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'''Forex Capital Markets''', better known as '''FXCM''', is or was an online ] broker based in the ] currently undergoing severe regulatory problems. On February 6, 2017 the firm agreed to pay a $7 million penalty to settle a suit from the ] (CFTC), withdraw its CFTC registration, and agree not to re-register in the future, effectively banning it from trading in the United States.<ref name="Law360">{{cite web|last1=Atkins|first1=Dorothy|title=FXCM To Pay $7 M For Hiding Deal With Market Maker|url=https://www.law360.com/articles/889101/fxcm-to-pay-7m-for-hiding-deal-with-market-maker|website=]|publisher=]|accessdate=February 23, 2017|date=February 6, 2017}}</ref> Three top managers have resigned under regulatory pressure and the firm has changed its name to Global Brokerage Inc.<ref name="Roy">{{cite news|last1=Chavez-Dreyfuss|first1=Gertrude|title=FXCM changes company name; appoints interim CEO|url=http://finance.yahoo.com/news/fxcm-changes-company-name-appoints-172926956.html|accessdate=February 24, 2017|agency=Reuters|publisher=Yahoo Finance|date=February 21, 2017}}</ref> '''Forex Capital Markets''', better known as '''FXCM''', is or was an online ] broker based in the ] currently undergoing severe regulatory problems. On February 6, 2017 the firm agreed to pay a $7 million penalty to settle a suit from the ] (CFTC), withdraw its CFTC registration, and agree not to re-register in the future, effectively banning it from trading in the United States.<ref name="Law360">{{cite web|last1=Atkins|first1=Dorothy|title=FXCM To Pay $7 M For Hiding Deal With Market Maker|url=https://www.law360.com/articles/889101/fxcm-to-pay-7m-for-hiding-deal-with-market-maker|website=]|publisher=]|accessdate=February 23, 2017|date=February 6, 2017}}</ref> Three top managers have resigned under regulatory pressure and the firm has changed its name to Global Brokerage Inc.<ref name="Roy">{{cite news|last1=Chavez-Dreyfuss|first1=Gertrude|title=FXCM changes company name; appoints interim CEO|url=http://finance.yahoo.com/news/fxcm-changes-company-name-appoints-172926956.html|accessdate=February 24, 2017|agency=Reuters|publisher=Yahoo Finance|date=February 21, 2017}}</ref>


An employee of ], which holds a major equity stake in the company, has been appointed chairman of the FXCM board. The staff of FXCM's London operation have been told to seek other employment, according to unnamed sources cited by Reuters.<ref name="Roy"/>
⚫ In other markets, the company provides services through its own ] and through third party platforms such as ]. FXCM allows retail and institutional clients to speculate on global foreign exchange markets in what is known as "margin forex trading". Outside the US, FXCM also provides trading in ] (CFDs) on major ] and commodities such as ] and ].

⚫ The company provided services through its own ] and through third party platforms such as ]. FXCM allowed retail and institutional clients to speculate on global foreign exchange markets in what is known as "margin forex trading". Outside the US, FXCM also provided trading in ] (CFDs) on major ] and commodities such as ] and ].


