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Proposed NFA Capital Requirement

  • #61
  • Jul 18, 2007 5:59pm Jul 18, 2007 5:59pm
Another day, another small forex broker dealer shuttered. But before we start throwing dirt on the coffin of forward forex let's take a peak inside and perform an autopsy on the cadaver. For some its old news but for those concerned about the fragile state of the forex industry I think a proper examination is in order. For starters, why and how did this firm get shut down by regulators?

Forward Forex was granted a NFA license in January of 2006.
http://www.nfa.futures.org/BasicNet/...tityid=0362887

On June 18, 2007, the NFA began its examination of Forward Forex and met its CEO, Onelio Manuel Murias. Murias stuck around for an hour after the NFA arrived and then apparently slipped out the back door. He has not been seen since. That's right. As soon as the regulators showed up at his door to look at his books the CEO of the company fled! It's like an episode of "To Catch a Predator" where Chris Hansen breaks out the cameras and the perps go running. So the NFA goes over and speaks with another AP/Principal of the firm, Marshall David Wertheim. Wertheim then tells the NFA that he didn't even know he was an Associated Person and just entered trades in the dealing room. And this guy was legally listed as an AP of the firm?! The rest of the audit consists of the NFA desperately trying to get basic book keeping information only to be told by clueless employees that "we know nothing." Finally Murias' lawyer followed up with the NFA and after a round of Monty Pythonesque negotiating conclude that Murias will not be responding to queries. Hard to believe right? See it all for yourself:
http://www.nfa.futures.org/BasicNet/...px?seqnum=1269

This goes right to the heart of what I have been saying these past few weeks. The National Futures Association has been inundated with this kind of activity amongst smaller, undercapitalized broker dealers (for the record Forward Forex had only $1.8 million according to the latest CFTC report.) When you don't have any capital you skimp on things like, oh, well, accountants, compliance staff, Associated Persons... This company was a complete farce. But if you are an ordinary trader how can you really tell? Before this scandal broke they were registered with the NFA and were meeting their minimum capital requirements. I'm sure they had some smooth talking salesmen spinning stories about how well regulated they were. So from the outside it looked ok, right?

Wrong. This is why the NFA is dramatically raising capital requirements. They are tired of dealing with these flimsy, undercapitalized firms. The very fact that the NFA is raising capital requirements should tell you that they have very little confidence in firms with net capital below $5 million. This isn't my opinion. This is the NFA's own opinion. And if a regulator thinks that then the average trader needs to think long and hard before putting their hard earned money in the bank accounts of any of the dead forex firms walking.

One last point. It has been said by some that after the NFA decides to raise capital requirements that there will be an orderly process for unwinding the smaller brokers who can't make the cut. Really? What's to stop the Murias' of the world from bolting with the company's funds and fleeing the state or country once they know the jig is up? The NFA couldn't even get the CEO of forward forex to answer some simple auditing questions and they're going to be able to keep some of these bucket shops out there from fleeing with customer assets? This whole Capitalization issue has the potential to be a real train wreck. So do yourself a favor and keep a sharp eye out on the dead forex firms walking.

P.S. To those firms on the dead forex firms walking list just put up the money now. Why put your customers through the agony of not knowing whether or not your firm is going to make the cut? As for the attacks against me and bizarre cyber stalking of me by EFX I suggest you guys spend your time raising enough money to stay in business rather than personally attacking me. And no, I don't work for FXCM. But if they want to cut me a cheque I'll be glad to accept it.
  • #62
  • Jul 18, 2007 7:39pm Jul 18, 2007 7:39pm
Quoting Clubber Lang
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?
Cleverly, FXCM is not on the real list. They have two operations. Look for Forex Capital Markets.
FXChant Singing the World of Forex
  • #63
  • Jul 18, 2007 7:42pm Jul 18, 2007 7:42pm
Quoting forexsavior
Another day, another small forex broker dealer shuttered. But before we start throwing dirt on the coffin of forward forex let's take a peak inside and perform an autopsy on the cadaver. For some its old news but for those concerned about the fragile state of the forex industry I think a proper examination is in order. For starters, why and how did this firm get shut down by regulators?

