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  • FXCM Lobbied Against Leverage Limit Before Trades Went Bad

    From bloomberg.com

    FXCM Inc. (FXCM), the brokerage facing a shortfall of nearly a quarter-billion dollars after highly-leveraged investors made losing bets on the Swiss franc, pushed back against U.S. regulatory efforts that likely would have left it less vulnerable. In 2010, the Commodity Futures Trading Commission sought to force individual investors trading currencies to give their broker 10 cents in capital to back every $1 in positions. The regulator failed to accomplish that amid pressure from New York -based FXCM and other brokers, meaning only 2 cents must be pledged. The agency’s proposal would “have a devastating impact ... (full story)

About time this article made it's way here .... LOL
Ghost Rider - WWTBMD?
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No leverage limitation in the world would have prevented this from happening.
With all the warning about trading forex, we still have the whiners and finger pointers. I stopped trading eur/chf when the floor went into effect and very little on other chf pairs. None since I can't remember when.

If you want to point fingers and whine, look to Switzerland. Those who KNEW what would happen were prepared. Repeat...They KNEW what would happen. Think about that if you want to point fingers. ?But YOU also KNOW what is in the water. So...shutup.
Isn't the real problem the simple fact that the brokers didn't have the money to back the leveraged trades they were allowing clients to take on? They are supposed to give you buying power not extend their credit to you so you can have buying power.
Right, look what that beautiful leverage did. A big 'ol fat $225 million loss in 30 mins. Way to go, way to go!
When the facts change I change my mind, what do you do sir
Maybe FXCM just has a bunch of shitty traders.
The "Regulators" are not now, nor ever have been looking out for the interest of the "investors" (retail traders). They are looking out for the interest of the bank market makers.

If a sufficient number of retail traders get margin calls to cause what happened at FXCM and Alpari (UK0, it is clear that the brokers end up paying some of the loosses. And to whom do these payments go? To the bank market makers!

This is all about making it easier for the Robber Bank MMs to legally steal - and to be sure they get what they went after - than it is about protecting traders! It is a flat out lie that the Regulators are primarily interested in protecting the interests of the traders.

This is just like the SEC that goes on pretending to exist for the protection of shareholders and to see that the market is a level playing field for all traders. Nothing could be further from the truth! And this has been proven time and again. Naked Shorting still exists and the SEC continues to turn a blind eye to other shenanigans of the "Thieves of Wall Street".

This is about the super-rich behind the markets continuing to get what they want to facilitate putting other peoples money into their own pockets, and about their continuing push to make it easier and easier for them to do so.

The writer and publisher of this article, that makes it sound like leverage for retail traders is a bad thing, are just mindless minions that are serving the ongoing push of these bastards.
Quoting Pip Anon
Right, look what that beautiful leverage did. A big 'ol fat $225 million loss in 30 mins. Way to go, way to go!
Why do you make fun? No sympathy?
Quoting traderathome
The "Regulators" are not now, nor ever have been looking out for the interest of the "investors" (retail traders). They are looking out for the interest of the bank market makers. .....
Amen. 100% correct. SEC does not look out for traders, nor do they level the playing field.

Lets go further to say, if you are one of the ones over-leveraging your account, you got what you deserved. Now- because of your actions, and many like you- retail forex is about to get fucked.

Play this game, you're likely to get burned. The responsibility should be on your shoulders, not the brokers- and certainly not the rest of forex (through regulation).
Quoting Pharm0r
Amen. 100% correct. SEC does not look out for traders, nor do they level the playing field.

Lets go further to say, if you are one of the ones over-leveraging your account, you got what you deserved. Now- because of your actions, and many like you- retail forex is about to get fucked.

Play this game, you're likely to get burned. The responsibility should be on your shoulders, not the brokers- and certainly not the rest of forex (through regulation).
SEC? They're not responsible for regulating retail forex brokers. The CFTC does it. It's obvious you didn't read the article.
"Nature's law" is called "Reason". When perfectly understood by human it is
Quoting Caesar95
SEC? They're not responsible for regulating retail forex brokers. The CFTC does it. It's obvious you didn't read the article.
My SEC comment was separate from my comment about forex. Sorry for the confusion, I trade stocks as well, and hate the SEC, and well- regulation in general.

