a problem if FXCM had reduced all leverage for EUR/CHF to a max of 10% just for that 1 pair or maybe for the CHF pairs in total depending on the forecast risk and actual trades placed by customers. This is done in many other industries, risk assessment is part of doing business. Insurance companies, banks and many others divest risk every day. By limiting leverage FXCM could control the potential exposure to some high risk events. They would need nothing more then long or short company totals for a pair.
Having a read through this ( The CHF Debacle, Why it Happened and Where do We Go From Here | Meet the Experts ) it sounds like the worst of it really is a death by a 1 000 000 cuts from small traders who end up having outstanding amounts to small to bother paying someone to go after to recover but add up to kill a company. FXCM should be actively assessing total risk that they carry on behalf of customers (small and all) who don’t take the time to personally asses risk or don’t care about blowing the $300 account and ending up with a $1000 debt that never gets paid back. Those unpaid amounts add up then a company folds and that puts at risk all the customers money who did proper risk assessments.
By the company changing the leverage for high risk pairs they are ensuring that the rest of the customer base is at least in part protected.
I can’t see that any company will enforce a company wide reduction of leverage. To many people would jump ship and go to brokers offering the higher leverage if that is the only thing the customer wanted.
What I would like to see after this is a truly central exchange based market. Actually start to get proper volume readings in the FX market!
Hi EatSleepPipRepeat,
Leucadia National Corporation extended a $300M loan to FXCM and the funds have been applied to meet our regulatory capital requirements. FXCM’s operations continue as normal for you to trade, withdraw and deposit as normal. Please let me know if you have any further questions.
Thanks,
Jason
Leucadia extended a $300M load to FXCM. The FXCM management team continues to be in control of the day to day deicisions of the firm.
Hi TimeValue and Getty,
While I can’t speak for other brokers or the industry as a whole, FXCM believes that currencies held at artificial levels as we saw with EUR/CHF remain at the same risk so we will be looking to implement additional measures to prevent this from happening in the future. I will share more details once I have more information.
Since our founding in 1999, FXCM has had experience with gapping and significant price moves. FXCM processes approximately half a milllion transactions a day and our margin system has worked through major market moves as in the 2008 financial market crisis as well as the 2011 Japan earthquake.
Prior to Thursday, the EUR/CHF was looked at as a very liquid G10 currency with very low volatility. From the profitability study DailyFX released, we know that our clients tend to be most profitable in low volatility currency pairs. The floor at 1.2000 for the past 3+ years made it a popular currency pair for traders for this reason and there were no indications that this would not continue. However, the SNB essentially lied and didn’t intend to protect the floor.
We believe that the NDD model remains the fairest pricing model for forex traders. When you are trading with a dealing desk or market maker, at the most basic level, when you lose money on those trades, they make money. Some of these brokers are now announcing record profits as a result of their client losses. If the market would have moved in EUR/CHF traders favor, then we may have been looking at a much different scenario.
So did you have a chance to read The CHF Debacle, Why it Happened and Where do We Go From Here | Meet the Experts ? Any chance we will see FXCM leading a push to a exchange based FX market?
Also, what is the likely outcome going forward for all the FXCM accounts that now owe a debt beyond the value of the customers account after this gap down?
Will all customers have to settle outstanding amounts owed - micro accounts to active trader?
If some are forgiven will there be trade price adjustments going forward to recover those costs?
Hello Everyone.
Before I head out for the day, here’s an FXCM business update we just released:
[B]Strong Operating Metrics[/B]
Through Thursday, January 22, FXCM’s month-to-date retail customer trading volume, which includes all retail FX and CFD volume, is $406 billion* with 30% coming from the last 5 days alone, which included a U.S. bank holiday. Average retail customer trading volume per day during this period is $27 billion.* As of January 22, tradable accounts were 224,547, and client equity was $1 billion.