Following a large increase in the price of ]s on January 15, 2015, the company announced that it may be "in breach of some regulatory capital requirements."<ref name=swup>{{cite web|title=FXCM Comments on Swiss Franc Movement|url=http://money.cnn.com/news/newsfeeds/articles/globenewswire/10115820.htm|website=GlobeNewswire|publisher=CNN|accessdate=16 January 2015}}</ref> On January 16, FXCM announced that it had secured a $300 million loan with a 10% coupon from ] in order to meet its capital requirements.<ref name=reuters>{{cite news|last1=Stone|first1=Mike|last2=Chavez-Dryfuss|first2=Gertrude|last3=Toonkel|first3=Jessica|title=FX broker FXCM gets rescue from Jefferies parent Leucadia|url=http://www.reuters.com/article/2015/01/16/us-swiss-snb-fxcm-idUSKBN0KP1MY20150116|accessdate=16 January 2015|agency=Reuters|date=16 January 2015}}</ref> On January 20 further terms of the loan were released, showing that the coupon rate might rise to 17% and that asset sales and other limitations were imposed. ] analysts quoted by '']'' said that the terms of the loan “essentially wiped out” the value of FXCM’s stock.<ref name=bloomb>{{cite web|last1=Faux|first1=Zeke|title=FXCM Owners Almost Wiped Out as Bailout Lets Leucadia Force Sale|url=http://www.bloomberg.com/news/2015-01-20/fxcm-plunges-as-bailout-lets-leucadia-force-sale-of-brokerage.html|publisher=Bloomberg|accessdate=20 January 2015}}</ref><ref name=MWatch>{{cite news|last1=Wall Street Journal Staff|title=FXCM rescue package includes rising interest rate|url=http://www.marketwatch.com/story/fxcm-rescue-package-includes-rising-interest-rate-2015-01-20-8103622|accessdate=20 January 2015|agency=Market Watch|publisher=Staff|date=20 January 2015}}</ref> Following a large increase in the price of ]s on January 15, 2015, the company announced that it may be "in breach of some regulatory capital requirements."<ref name=swup>{{cite web|title=FXCM Comments on Swiss Franc Movement|url=http://money.cnn.com/news/newsfeeds/articles/globenewswire/10115820.htm|website=GlobeNewswire|publisher=CNN|accessdate=16 January 2015}}</ref> On January 16, FXCM announced that it had secured a $300 million loan with a 10% coupon from ] in order to meet its capital requirements.<ref name=reuters>{{cite news|last1=Stone|first1=Mike|last2=Chavez-Dryfuss|first2=Gertrude|last3=Toonkel|first3=Jessica|title=FX broker FXCM gets rescue from Jefferies parent Leucadia|url=http://www.reuters.com/article/2015/01/16/us-swiss-snb-fxcm-idUSKBN0KP1MY20150116|accessdate=16 January 2015|agency=Reuters|date=16 January 2015}}</ref> On January 20 further terms of the loan were released, showing that the coupon rate might rise to 17% and that asset sales and other limitations were imposed. ] analysts quoted by '']'' said that the terms of the loan “essentially wiped out” the value of FXCM’s stock.<ref name=bloomb>{{cite web|last1=Faux|first1=Zeke|title=FXCM Owners Almost Wiped Out as Bailout Lets Leucadia Force Sale|url=http://www.bloomberg.com/news/2015-01-20/fxcm-plunges-as-bailout-lets-leucadia-force-sale-of-brokerage.html|publisher=Bloomberg|accessdate=20 January 2015}}</ref><ref name=MWatch>{{cite news|last1=Wall Street Journal Staff|title=FXCM rescue package includes rising interest rate|url=http://www.marketwatch.com/story/fxcm-rescue-package-includes-rising-interest-rate-2015-01-20-8103622|accessdate=20 January 2015|agency=Market Watch|publisher=Staff|date=20 January 2015}}</ref>
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In June 2012 FXCM bought a controlling stake in Lucid Markets LLP, a London-based automated trading group focused on currency trading.<ref>{{cite web |url=http://online.wsj.com/article/SB10001424127887324747104579024833989031904.html |title=FXCM Eyes Stake in Infinium |publisher=The Wall Street Journal |date=August 21, 2013}}</ref> In June 2012 FXCM bought a controlling stake in Lucid Markets LLP, a London-based automated trading group focused on currency trading.<ref>{{cite web |url=http://online.wsj.com/article/SB10001424127887324747104579024833989031904.html |title=FXCM Eyes Stake in Infinium |publisher=The Wall Street Journal |date=August 21, 2013}}</ref>


In November 2016, FXCM expanded to South Africa. Its new office is based in Johannesburg.<ref>http://www.leaprate.com/2016/11/fxcm-opens-office-in-south-africa/</ref> In November 2016, FXCM expanded to South Africa, with an office is based in Johannesburg.<ref>http://www.leaprate.com/2016/11/fxcm-opens-office-in-south-africa/</ref>