Forward Forex was granted a NFA license in January of 2006.
http://www.nfa.futures.org/BasicNet/...tityid=0362887

On June 18, 2007, the NFA began its examination of Forward Forex and met its CEO, Onelio Manuel Murias. Murias stuck around for an hour after the NFA arrived and then apparently slipped out the back door. He has not been seen since. That's right. As soon as the regulators showed up at his door to look at his books the CEO of the company fled! It's like an episode of "To Catch a Predator" where Chris Hansen breaks out the cameras and the perps go running. So the NFA goes over and speaks with another AP/Principal of the firm, Marshall David Wertheim. Wertheim then tells the NFA that he didn't even know he was an Associated Person and just entered trades in the dealing room. And this guy was legally listed as an AP of the firm?! The rest of the audit consists of the NFA desperately trying to get basic book keeping information only to be told by clueless employees that "we know nothing." Finally Murias' lawyer followed up with the NFA and after a round of Monty Pythonesque negotiating conclude that Murias will not be responding to queries. Hard to believe right? See it all for yourself:
http://www.nfa.futures.org/BasicNet/...px?seqnum=1269

This goes right to the heart of what I have been saying these past few weeks. The National Futures Association has been inundated with this kind of activity amongst smaller, undercapitalized broker dealers (for the record Forward Forex had only $1.8 million according to the latest CFTC report.) When you don't have any capital you skimp on things like, oh, well, accountants, compliance staff, Associated Persons... This company was a complete farce. But if you are an ordinary trader how can you really tell? Before this scandal broke they were registered with the NFA and were meeting their minimum capital requirements. I'm sure they had some smooth talking salesmen spinning stories about how well regulated they were. So from the outside it looked ok, right?

Wrong. This is why the NFA is dramatically raising capital requirements. They are tired of dealing with these flimsy, undercapitalized firms. The very fact that the NFA is raising capital requirements should tell you that they have very little confidence in firms with net capital below $5 million. This isn't my opinion. This is the NFA's own opinion. And if a regulator thinks that then the average trader needs to think long and hard before putting their hard earned money in the bank accounts of any of the dead forex firms walking.

One last point. It has been said by some that after the NFA decides to raise capital requirements that there will be an orderly process for unwinding the smaller brokers who can't make the cut. Really? What's to stop the Murias' of the world from bolting with the company's funds and fleeing the state or country once they know the jig is up? The NFA couldn't even get the CEO of forward forex to answer some simple auditing questions and they're going to be able to keep some of these bucket shops out there from fleeing with customer assets? This whole Capitalization issue has the potential to be a real train wreck. So do yourself a favor and keep a sharp eye out on the dead forex firms walking.

