I am considering opening an account with FXCM-USA after a lesson learned the hard way with an offshore broker, namely capital trust markets in NZ.
Could lightning hit twice? Given the current financial situation with FXCM-USA and my current luck. Would it be a wise decison to fund my account with FXCM? Is my money protected, segregated, and insured?
I’d like to hear from other FXCM clients
Hi Contrails,
I’m sorry to hear of your negative experience with an offshore broker. US regulations prohibit anyone but US brokers from offering forex trading to US residents. However, unlike regulations in the UK and Canada, the regulations in the US do not give forex accounts segregated status. That means if your US broker went bankrupt, you would not have secured creditor status in bankruptcy proceedings. Furthermore, there is no insurance protecting forex accounts in the US similar to the FSCS in the UK or CIPF in Canada. All of that means it’s even more important for traders in the US to know their broker’s financials.
Since we are a publicly-traded company (NYSE ticker: FXCM) the details of our finances including the loan from Leucadia are well known. In fact, in our most recent quarterly earnings presentation, we clearly outlined how we plan to repay this debt. By contrast, most other forex brokers are privately-held companies, so it’s hard to know how much debt they have on their books or the state of their finances.
Despite the events of January 15th that resulted from the Swiss Franc movements, FXCM today remains in a strong competitive position:
[ul]
[li]$303 million in consolidated operating cash
[/li][li]$1.0 billion in customer equity
[/li][li]195,000 active retail FX accounts
[/li][li]Global regulatory capital of $252 million versus $93 million minimum requirements (an excess of $159 million)
[/li][/ul]
Over the past few years, FXCM has spent over $250 million dollars making strategic acquisitions building up our non-core businesses, mainly the institutional side as we tried to diversify the firm. We are now looking to sell some of those non-core assets; But, we are not in a rush and are looking to get the highest valuations for these assets. We are considering closing or selling smaller regulated entities that require large sums of capital requirements, but that offer increasingly low return on capital.
The first of these businesses, FXCM Japan, was sold on April 1, 2015 for $62.0 million. The latter move allows us to free up significant amounts of cash that is currently trapped. We believe that in the near term we can pay down a majority of the loan. That’s our goal. We have now repaid $66 million under the credit agreement, and as of April 1, 2015, the outstanding Leucadia loan balance is $244 million.
As discussed in the last earnings call on May 8, FXCM is pleased with how our debt reduction plan is proceeding. We are ahead of plan and the results of the FXCM Japan sale exceeded our expectations. With all the increased attention to our other properties, we are expecting robust and competitive auctions for the other non-core assets we have targeted to sell.