The problem though, is retail time and time again gives these a-holes plenty of ammunition when it comes to the "need" for regulation.
Got an email from Oanda, they stand by their clients and erased the debts of negative equity from the SNB shockwave. Normal operations continue including withdrawals. Alparii has filed for insolvency, Excel Markets has closed it's doors. In a crisis like this it the best retail forex broker has stood out from the rest.
Be humble or be humbled.
Although it is mentioned, the article's title is misleading...Every broker strongly lobbied against smaller leverage, not just FXCM.

Realistically, how many FX traders here could trade if they dropped leverage down to 10:1 or 5:1?

Get ready its coming, plus a minimum $10,000 trading account just like the minimum $25,000 account for US stock/options day traders.

Although they will promote this as a way to protect the common man, it is really designed to protect the banks.

If they want regulate something..start with credit default swaps.
Quoting Pharm0r
Amen. 100% correct. SEC does not look out for traders, nor do they level the playing field.

Lets go further to say, if you are one of the ones over-leveraging your account, you got what you deserved. Now- because of your actions, and many like you- retail forex is about to get fucked.

Play this game, you're likely to get burned. The responsibility should be on your shoulders, not the brokers- and certainly not the rest of forex (through regulation).

THIS ! +++1

What ever happened to personal accountability? The responsibility to learn and employ money management is on you. Increased regulations for retail traders will only make things worse. If the CFTC wants to regulate something, they should look to regulate the central banks. Leverage is not a bad thing, leverage used inappropriately IS a bad thing.... and that responsibility falls on the individual trader.
‘Keen Eye’

" The client losses are shining a spotlight on U.S. regulators’ oversight of retail currency trading and whether they stopped short of necessary curbs to protect customers. "

Clients didn't lose any money. FXCM did. Customers aren't the ones who need to be protected this time. And a couple hundred million lost is hardly a need for a trillion dollar government bailout. If anything, this will be used to protect the banks and squeeze the customers
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Quoting grin
1:50 has been typical leverage in CME currency pits for decades. Why would FX be different?
Because FX is different. If that were not the case why do you think this thread happened at all and in your lifetime?
One interesting part of all of this. The broker who had the highest regulation and over site, was listed on the NYSE, and the most stringent leverage requirements had the biggest losses.

How is this possible? What about all the 500:1 leverage brokers? They should have all been vaporized.