P.S. To those firms on the dead forex firms walking list just put up the money now. Why put your customers through the agony of not knowing whether or not your firm is going to make the cut? As for the attacks against me and bizarre cyber stalking of me by EFX I suggest you guys spend your time raising enough money to stay in business rather than personally attacking me. And no, I don't work for FXCM. But if they want to cut me a cheque I'll be glad to accept it.
Somehow, I don't see EFX having trouble, and I don't think anyone really cares whose payroll you are on, but it's obvious that you belong to one of the big firms. Here is how we know. Why don't you offer to state who you are and discuss this with people over the phone? Why hide behind a layer of secrecy if you have pure motives? State your motivation (please spare us the "I love posting all of this on boards to protect the public" stuff, as that would be read as "If true, I simply have no life.") or give it a rest.
FXChant Singing the World of Forex
  • #64
  • Jul 18, 2007 8:13pm Jul 18, 2007 8:13pm
Quoting fxchant
Somehow, I don't see EFX having trouble, and I don't think anyone really cares whose payroll you are on, but it's obvious that you belong to one of the big firms. Here is how we know. Why don't you offer to state who you are and discuss this with people over the phone? Why hide behind a layer of secrecy if you have pure motives? State your motivation (please spare us the "I love posting all of this on boards to protect the public" stuff, as that would be read as "If true, I simply have no life.") or give it a rest.
Apparently I have really stirred the pot with EFX. However, they are not the only firm on that list and I have hardly singled them out. It's just that their constant retorts only serve to cause collateral damage on themselves. My motive? I was burned by an outfit called FX First. And I believe the trading public has a right to know the dangers of trading with these smaller fx boutiques. EFX's employees don't think the public has a right to know this information. Fine. That's their opinion. As for giving out my phone number on the internet... Are you insane? I've already got EFX cyber stalking me as it is and you wonder why I don't give out my personal information? I don't think attacking the messenger is a good subsitute for substantively addressing the issue. Please try again. And please, address the issue, if you can.
  • #65
  • Jul 18, 2007 8:50pm Jul 18, 2007 8:50pm
Quoting forexsavior
Apparently I have really stirred the pot with EFX. However, they are not the only firm on that list and I have hardly singled them out. It's just that their constant retorts only serve to cause collateral damage on themselves. My motive? I was burned by an outfit called FX First. And I believe the trading public has a right to know the dangers of trading with these smaller fx boutiques. EFX's employees don't think the public has a right to know this information. Fine. That's their opinion. As for giving out my phone number on the internet... Are you insane? I've already got EFX cyber stalking me as it is and you wonder why I don't give out my personal information? I don't think attacking the messenger is a good subsitute for substantively addressing the issue. Please try again. And please, address the issue, if you can.
I didn't say that you should give out the number over the Internet. I think Justin has made it very easy to access him, and I think you might actually get a full range of answers to your questions if you contacted him, but since he hasn't reported to us that you did, and since you admit that you haven't, then obviously, everything is questionable. I certainly don't want your phone number. I want people to have a conversation where we know the motivations.

Also, I don't see that EFX did any research on you at all. The moderator of another website did it, and you know which one because you are posting there too...Justin cut and pasted the post. I can't post which site because FF doesn't allow links to other sites. So your argument doesn't fit.

It's one thing to sit down and start a conversation. It is another to continue to implicate companies that are of one caliber with companies of a lower caliber based on one number that you choose to think is important. Let's pretend that you have an understanding of this market. Let's take two firms with the exact same number and size of customers. Is it your opinion that if one of those is a deal desk and one is an ECN that they would both be equally at risk of running into financial troubles from their trading exposure?
FXChant Singing the World of Forex
  • #66
  • Jul 18, 2007 9:08pm Jul 18, 2007 9:08pm
Quoting fxchant

It's one thing to sit down and start a conversation. It is another to continue to implicate companies that are of one caliber with companies of a lower caliber based on one number that you choose to think is important.
Once again FX Chant you want to make me the issue instead of addressing the undercapitalization issue. Fine. You know full well that Justin and the person who cyber stalked me worked together hand in glove. Don't try to play games. As such why on Earth would I want to speak with someone as underhanded as Justin? The whole point of this conversation is that there is no way of knowing whether or not the firms on the dead forex firm's walking list are indeed of another caliber as the firms that are being forced to close up shop every day. In fact, the NFA doesn't even know that. THAT IS WHY THEY ARE RAISING CAPITAL REQUIREMENTS. Any firm that meets the new requirement clearly proves they are not one of these forward forex type firms. So instead of trying to attack me (and by attacking me you are in essence attacking the NFA) why don't you guys focus on the issue at hand. Clearly, you're not able to do that which is why you either: a) downplay and ignore the issue b) attack the messenger.
  • #67
  • Jul 18, 2007 9:28pm Jul 18, 2007 9:28pm
Quoting forexsavior
Once again FX Chant you want to make me the issue instead of addressing the undercapitalization issue. Fine. You know full well that Justin and the person who cyber stalked me worked together hand in glove. Don't try to play games. As such why on Earth would I want to speak with someone as underhanded as Justin? The whole point of this conversation is that there is no way of knowing whether or not the firms on the dead forex firm's walking list are indeed of another caliber as the firms that are being forced to close up shop every day. In fact, the NFA doesn't even know that. THAT IS WHY THEY ARE RAISING CAPITAL REQUIREMENTS. Any firm that meets the new requirement clearly proves they are not one of these forward forex type firms. So instead of trying to attack me (and by attacking me you are in essence attacking the NFA) why don't you guys focus on the issue at hand. Clearly, you're not able to do that which is why you either: a) downplay and ignore the issue b) attack the messenger.
Manhattan Boy-

