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Proposed NFA Capital Requirement

  • #41
  • Jul 9, 2007 2:12pm Jul 9, 2007 2:12pm
Thanks Mike. I guess my first concern is how can you tell whether or not these brokers you see on the Internet are real companies or just one man operations with a website? Is there some kind of "consumer reports" for fx brokers? What kind of criteria should one use to sort through brokers?
  • #42
  • Jul 9, 2007 2:21pm Jul 9, 2007 2:21pm
Quoting Clubber Lang
Thanks Mike. I guess my first concern is how can you tell whether or not these brokers you see on the Internet are real companies or just one man operations with a website? Is there some kind of "consumer reports" for fx brokers? What kind of criteria should one use to sort through brokers?
a good place to start is with the big name brokers, a lot of the broker websites you see, they are just IB(introducing brokers) for other companies. For any company u see then check the NFA website. I personally would never put money with a company that even seemed obscure. This forum really has a ton of info on most brokers. Enough to make a very educated decision. Sometimes someone will post a thread, has anyone heard of so and so(random) broker. And no one has, or responds. To me that is an immediate yellow flag. If I can't speak with someone I know that uses a broker, no chance I would ever put a large sum of money in. There are also the preferred brokers on this site on the homepage area. That is a good place to start. Just get your feet wet, ask around, people will tell you their opinions. Every broker has it's good and bads. That is just part of it. Some might offer higher spreads, but great execution. Most people move brokers in the beginning quite often.

I know it isn't the answer you want. But there is no credible consumer site, that has ratings which are good enough to blindly follow.

Best,
Mike
  • #43
  • Jul 10, 2007 9:44am Jul 10, 2007 9:44am
Thanks again. So I check the forex factory "Preferred Brokers" but one of the firms listed there, I Trade FX, actually has negative capital? Knowing that how legit would you say the "Preferred Brokers" are on this site or do those firms just pay money to advertise here?

Also, how much stock do you put into these "adjusted net capital" figures the cftc reports?
  • #44
  • Jul 10, 2007 10:10am Jul 10, 2007 10:10am
Quoting Clubber Lang
As someone new to trading and someone who is posting on this board for the first time I must say I'm a bit overwhelmed by all the different broker choices available. How is a new trader expected to sort all this stuff out? Are there any independent, third party sources where all this information can be weighed without bias?
Forums are great but the same questions are asked over and over again. This why I started Forex Anonymous so things like this could be found quick and simple.
  • #45
  • Jul 10, 2007 3:14pm Jul 10, 2007 3:14pm
Quoting turbokaos
Forums are great but the same questions are asked over and over again. This why I started Forex Anonymous so things like this could be found quick and simple.
I'm not following you turbo?
  • #46
  • Jul 10, 2007 9:00pm Jul 10, 2007 9:00pm
Quoting Clubber Lang
Thanks again. So I check the forex factory "Preferred Brokers" but one of the firms listed there, I Trade FX, actually has negative capital? Knowing that how legit would you say the "Preferred Brokers" are on this site or do those firms just pay money to advertise here?

Also, how much stock do you put into these "adjusted net capital" figures the cftc reports?
business is business this is how ff makes it's money, so no there not here to look out for you, you have to do your own research.
If I Go Broke Trying Then I Will die happy.
  • #47
  • Jul 11, 2007 2:48pm Jul 11, 2007 2:48pm
According to the current month month, I Trade FX has positive 3 million+ in capital. Was the previous month a misprint?

http://www.cftc.gov/files/tm/fcm/tmfcmdata0705.pdf
  • #48
  • Jul 11, 2007 7:37pm Jul 11, 2007 7:37pm
To "tdion": my tone re. my "BS" comments was wrong, so I apologize about that. What I meant was simply that the "Dead Pool" thread got nixed, I assume becuase it was a bunch of unsubstantiated hype (at least that was my take on it), and this thread just seemed very similar.

When I first heard all this stuff about brokers getting shut down, and the ones "on the verge" I was nervous, but now I am not at all after researching it a little bit. I just don't like seeing someone start a panic for no good reason. BUT, this is a free country, so no real problem with it in the end.
  • #49
  • Edited 10:46am Jul 12, 2007 10:35am | Edited 10:46am
The tone from the link in the first post was over the top. But it does raise interesting questions about whether or not these companies will have enough money should this rule go through. In that respect, I think it is a legitimate question. After all one of the firms on that list appears to have gotten into serious trouble judging from this thread: http://www.forexfactory.com/showthread.php?t=37571

I would like to see more discussion about this. This industry is the Wild West and I have already seen several threads posted on this forum detailing the demise of this firm or that firm.
  • #50
  • Jul 17, 2007 8:24pm Jul 17, 2007 8:24pm
As I continue to update the dead forex firms walking list I'm amazed how many people think fraud and undercapitalization are completely separate issues. Often times they are not. The reason is quite simple: firms that are committing fraud are not known for having legible books. And Vice versa. Firms that have a hard time maintaining their capital requirements will often cut corners and commit fraud to keep their firms from going under. Finally, smaller firms simply don't have the money to maintain the kind of large legal and compliance staffs necessary to keep up with the battery of regulations being issued by the NFA and CFTC. And of course some firms are just plain incompetent. All these factors have come to a head with Forex Dealer Dead Pool Member One World Capital, who is now in serious trouble with regulators.