It will be interesting to see how and why FXCM was so heavy the wrong side of the Chf trades. Someone was probably promoting long the EUchf as the sure bet trade.
FXCM tends to have the worst traders. There's a sheet floating around that shows the '12,'13, and '14 wins vs losses among brokers. FXCM has consistently been on the bottom of the winners list, and top of the losers...by a large margin. Maybe most of that stems from having more traders than others...but percentage wise...it didnt matter. Who knows.
What needs to be remembered that even if one was on the positive side of the trade when the spreads were widened to such an extreme you were gone anyway. A 20- 50 or 80 pt stop didn't come close to cutting the mustard. People don't usually have stops as large as the spreads that were encountered no matter how big of a set one has. Just my 2 cents worth
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Hopefully the forex industry will learn from this and implement instruments to mitigate similar occurrences in future. Some have suggested 'turning the clock back' policies', where a broker has a policy that in the case of extraordinary events like this suspends withdrawal of account funds until the dust settles and holt trading. After the event, the clock is wound back to just before the extraordinary event. The winners of this extraordinary event will not grow their account balances buy the full amount but equally the losers will not suffer the full loss. This way irreparable damage to the industry is avoided. If you set a realistic trigger say somewhere between 5 and 10% price fall within a day for the trigger then this could have merit.
I trade with 500:1 leverage broker. People who do not know how to use leverage simply shouldn't trade. For those that do, the leverage restriction impeeds our ability to make money. I have a $10,000 forex account of which $9,000 is kept in my FDIC insured bank account. I open positions with about 7:1 and as trade goes in my favor, I scale in to the point where sometimes I am at 200:1 with stops at break even. This week I risked $20 on a euraud short and my profit on the trade was $844. Explain to me how I could do this with these regulations that are protecting us. First of all, I would have to put up 10 times the margin to execute the same size trade and I have to put that amount up with a broker who does absolutely nothing to protect my funds. Nobody stops anyone from walking into a casino and betting any amount they want, why are they so worried about what we risk on forex. Go police the casinos! If you want to help, make segregated accounts mandatory.
Quoting Temujin
Got an email from Oanda, they stand by their clients and erased the debts of negative equity from the SNB shockwave. Normal operations continue including withdrawals. Alparii has filed for insolvency, Excel Markets has closed it's doors. In a crisis like this it the best retail forex broker has stood out from the rest.
Oanda survived because they trade against their clients. Just like Gain,who earned a profit on the day. Market makers are not hurt and can forgive negative balances as they don't owe the lp's anything. Yeah, all the best brokers trade against their clients. People are so clueless, it's amazing sometimes.
Quoting Profit Daily
I trade with 500:1 leverage broker. People who do not know how to use leverage simply shouldn't trade. For those that do, the leverage restriction impeeds our ability to make money. I have a $10,000 forex account of which $9,000 is kept in my FDIC insured bank account. I open positions with about 7:1 and as trade goes in my favor, I scale in to the point where sometimes I am at 200:1 with stops at break even. This week I risked $20 on a euraud short and my profit on the trade was $844. Explain to me how I could do this with these regulations that...

+++ 1
Quoting Profit Daily
Oanda survived because they trade against their clients. Just like Gain,who earned a profit on the day. Market makers are not hurt and can forgive negative balances as they don't owe the lp's anything. Yeah, all the best brokers trade against their clients. People are so clueless, it's amazing sometimes.
Hello Profit Daily:

Can you please explain how you know for a fact that Oanda trades against their clients ?

And also out of curiosity can you tell me who is your broke, if you don't mind ?
May the Forex be with you.
Quoting pipster1
Although it is mentioned, the article's title is misleading...Every broker strongly lobbied against smaller leverage, not just FXCM.

Realistically, how many FX traders here could trade if they dropped leverage down to 10:1 or 5:1?

Get ready its coming, plus a minimum $10,000 trading account just like the minimum $25,000 account for US stock/options day traders.

Although they will promote this as a way to protect the common man, it is really designed to protect the banks.

If they want regulate something..start with credit default...
You create a false flag to create the desired result. Not anything different than 9/11, Sandy Hook, the 2008 crash (Dodd-Frank),etc.
One Tragedies here is that one of FXCM's most promoted strategies is to take a contrarian position to the retail market. They publish their details twice a day and from my recollection their clients were heavily long EUR/CHF with the weekly COT showing speculators very long CHF. Hindsight is 20:20 vision and otherwise absolutely useless, nevertheless alarm bells should have been ringing very loud. It is a pity that FXCM have lost so badly as they are really one of the very best brokers. It is good that they have interim funding in place which will allow them to continue operations. Clearly it was a very bad mistake though at least they survived albeit at their shareholders expense. However as with anything in the financial market it is a risk though the good thing is they are here to fight another day.

The thing is that it was the brokers primarily at fault for not having proper protection in place for themselves and not the retail forex traders. Hopefully any future action will not punish the retail forex trader.
So tired of hearing about the small retail trader. CNBC makes sound like the retail trader is so naive. I was short GBPCHF the night before the news, because the GBPCHF was overbought and at the top of consolidation on the daily. I set my limit for profit around support and the daily trading range, put in one more order to sell one more lot @ 1.5595, took a screen shot of my account and my entry order and went to bed. I made a +300 hundred pips on two standard lots, you didn't need to be a rocket scientist to know that you shouldn't have been selling CHF. I don't see CNBC reporting on how Smartest money in the world, Banks, Hedge funds, Brokers where so wrong! and how the smartest money in Fx trading lost there clients money! I would like to hear just how much money the Pros lost compared to the small retail trader. If Oanda and Gain trade against its clients, does it matter? I don't care what broker you are using they are not your friend. We know the spread, margin required, roll, risk, ect. What matters is, if your orders are being executed as you place them, Period!!
Quoting Borg
Hello Profit Daily:

Can you please explain how you know for a fact that Oanda trades against their clients ?