Yes, last time I downplayed and ignored the issue, the NFA raised the requirement from $250,000 to $1.5 million and all three of my brokers at the time (MBT/EFX included) were either already above the criteria or raised their net cap in response. My world didn't end, just like I figured it wouldn't. So I will choose to downplay and ignore the issue when it comes to my broker(s) (Oanda and EFX) because I don't have doubts, but I will whole-heartedly agree that there are many scam brokers out there who set up shop overnight with the intent of trading against their customers and taking their money. And if your posts had initially just been about that, I'd probably just nod my head and say, "Yeah, so there are indeed scam deal desks out there and they eventually go under and customers that give them money are crazy. We knew that." But that isn't what happened, and you can't undo history. You posted on multiple boards not just a conversation about this topic but a specifically titled board everywhere that mentioned and targeted one firm in the list. And that makes your motivations questionable.

And by the way, how would I know firsthand that Justin and that Moderator worked hand in hand? Do I suddenly know all of the moderators of all of the boards personally? Do you? Talk about attacking the Messenger, that guy did something pretty important since you won't identify yourself, and you start name-calling him and Justin. How about you stand up and come forward and have the conversation that you want to have instead of hiding and name-calling?

I do know one thing. Many of us have nothing but respect for Justin and the work that he does on these boards answering questions about the industry, his platform, and everything else, and anyone that comes in and says ANYTHING negative like that about him personally deserves to get smacked. Either you have no idea how straight-up they are because you've never looked into it, or you just don't care. I suspect the latter.
FXChant Singing the World of Forex
  • #68
  • Jul 18, 2007 9:32pm Jul 18, 2007 9:32pm
Quoting fxchant

I do know one thing. Many of us have nothing but respect for Justin and the work that he does on these boards answering questions about the industry, his platform, and everything else, and anyone that comes in and says ANYTHING negative like that about him personally deserves to get smacked. Either you have no idea how straight-up they are because you've never looked into it, or you just don't care. I suspect the latter.

amen brother
  • #69
  • Jul 18, 2007 9:37pm Jul 18, 2007 9:37pm
Quoting fxchant
Manhattan Boy-

Yes, last time I downplayed and ignored the issue, the NFA raised the requirement from $250,000 to $1.5 million and all three of my brokers at the time (MBT/EFX included) were either already above the criteria or raised their net cap in response. My world didn't end, just like I figured it wouldn't.
Interesting that you mention this. Guess what? All the firms I have discussed thus far that have been shut down ALSO were able to meet that capital requirement when the NFA raised it last year. What does that tell you? It tells you it clearly wasn't enough since the bucketshops were also all able to meet the requirement. duh. This is why the NFA is raising it much higher to 5 million. Again, the trading public has a right to know this- even if you want to keep this secret from them.

As for the rest of your comments they are so grossly offensive (threatening the use of violence now?) I care not to address them. I'm sticking to the issue, which clearly you cannot.
  • #70
  • Edited 9:44pm Jul 18, 2007 9:41pm | Edited 9:44pm
Hi Guys ~

Thanks for the thoughts, but it really doesn’t matter who this guy is. This is the issue with the Internet. Anyone can say whatever with no accountability, and the rest of us have to try to filter through the junk. Since he won’t come forward, obviously any sane person can see that his posts are questionable, although I don’t mind hearing about the bucketshops that go under! But of course, we’ll still be here in 2008 and beyond, and this guy will fade. Let’s just ignore and see what happens.

