What does FXCM do with its deposits?

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1

It’s my understanding that a deposit of funds isn’t actually used in the trade, and it’s more of a “good-faith deposit”. So how does FXCM use its customers’ deposits? Do they invest it?

2

Hi RisingSun,

If by “invest” you mean “speculate”, then the answer is no; FXCM does not use client funds to speculate in the markets.

The funds of our clients are held in client trust accounts at several of the largest banks in the world and kept separate from the operational accounts that we use to run our day-to-day business. The amount in these client trust accounts will adjust everyday based on client deposits and withdrawals, and client profits and losses on their trading positions.

As of the latest publicly available data, traders have entrusted FXCM with $1.245 billion in client funds.

3

Thanks for the quick reply Jason. By investing, I was thinking and guessing more along the lines of short-term bonds, corporate paper, and the like. Are these the type of assets the cash gets stored as? I’m just curious how the forex business works.

4

While I can’t speak for other brokerages, at FXCM, the funds of our clients are held in client trust accounts which are bank accounts, not bonds or other speculative investments.

5

I just wanted to add that FXCM is regulated in major financial jurisdictions around the world. While your forum profile does not mention where you live, if you tell me your country of residence, I can provide you with more specifics regarding the client money rules that apply to the FXCM entity in your region.

6

I live in the U.S.

7

As do I, RisingSun :42:

Unlike the client money rules in the UK and Canada, forex trading regulations in the US are unique in 2 key ways:

[ol]
[li]Forex accounts are not afforded segregated fund status in bankruptcy proceedings.
[/li][li]Only US-regulated brokers are allowed to offer forex trading services to US residents.
[/li][/ol]
That means US traders can’t take advantage of the fund segregation and protection available from brokers regulated in the UK and Canada. It makes it all the more important for traders in the US to choose brokers with strong financials.

There was an earlier discussion on the forum about this topic that you may find interesting: 301 Moved Permanently