And also out of curiosity can you tell me who is your broke, if you don't mind ?

lol. Their website.
Quoting Profit Daily
lol. Their website.
Oanda’s web site says “we never trade against our clients” so if their web site is your source then you are apparently wrong.

See
How Transparent is the Retail FX Industry?
Posted by Ed Eger at Dec 02, 2014
http://www.oanda.com/corp/forex-lab-notes/

…Transparency is our business model: OANDA is a market maker, and an industry steward, publishing proprietary data like graphical spread statistics, open order summary statistics, and our clients’ entry price statistics. This is critical market intelligence, aggregated from a large sample of active traders. Furthermore, we never trade against our clients,
May the Forex be with you.
Quoting Borg
Oanda’s web site says “we never trade against our clients” so if their web site is your source then you are apparently wrong.

See
How Transparent is the Retail FX Industry?
Posted by Ed Eger at Dec 02, 2014
http://www.oanda.com/corp/forex-lab-notes/

…Transparency is our business model: OANDA is a market maker, and an industry steward, publishing proprietary data like graphical spread statistics, open order summary statistics, and our clients’ entry price statistics. This is critical market intelligence, aggregated from a large...

Did you miss the part where it says OANDA is a market maker. Everyone knows this. How do you not know this?
From Oanda's website:

When you enter into an OTC Contract with OANDA, you will be entering into a privately negotiated contract with
OANDA as principal. This means that OANDA acts as the seller when you buy and the buyer when you sell.
Again I dont think people quite understand just how this works This is my take Say you are good at knowing which way the market is moving you are long the CHF in the GBPCHF which is short GBP on the other side of the cross,this all happens quickly you enter short with a 50 pip stop all looks good going in your direction no problems you are in profit great. News breaks on CHF peg.Trade bolts in your direction just what you wanted and picked. In same instant and I mean instant spread widens by many hundreds of points you cant close position quick enough you get stopped on the other side of spread because in volatile times it jumped your 50 point stop and closed at next available price 850 points away. Game over that is why anyone who was trading CHF crosses even if you were in a wining trade it changed to a loser in the blink of an eye and thats in a winning direction if you had the direction wrong well that is just a straight up losing trade and because of the stops being jumped by the instantly widened spreads a small loss is now a huge loss. In this instance everyone was a loser. Please correct me if have this wrong
Quoting Profit Daily
Did you miss the part where it says OANDA is a market maker. Everyone knows this. How do you not know this?
I do know it, but apparently you believe because they are a market maker therefore they “trade against their clients” and some how Oanda is doing some thing under handed. Some definitions to clarify the discussion.

http://fxtrade.oanda.co.uk/learn/intro-to-currency-trading/currency-market/evolution
Market-Maker – A dealer or broker that provides a two-way quote (i.e. a bid and ask price) for which the dealer agrees to buy or sell. Offering both sides of a trade literally "makes" a market for those wishing to engage in currency trading. OANDA is an example of a forex market-maker.

Market maker
A financial institution or individual making consistent buy and sell quotations in a selection currencies. A market maker must hold or have ready access to the amounts quoted, that is carry an inventory.

http://fxtrade.oanda.com/learn/intro-to-currency-trading/conventions/spot-trading
“OANDA offers immediate settlement on all trades and updates accounts accordingly. This is because as a market maker, OANDA can support both sides of each trade.”


Oanda is very transparent about how they make their money. They make their money off the spread and have a ready inventory to take the other side of the trade for immediate settlement of trades. Since the trader and Oanda are both benefiting from this well publicized relationship I don’t see what is wrong with it. Both benefit and again Oanda only profits from the spread, not by trading against the customer.