By the way, most of you know about the Omega webinar event this next Tuesday. Anyone is free to ask questions about all of this at that event as well to have a real conversation so it isn’t just about the snippets back and forth here. Obviously, I’d say that the guy from NY is invited and could ask questions and just use a screen name, but I somehow don’t think he’d show.

EDIT: Or even better I could just request that the moderators for FF just shut this thread down if we can't all play nice.
  • #71
  • Jul 18, 2007 9:47pm Jul 18, 2007 9:47pm
Quoting jleblang
Hi Guys ~

Thanks for the thoughts, but it really doesn’t matter who this guy is. This is the issue with the Internet. Anyone can say whatever with no accountability,
If it really didn't matter who I was why did you cyberstalk me Justin? The reason is obvious, you can't address the issue so you just hammer away at the messenger or get you minions to threaten to "smack" the messenger. No matter. I will keep reporting these events. My motto is simple: the trading public has a right to know.
  • #72
  • Jul 18, 2007 9:53pm Jul 18, 2007 9:53pm
Quoting forexsavior
Once again FX Chant you want to make me the issue instead of addressing the undercapitalization issue. Fine. You know full well that Justin and the person who cyber stalked me worked together hand in glove. Don't try to play games. As such why on Earth would I want to speak with someone as underhanded as Justin? The whole point of this conversation is that there is no way of knowing whether or not the firms on the dead forex firm's walking list are indeed of another caliber as the firms that are being forced to close up shop every day. In fact, the NFA doesn't even know that. THAT IS WHY THEY ARE RAISING CAPITAL REQUIREMENTS. Any firm that meets the new requirement clearly proves they are not one of these forward forex type firms. So instead of trying to attack me (and by attacking me you are in essence attacking the NFA) why don't you guys focus on the issue at hand. Clearly, you're not able to do that which is why you either: a) downplay and ignore the issue b) attack the messenger.
forexsavior you are the issue. You and whatever your agenda is. Attacking Justin just confirms to me that you do not have anything of value to add to the forum. Compare your posting history with his. Just because you can type and compile a list of companies you have doubts about (or don't like) does not make you credible. I think this thread should follow your original one to where it belongs.
  • #73
  • Jul 18, 2007 9:57pm Jul 18, 2007 9:57pm
Quoting nvwine
forexsavior you are the issue. You and whatever your agenda is. Attacking Justin just confirms to me that you do not have anything of value to add to the forum. Compare your posting history with his. Just because you can type and compile a list of companies you have doubts about (or don't like) does not make you credible. I think this thread should follow your original one to where it belongs.
I am only the issue because people like yourself can't honestly debate the capital requirement issue. Since you have nothing to say about this issue please go post in another thread.
  • #74
  • Jul 18, 2007 10:03pm Jul 18, 2007 10:03pm
I don’t know where the cyberstalking comes from, although I might suggest that posting on no less than 11 boards the exact same thing about us might be construed as cyberstalking. No point in hammering at the messenger, as I’ve said. We were among the first on these boards two years ago to talk about the issues with deal desks, address NFA concerns, suggest where we thought this industry will go, etc. All of it seems to be coming into place, and I like this conversation you keep having because it’s helping us in a lot of ways that you’ll never understand. I’d love to thank you personally, but we know that won’t happen. Keep going with the posts though. Just keep ‘em civil and it’s a fun conversation. I’m curious. Assuming we’re still in business after the NFA raises the requirements next year, will you still be around and talk about how we must be one of the reputable ones?
  • #75
  • Edited 10:17pm Jul 18, 2007 10:05pm | Edited 10:17pm
Quoting Phil Davis @ another forum
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.
there are like 15 million people that live 5 miles from downtown, and there are tons of brokers and insiders within that range. to make a connection to FXCM is a far stretch imo.
Relax and be happy.
  • #76
  • Jul 18, 2007 10:09pm Jul 18, 2007 10:09pm
Quoting jleblang
I don’t know where the cyberstalking comes from, although I might suggest that posting on no less than 11 boards the exact same thing about us might be construed as cyberstalking. No point in hammering at the messenger, as I’ve said. We were among the first on these boards two years ago to talk about the issues with deal desks, address NFA concerns, suggest where we thought this industry will go, etc. All of it seems to be coming into place, and I like this conversation you keep having because it’s helping us in a lot of ways that you’ll never understand. I’d love to thank you personally, but we know that won’t happen. Keep going with the posts though. Just keep ‘em civil and it’s a fun conversation. I’m curious. Assuming we’re still in business after the NFA raises the requirements next year, will you still be around and talk about how we must be one of the reputable ones?
I'm a one note poster. If EFX makes the cap requirement at 5 million how can even forex savior doubt your firm after everything I have said about cap requirements? That's the beauty about this rule, it will weed out the hucksters. I have never said your firm was one of the hucksters, only that there is no way to tell right now. Put up the money and all doubts will be answered.
  • #77
  • Jul 18, 2007 10:10pm Jul 18, 2007 10:10pm
Quoting forexsavior
I am only the issue because people like yourself can't honestly debate the capital requirement issue. Since you have nothing to say about this issue please go post in another thread.
OK, let's honestly have the conversation, and you tell me where the issue is.