===CFTC penalty and NFA membership revocation=== ===CFTC penalty and NFA membership revocation===
On February 6, 2017, CFTC imposed a penalty of $7 million on FXCM for ] its retail customers. The commission also prohibited the company from registering with CFTC, effectively banning it from the US Forex industry.<ref name=streetinsider>{{cite web|title=CFTC Orders FXCM (FXCM) to Pay $7M Penalty for Defrauding of Retail Forex Customers|url=http://www.streetinsider.com/dr/news.php?id=12502887&gfv=1|website=StreetInsider|publisher=StreetInsider|accessdate=6 February 2017}}</ref> The same day, NFA barred FXCM from its membership.<ref name="NFAbarring">{{Cite web |url=http://www.nfa.futures.org/news/newsRel.asp?ArticleID=4786 |title=NFA bars New York retail foreign exchange dealer Forex Capital Markets, LLC and its principals Dror Niv, William Ahdout and Ornit Niv from membership |date=February 6, 2017 |access-date=February 7, 2017 |publisher=NFA}}</ref> The company reacted by selling its US customer base to a rival Forex broker ].<ref name="GainSale">{{Cite news |url=http://www.leaprate.com/2017/02/fxcm-sells-its-us-clients-to-gain-capital-as-it-exits-us-forex-markets/ |title=FXCM sells its US clients to Gain Capital as it exits US Forex market |date=February 7, 2017 |access-date=February 7, 2017 |publisher=LeapRate}}</ref> On February 6, 2017, CFTC imposed a penalty of $7 million on FXCM for ] its retail customers. The commission also prohibited the company from registering with CFTC, effectively banning it from the US commodity brokerage industry.<ref name=streetinsider>{{cite web|title=CFTC Orders FXCM (FXCM) to Pay $7M Penalty for Defrauding of Retail Forex Customers|url=http://www.streetinsider.com/dr/news.php?id=12502887&gfv=1|website=StreetInsider|publisher=StreetInsider|accessdate=6 February 2017}}</ref> The same day, NFA barred FXCM from its membership.<ref name="NFAbarring">{{Cite web |url=http://www.nfa.futures.org/news/newsRel.asp?ArticleID=4786 |title=NFA bars New York retail foreign exchange dealer Forex Capital Markets, LLC and its principals Dror Niv, William Ahdout and Ornit Niv from membership |date=February 6, 2017 |access-date=February 7, 2017 |publisher=NFA}}</ref> The company reacted by selling its US customer base to a rival forex broker ].<ref name="GainSale">{{Cite news |url=http://www.leaprate.com/2017/02/fxcm-sells-its-us-clients-to-gain-capital-as-it-exits-us-forex-markets/ |title=FXCM sells its US clients to Gain Capital as it exits US Forex market |date=February 7, 2017 |access-date=February 7, 2017 |publisher=LeapRate}}</ref>


==Operations== ==Operations==
FXCM has its headquarters in New York and offices in Hong Kong, London, Tokyo, Paris, Berlin, Sydney, Dubai, Beirut, Milan, Santiago de Chile, Athens, Jerusalem and Tel Aviv. FXCM also owned the Forex trading news and research web site ] before its sale to ].<ref>{{cite news|last1=Golovtchenko|first1=Victor|title=Breaking: IG Group Buys DailyFX from FXCM for $40m|url=http://www.financemagnates.com/forex/brokers/breaking-ig-group-buys-fxcm-dailyfx-40-mln/|accessdate=10 October 2016|work=Finance Magnates|date=30 September 2016}}</ref> FXCM was headquartered in New York with offices in Hong Kong, London, Tokyo, Paris, Berlin, Sydney, Dubai, Beirut, Milan, Santiago de Chile, Athens, Jerusalem and Tel Aviv. FXCM also owned the Forex trading news and research web site ] before its sale to ].<ref>{{cite news|last1=Golovtchenko|first1=Victor|title=Breaking: IG Group Buys DailyFX from FXCM for $40m|url=http://www.financemagnates.com/forex/brokers/breaking-ig-group-buys-fxcm-dailyfx-40-mln/|accessdate=10 October 2016|work=Finance Magnates|date=30 September 2016}}</ref>


===Industry criticism=== ===Industry criticism===

Revision as of 17:44, 24 February 2017

FXCM Inc.
File:FXCM white logo reduced resolution.jpg
Company typePublic Company
Traded asNasdaq: FXCM
ISINUS3026931069 Edit this on Wikidata
IndustryFinancial Services
Founded1999 (1999)
HeadquartersNew York City, United States
Key peopleDrew Niv, former CEO and Co-founder
ServicesFinancial broker, foreign exchange
Number of employees804
Websitewww.fxcm.com Edit this on Wikidata

Forex Capital Markets, better known as FXCM, is or was an online foreign exchange market broker based in the United States currently undergoing severe regulatory problems. On February 6, 2017 the firm agreed to pay a $7 million penalty to settle a suit from the U.S. Commodity Futures Trading Commission (CFTC), withdraw its CFTC registration, and agree not to re-register in the future, effectively banning it from trading in the United States. Three top managers have resigned under regulatory pressure and the firm has changed its name to Global Brokerage Inc.