Perhaps you define taking the other side of the trade as “trading against their clients”, but this only works if Oanda profits from the trade going against the client which I don’t see here. How could they stay in business if the only way they could make money is by trading against their clients that’s not much of a business model is it. So again I do believe you are mistaken and Oanda’s claim that they do not trade against their clients stands.

Btw if you have ever bought gold coins at a coin shop you might have wondered how they can make a profit both when gold is going down in price and when it is going up in price. You could say the same thing about them that you say about Oanda namely that the coin shop “acts as the seller when you buy and the buyer when you sell.” So are they trading against their clients by profiting from their loss in the coin market ? No, they make their profit off the spread (buy price, sell price difference) which is clearly posted for every one to see just like Oanda does.
May the Forex be with you.
Quoting Profit Daily
From Oanda's website:

When you enter into an OTC Contract with OANDA, you will be entering into a privately negotiated contract with
OANDA as principal. This means that OANDA acts as the seller when you buy and the buyer when you sell.
This is directly from THEIR website under risk disclosure when you buy they are the seller and vice versa, when you win, they lose and vice versa. It's not underhanded- they don't hide it. But when trading with a broker who loses when you win, they will hunt your stops, widen the spreads and freeze the platform if you're happy with them, keep trading with them. I personally would never trade with that business model, but that's me.
Quoting Profit Daily
This is directly from THEIR website under risk disclosure when you buy they are the seller and vice versa, when you win, they lose and vice versa. It's not underhanded- they don't hide it. But when trading with a broker who loses when you win, they will hunt your stops, widen the spreads and freeze the platform if you're happy with them, keep trading with them. I personally would never trade with that business model, but that's me.
So who do you trade with ?
May the Forex be with you.
Quoting Borg
So who do you trade with ?

I sent you a pm
Hi Profit Daily,

Appreciate your advice, which broker that you believe do not trade against their client.

I am planning to switch broker.

Thanks
ken.
Leverage not the issue here, people not knowing how leverage works is the problem. There was nothing devious or illegal in these happenings with those brokers in the spotlight ( although I suspect the investigations being undertaken as a result is going to uncover some regulatory issues), the market moved fast. It happens and you get caught out. Consider yourself lucky it was in FX where the positions where closed, not equities or futures where you would be left holding worthless stocks or contracts. For example FXCM shares today...anyone remember 87? Trade well folks, don't follow some "guru". Perhaps a larger account minimum is a good thing to keep out those that perhaps shouldn't be in the market.
if leverage getting drop into 1:10, forex doesn't interesting anymore. Open 0.01 lot with $1000 deposit, this real turtle way. For sure that's more more better trade stock even with 1:1
broker not gonna lobby regulator to set leverage become 1:1

all what they do now is get back client trusth and interest, with launching promotion, bonus, etc.

if leverage become 1:1,, then who gonna deposit to them ? broker will very hard to get client, only rich people, rich people have powerful money, they can buy information, they can hire smart account manager, and trading safely, that mean broker hard to eat their SL, no SL mean no food
and also rich people trusth to top broker, bank institutional. mean many medium to small broker gonna fall, bussines close, no retail traders mean no retail broker.

forex trading open to retail traders, because many brokerage company hard get profit,
they thinking how to make market more "liquid".. so that is beginning of high leverage, small deposit, micro lot size, deposit bonus, etc...

will they reverse back market to old frozen time ? by set leverage to 1:1.. just because few broker burn ?
the answer is only one,, helllll nooooo
take what you can take, before market take it back
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Quoting BadakHitam
if leverage getting drop into 1:10, forex doesn't interesting anymore. Open 0.01 lot with $1000 deposit, this real turtle way. For sure that's more more better trade stock even with 1:1
I don't agree with you. I think fx traders is addicted with high leverage and they are almost newbie.
If you are good and trader 1:1 you can get excelente result...
I've been trading with 1:1 for year and I've been getting 0,5~1,5% gains or losses
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  • Story Stats
  • Posted: Jan 17, 2015 3:55am
  • Submitted by:
     Newsstand
    Category: Forex Industry News
    Comments: 41  /  Views: 9,652