To see the full report on One World's misdeeds you can click on the NFA's report yourself: http://www.nfa.futures.org/BasicNet/...px?seqnum=1190

I have highlighted some of the worst allegations below. After reading through them I think you'll understand why One World is on the dead firm's walking list and why that should be serious cause for concern for anyone who has an account with them or any firm like them.

"One World lacked an understanding of, or was inattentive to, regulatory requirements and was ill prepared to accept customer business as either an FDM or an FCM. The firm had not established adequate systems to enable it to handle customer funds or comply with customer reporting requirements."

"The firm was unable to properly account for its liabilities to its forex customers." (Insert appropriate jaw dropping sound. This is the text book definition of a firm destined to go bankrupt.)

"In addition, NFA's audit found that One World and Walsh [Principal] provided false and misleading information to NFA auditors concerning an individual names Charles Martin and his role at One World. Walsh said Martin had no involvement in the firm. However, NFA subsequently learned that Walsh's claim was untrue and that Martin was, in fact, heavily involved in the operations of One World and solicited customers on its behalf." (Who is Charles Martin you ask? The NFA states Martin was turned down to be a principal before because of a "felony drug conviction and a misdemeanor theft conviction.")

It goes on and on, misleading promotional materials, outright lies to regulators, failure to report capital and maintain any semblance of book keeping standards. In short, One World is a classic Dead Forex Firm walking. Firms like One World are the reason the NFA is going to raise capital requirements. And when they do, does anyone honestly believe the One World's of the world will survive?
  • #51
  • Jul 17, 2007 10:32pm Jul 17, 2007 10:32pm
Quoting forexsavior
As I continue to update the dead forex firms walking list I'm amazed how many people think fraud and undercapitalization are completely separate issues. Often times they are not. The reason is quite simple: firms that are committing fraud are not known for having legible books. And Vice versa. Firms that have a hard time maintaining their capital requirements will often cut corners and commit fraud to keep their firms from going under. Finally, smaller firms simply don't have the money to maintain the kind of large legal and compliance staffs necessary to keep up with the battery of regulations being issued by the NFA and CFTC. And of course some firms are just plain incompetent. All these factors have come to a head with Forex Dealer Dead Pool Member One World Capital, who is now in serious trouble with regulators.

To see the full report on One World's misdeeds you can click on the NFA's report yourself: http://www.nfa.futures.org/BasicNet/...px?seqnum=1190

I have highlighted some of the worst allegations below. After reading through them I think you'll understand why One World is on the dead firm's walking list and why that should be serious cause for concern for anyone who has an account with them or any firm like them.

"One World lacked an understanding of, or was inattentive to, regulatory requirements and was ill prepared to accept customer business as either an FDM or an FCM. The firm had not established adequate systems to enable it to handle customer funds or comply with customer reporting requirements."

"The firm was unable to properly account for its liabilities to its forex customers." (Insert appropriate jaw dropping sound. This is the text book definition of a firm destined to go bankrupt.)

"In addition, NFA's audit found that One World and Walsh [Principal] provided false and misleading information to NFA auditors concerning an individual names Charles Martin and his role at One World. Walsh said Martin had no involvement in the firm. However, NFA subsequently learned that Walsh's claim was untrue and that Martin was, in fact, heavily involved in the operations of One World and solicited customers on its behalf." (Who is Charles Martin you ask? The NFA states Martin was turned down to be a principal before because of a "felony drug conviction and a misdemeanor theft conviction.")

It goes on and on, misleading promotional materials, outright lies to regulators, failure to report capital and maintain any semblance of book keeping standards. In short, One World is a classic Dead Forex Firm walking. Firms like One World are the reason the NFA is going to raise capital requirements. And when they do, does anyone honestly believe the One World's of the world will survive?
You were the poster that start the original thread on this topic. All 4 of your forum posts are on this topic.

What is your agenda? You never did answer that question in the original thread.
  • #52
  • Jul 17, 2007 11:10pm Jul 17, 2007 11:10pm
this guy has post this same kind of info in about 6 forums, don't know what this guy is up too, we heard it already, and some of the stuff he's saying is just not true about certain firms, i.e. Mb Trading.
If I Go Broke Trying Then I Will die happy.
  • #53
  • Jul 18, 2007 9:52am Jul 18, 2007 9:52am
Like many of the firms on this board I have never heard of One World Capital. They aren't even in the preferred broker section on this website. How do these people even manage to get a license with barely any money in the bank?
  • #54
  • Edited 1:28pm Jul 18, 2007 1:06pm | Edited 1:28pm
Quoting ForexPIPsMaster
FXCM LLC, is under the NFA requirement too?
FXCM LLC is a sub of Forex Capital Market.....It was posted yesterday, that to end confusion, FXCM LLC's name has been changed to FXCM Futures LLC, ( or very similar ) FXCM is going to be opening a FCM for futures trading....not accepting clients as of yet....The name change has not taken effect on the CFTC rankings.