1) Minimum net cap is essentially $1.5 million currently (there is some temporary leeway).

2) MBT/EFX has over $3 million, more than double the current amount. They didn't show anywhere near this over a year ago when the requirement was $250,000. They choose to show more now.

3) The NFA is likely to raise the requirement, probably with an effective date of early 2008, to $5 million plus a cushion.

4) MB as a company has been operating for over a decade with no net cap issues on the stock side, which has a much deeper history of regulatory requirements. It's a huge company. What they choose to show on the books for their forex arm might not have anything to do with what they really have total in reserves.

Now it seems to me that debates are about facts. Those are facts, and I'd like to see you debate them.

Your comment of course will then be "But...but...but...they should have $5 million now." Or maybe "Well, I think anyone under $5 million now should be viewed as high risk." Those are OPINIONS. You don't debate opinions, you give them and let people decide. However, my understanding of this market leads me to agree that a true non-dealing desk broker has a substantially different risk profile. So, in response to your points (I'll save you the time of making them):

1) I'm not worried about MBT/EFX and their risk.

2) I'm not worried about whether they can raise their capital to meet the requirements.

3) I'd rather trade with them that an bucketshop out there whose higher net cap is a result of the money that they have stolen from their customers.

Those are my opinions, and I'm quite comfortable with them. Now tell me I am wrong. Please.
FXChant Singing the World of Forex
  • #78
  • Jul 18, 2007 10:11pm Jul 18, 2007 10:11pm
Quoting forexsavior
I'm a one note poster. If EFX makes the cap requirement at 5 million how can even forex savior doubt your firm after everything I have said about cap requirements? That's the beauty about this rule, it will weed out the hucksters. I have never said your firm was one of the hucksters, only that there is no way to tell right now. Put up the money and all doubts will be answered.
Good, something we can all agree on. Debate over. Night.
FXChant Singing the World of Forex
  • #79
  • Jul 18, 2007 10:13pm Jul 18, 2007 10:13pm
Quoting merlin
there are like 15 million people that live 5 miles from downtown, and there are tons of brokers and insiders within that range. to make a connection to FXCM is a far stretch imo.
I don't disagree...but as forexsavior stated "I don't think attacking the messenger is a good subsitute for substantively addressing the issue."

I didn't write the post...I just cut and pasted from elsewhere.
  • #80
  • Jul 18, 2007 10:15pm Jul 18, 2007 10:15pm
yeah i realized that was a quote from someone else justin. sorry i made it look like it came from you, i will edit that...
Relax and be happy.
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