“A week after the unprecedented movement of the Swiss Franc, and our financing agreement with Leucadia, FXCM continues to operate in the normal course of business. All of our entities have capital in excess of regulatory requirements. As our month-to-date metrics show, FXCM continues to be a global leader in retail FX with volumes on pace to set a record. We are especially thankful for our customers’ loyalty and support,” said Drew Niv CEO of FXCM.
Niv continued, “[U]The financing we received from Leucadia has strengthened our balance sheet and gives us the opportunity to grow our core business while reducing our debt through the sale of non-core assets.[/U] We anticipate that the proceeds from these sales and continued earnings, we can meet both near and long term obligations of our financing, while preserving the strength of our franchise.”
Richard B. Handler, Chief Executive Officer, and Brian P. Friedman, President of Leucadia, commented: “We view FXCM as our next opportunity to work with an investee company to create long-term value for all stakeholders, including FXCM’s dedicated employees and customers. We look forward to assisting Drew Niv and his team to develop the liquidity opportunities to repay last week’s emergency financing and then, as the long-term investors we are, to exercising the patience and diligence needed to maximize the value of FXCM over time as we strive to do for every investment in our portfolio, many of which we have held for the long term, and, in some cases, for over a decade.”
*Amount excludes volume generated by clients with negative balances following the Swiss National Bank’s decision to abandon the maximum exchange rate of 1.2 Swiss Francs per Euro.
Full statement: FXCM Provides Business Update (NYSE:FXCM)
As our CEO Drew mentioned, thank you to our traders for your continued support. I appreciate your patience while we work on answers to your most pressing questions, and I will continue to provide more information as I am able to.
Have a great weekend!
Jason
Just as a follow up to my earlier posts, here’s an article in today’s Wall Street Journal where Leucadia confirms that they have begun to receive payments from us and expect to recover more than a quarter of their investment within three months of the deal’s closing: Leucadia Begins Recovering FXCM Investment - WSJ
As mentioned previously, FXCM has spent over $250 million dollars in the past few years making strategic acquisitions building up our non-core businesses, mainly on the institutional side. Our goal is to repay the Leucadia loan by selling those non-core assets.
I can now provide more details on this. Below is a slide from the March 13 public presentation for our Q4 2014 financials and February 2015 operating metrics.
A few weeks ago I mentioned our goal is to repay the Leucadia loan by selling certain non-core assets, and today we have announced the first:
[B]FXCM to Sell FXCM Japan to Rakuten Sec for $62 Million[/B]
NEW YORK, March 25, 2015 (GLOBE NEWSWIRE) – FXCM Inc. (NYSE:FXCM) a leading online provider of foreign exchange (FX) trading and related services, today announced that FXCM Holdings, LLC and FXCM Newco, LLC (“FXCM”) have signed a definitive agreement to sell FXCM Japan Securities Co., Ltd (“FXCM Japan”) to Rakuten Securities, Inc. (“Rakuten Sec”), a top 5 FX broker in Japan, and a subsidiary of Rakuten, Inc. (“Rakuten”) (TOKYO:4755), one of the world’s largest Internet services companies, for a purchase price of approximately $62 million.
Read full press release: FXCM to Sell FXCM Japan to Rakuten Sec for $62 Million (NYSE:FXCM)
Today we announced another related update:
[B]FXCM Pays Additional $54 Million Owed to Leucadia[/B]
[I]Avoids Contingent Financing Fee of $30 Million[/I]
NEW YORK, April 2, 2015 (GLOBE NEWSWIRE) – FXCM Inc. (NYSE:FXCM) a leading online provider of foreign exchange (FX) trading and related services, today announced that it has repaid an additional $54 million outstanding under its credit agreement with Leucadia. The payment was funded in part with proceeds from the sale of FXCM Japan. FXCM has now repaid $66 million under the credit agreement, and as of April 1, 2015, FXCM’s outstanding Leucadia loan balance is $244 million.
Read full press release: FXCM Pays Additional $54 Million Owed to Leucadia (NYSE:FXCM)
Jason, I and some other people who own lots of shares of FXCM are wondering why company insiders do not buying shares after that crash? Can you explain that? Thanks.