An employee of Leucadia National Corp, which holds a major equity stake in the company, has been appointed chairman of the FXCM board. The staff of FXCM's London operation have been told to seek other employment, according to unnamed sources cited by Reuters.

The company provided services through its own online trading platforms and through third party platforms such as MetaTrader 4. FXCM allowed retail and institutional clients to speculate on global foreign exchange markets in what is known as "margin forex trading". Outside the US, FXCM also provided trading in contract for difference (CFDs) on major indices and commodities such as gold and crude oil.

Following a large increase in the price of Swiss francs on January 15, 2015, the company announced that it may be "in breach of some regulatory capital requirements." On January 16, FXCM announced that it had secured a $300 million loan with a 10% coupon from Leucadia National Corp in order to meet its capital requirements. On January 20 further terms of the loan were released, showing that the coupon rate might rise to 17% and that asset sales and other limitations were imposed. Citigroup analysts quoted by Bloomberg said that the terms of the loan “essentially wiped out” the value of FXCM’s stock.

History

Foundation

Forex Capital Markets was founded in 1999 in New York, and was one of the early developers of online forex trading. In January 2003, FXCM entered into a partnership with Refco group, one of the largest US futures brokers at the time. Refco took a 35% stake in FXCM and licensed the FXCM software for use by its own clients. Following the collapse of Refco in October 2005, FXCM became entrenched in the Refco bankruptcy proceedings for a number of years.

In 2003, FXCM expanded overseas when it opened an office in London which became regulated by the UK Financial Services Authority.

In 2008, the self-regulatory organization for the US futures industry, the National Futures Association (NFA), obtained permission from the Commodity Futures Trading Commission (CFTC) to increase the minimum capital requirements, in staged increments, to $20M for "Forex Dealer Members" including FXCM. The increase was in response to the failures of a few forex brokers, and it allowed FXCM to acquire new business from some of its smaller competitors who either ceased all operations or moved out of the US. The same year it continued its overseas expansion and opened offices in France and Australia.

The following year FXCM UK started offering a limited number of CFDs to its non-US based clients, in addition to its currency products. In May 2010, FXCM acquired the UK CFD and spreadbetting provider ODL.

Initial public offering, law suits, fines and expansion

In December 2010, FXCM went public and began trading on the NYSE, becoming the first forex broker in the US to IPO. The initial public offering price was 14.00 per share. The following year, in February and March 2011, a number of class actions lawsuits were filed against FXCM, alleging fraud and racketeering from deceptive and unfair trade practices, and misleading shareholders during the 2010 IPO.

In August 2011, the NFA fined FXCM $2M for slippage malpractices. FXCM reached settlements with the NFA and the CFTC of $2M and $6M respectively, for practices relating to failure to pass along positive slippage to customers on certain order types prior to August 2010. In conjunction with these settlements, FXCM provided clients with restitution for the total amount of positive slippage, approximately $8M.

In October 2011, FXCM completed its acquisition of Japanese FX broker Foreland Forex Co., Ltd. for approximately $17M, net of cash and liquid assets acquired.

On October 25, 2011, three debtors, Certified, Inc., Global Bullion Trading Group, Inc., and WJS Funding, Inc., filed an adversary complaint in the United States Bankruptcy Court for the Southern District of Florida against Forex Capital Markets LLC, ODL Securities, Inc., and ODL Securities, Ltd. (“Defendants”). The complaint asserts claims under the Federal Bankruptcy Code to recover allegedly preferential and fraudulent transfers to the Defendants, under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C §1961 et seq., as well as the common law. The complaint seeks an unspecified amount of compensatory and punitive damages, interests, and costs.

In June 2012 FXCM bought a controlling stake in Lucid Markets LLP, a London-based automated trading group focused on currency trading.

In November 2016, FXCM expanded to South Africa, with an office is based in Johannesburg.

CFTC penalty and NFA membership revocation

On February 6, 2017, CFTC imposed a penalty of $7 million on FXCM for defrauding its retail customers. The commission also prohibited the company from registering with CFTC, effectively banning it from the US commodity brokerage industry. The same day, NFA barred FXCM from its membership. The company reacted by selling its US customer base to a rival forex broker Gain Capital Holdings Inc.

Operations

FXCM was headquartered in New York with offices in Hong Kong, London, Tokyo, Paris, Berlin, Sydney, Dubai, Beirut, Milan, Santiago de Chile, Athens, Jerusalem and Tel Aviv. FXCM also owned the Forex trading news and research web site DailyFX before its sale to IG Group.