I think this was posted in the trader forum.....though best to search, I'm writing from memory....though I did read that yesterday, and I also spoke to a rep a few days ago.

UPDATE: That POST I spoke of is in the Forex News and Analysis section. July 17th at 0831am.
Proper Prior Planning Prevents Piss Poor Performance
  • #55
  • Jul 18, 2007 3:47pm Jul 18, 2007 3:47pm
From Phil Davis at another Forum about Forexscholar and his possible motives.....

"It appears Chris's suspicion regarding Forexscholar's original posting declaring all but a small handfull of well capitalized market makers are destined to close their doors may be more than a suspicion. I spent a hour or so this morning doing a little research and discovered the Forexscholar lives just 5.4 miles from FXCM's downtown Manhattan offices.

Considering the distribution of the world's population, I'm hard pressed to think that this is just a mere coincidence. If, in fact, Forexscholar does work for FXCM it shows how low the company will stoop to exclude real competition in the marketplace. As Chris points out, the fact that Forexscholar put MBTrading/EFX name in the title of each of the forum postings only shows that ECN (non-dealing desk) trading is a real threat to the market maker business model.

Regarding capitalization requirements, anyone who knows anything about business knows that no properly managed company deposits phenomenally more than it has to deposit in an account that generates a nominal rate of return unless it has a good reason to do so. I would suggest that the well capitalized FCMs cited in Forexscholar's original post show those high balances for one reason and one reason only - it makes the look stronger than the little guy.

In FXCM's case, (IMHO) the only reason they show the biggest account is that they're using that to persuade traders that they're the best capitalized FCM in the business. Well, they ought to be. They've been screwing clients worldwide since 2001 and now want to change the rules of the game - not to protect the trader mind you but to insulate themselves from legitimate competition.

Any good financial planner will tell you that a balanced investment portfolio will include CDs and other time deposits but not to the exclusion of other asset classes. My guess is that the $50M they show is chump change considering the revenues they generate pulling off 2 pips per trade on the 90,000 traders they have in their camp. In 2005 they reported $154M. If that figure is accurate it's not a stretch to think that they currently have at least $200M in their political war chest considering the fact that they were willing to pay upwards of $110M to buy the now defunct Refco client list.

There's certainly no concern on my part that FXCM is going to go under unless, of course, the NFA decides to shut them down for some other reason. I'm not concerned about MBTrading/EFX either. They are but one of a small number of FCMs offering an alternative to the traditional bucket shop and push comes to shove, if they need to meet a higher cap requirement, I'm confident they'll find a way to make that happen. Their business model is not only an ethical one, it's a viable one that's obviously scaring the beJesus out of FXCM. Otherwise, FXCM wouldn't be encouraging its minions to create a fear campaign to drive MBTrading/EFX and others out of the business.

Again, it's hard for me to believe that Forexscholoar isn't in the employ of FXCM so members might want to take what he/she had to say with a big block of salt."

Phil Davis - NDD
  • #56
  • Jul 18, 2007 4:12pm Jul 18, 2007 4:12pm
Apropos "stooping low": How would you qualify:

* spreading rumors about competitors without proof (OMG someone on the internet said he lives in manhatten - it HAS to be a FXCM emplyee!)

* constantly implying on various bulletin boards that marketmaking is a dubious business with the sole aim of skewing prices and scamming (while totally neglecting the fact that with out any marketmakers there would be litte liquidity on your own platform)

The motto seems to be: not guilty until speculated otherwise! As far as i am concerned, this is a battle of the shills. Justin gets +1 credibility tho for identifying himself.
  • #57
  • Jul 18, 2007 4:16pm Jul 18, 2007 4:16pm
Quoting shrike
Apropos "stooping low": How would you qualify:

* spreading rumors about competitors without proof (OMG someone on the internet said he lives in manhatten - it HAS to be a FXCM emplyee!)

* constantly implying on various bulletin boards that marketmaking is a dubious business with the sole aim of skewing prices and scamming (while totally neglecting the fact that with out any marketmakers there would be litte liquidity on your own platform)

The motto seems to be: not guilty until speculated otherwise! As far as i am concerned, this is a battle of the shills. Justin gets +1 credibility tho for identifying himself.
shrike....thanks for the +1 I certainly do appreciate it.
  • #58
  • Jul 18, 2007 4:17pm Jul 18, 2007 4:17pm
Quoting shrike
(while totally neglecting the fact that with out any marketmakers there would be litte liquidity on your own platform)
Ummmm, let's be clear that bank liquidity and deal desks (market markets of forex) are two totally different things. Justin's platform doesn't have market makers at all.
FXChant Singing the World of Forex
  • #59
  • Jul 18, 2007 4:33pm Jul 18, 2007 4:33pm
Because banks dont make markets, they pull the quotes out of their rear instead?
  • #60
  • Jul 18, 2007 5:10pm Jul 18, 2007 5:10pm
If FXCM this forex guy why would they list themselves as being one of the firms in danger like they did in the first post of this thread?
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