Industry criticism

Critics of the industry claim that few retail traders have the experience to make money trading forex. Drew Niv, chief executive of FXCM, said: "If 15% of day traders are profitable I'd be surprised." FXCM now claims that the percentage of profitable customers ranged from 21% for those with accounts under $1,000, to 37% for those with accounts between $5,000 and $9,999.

See also

References

  1. "FXCM Inc. Prospectus". FXCM. Retrieved December 31, 2015. (2015)
  2. Atkins, Dorothy (February 6, 2017). "FXCM To Pay $7 M For Hiding Deal With Market Maker". Law360. LexisNexis. Retrieved February 23, 2017.
  3. ^ Chavez-Dreyfuss, Gertrude (February 21, 2017). "FXCM changes company name; appoints interim CEO". Yahoo Finance. Reuters. Retrieved February 24, 2017.
  4. "FXCM Comments on Swiss Franc Movement". GlobeNewswire. CNN. Retrieved January 16, 2015.
  5. Stone, Mike; Chavez-Dryfuss, Gertrude; Toonkel, Jessica (January 16, 2015). "FX broker FXCM gets rescue from Jefferies parent Leucadia". Reuters. Retrieved January 16, 2015.
  6. Faux, Zeke. "FXCM Owners Almost Wiped Out as Bailout Lets Leucadia Force Sale". Bloomberg. Retrieved January 20, 2015.
  7. Wall Street Journal Staff (January 20, 2015). "FXCM rescue package includes rising interest rate". Staff. Market Watch. Retrieved January 20, 2015.
  8. Zian, Mashit (October 2, 2015). "FXCM Sells Forex News Website DailyFX.com for $40 Million". FXdailyReport.Com. Retrieved October 10, 2016.
  9. "Net Capital Requirements for Forex Dealer Members". NFA. September 24, 2008. Retrieved July 28, 2010.
  10. "NFA proposal could cause significant shakeup among forex brokerages" (PDF). Currency Trader Magazine. August 2007. Retrieved July 28, 2010.
  11. Harry Wilson (May 4, 2010). "Forex broker ODL accepts US takeover". telegraph.co.uk. London.
  12. Vannucci, Cecile; Spears, Lee (December 2, 2010). "FXCM's IPO Raises $211 Million at Midpoint of Range". Bloomberg. Retrieved December 10, 2010.
  13. "FXCM's IPO Raises $211 Million at Midpoint of Range". Bloomberg. August 21, 2013.
  14. "Morgan Business Trial Group Files Class Action Lawsuit Against Nation's Largest Forex Dealer – FXCM". February 10, 2011.
  15. "Kahn Swick & Foti, LLC And Former Louisiana Attorney General Announce Investigation Into FXCM, Inc. – FXCM". February 16, 2011.
  16. "Law Offices of Howard G. Smith Announces Investigation On Behalf of Investors of FXCM Inc". February 17, 2011.
  17. "Investor Relations (Press Release)". October 3, 2011.
  18. "Dismissal Granted in SNB Related Securities Class Action Lawsuit against FXCM Inc. and Certain Officers (Press Release)". October 13, 2011.
  19. "FXCM 10K Statement Q3 2011, Page 25". November 14, 2011.
  20. "FXCM Eyes Stake in Infinium". The Wall Street Journal. August 21, 2013.
  21. http://www.leaprate.com/2016/11/fxcm-opens-office-in-south-africa/
  22. "CFTC Orders FXCM (FXCM) to Pay $7M Penalty for Defrauding of Retail Forex Customers". StreetInsider. StreetInsider. Retrieved February 6, 2017.
  23. "NFA bars New York retail foreign exchange dealer Forex Capital Markets, LLC and its principals Dror Niv, William Ahdout and Ornit Niv from membership". NFA. February 6, 2017. Retrieved February 7, 2017.
  24. "FXCM sells its US clients to Gain Capital as it exits US Forex market". LeapRate. February 7, 2017. Retrieved February 7, 2017.
  25. Golovtchenko, Victor (September 30, 2016). "Breaking: IG Group Buys DailyFX from FXCM for $40m". Finance Magnates. Retrieved October 10, 2016.
  26. Karmin, Craig; MICHAEL R. SESIT (July 26, 2005). "Currency Markets Draw Speculation, Fraud". The Wall Street Journal. Dow Jones and Company. Retrieved October 31, 2007.
  27. Traits of Successful Traders, Page 31. Retrieved February 2, 2012.

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