Proposed NFA Capital Requirement

Thank you for proving my point Shrike. The fact is Hotspot has over 5 million not 4 million. Ask yourself why Justin specifically pointed out Hotspot instead of one of the ones on the list that are below 5 million? It's because he couldn't find a firm on the dead pool list with a parent the size of NITE. But no matter, perhaps Justin will publish MB Trading's Financials and put this debate to rest?

I don't think it is unreasonable to know what MB's financial status is. Why don't you make your financial balance sheet public? As a trader who is very concerned about where they place their funds I like to know who I am trading with. I'm sure you are a nice guy and all but this cftc report is the only independent source to check on your company's financial health. And honestly, it doesn't leave me feeling very confident.

HotspotFX has gone on the record with the NFA as saying they do not believe the proposed capital requirement increase should effect ECN brokers like themselves since they do "not have the same level of risk." The NFA and CFTC are considering that comment, as they are considering all comments for this proposed rule change. Should the NFA and CFTC disregard this idea I will disregard the idea that ECN brokers somehow are less risky than traditional market makers. Therefore you will be, in a word, discredited. You can wave your fist all you like about your belief that ECN brokers have less risk, but when even the regulators are not moved by this argument it becomes clear that the argument has been good and settled against you.

Do you ask the same of every single private (non-public) company you do business with?

If you do, you have your plan on what to do. If not...?

The word "Bucket Shop" gets thrown around a lot in the retail forex business. But what exactly is a bucket shop?

www.traderslog.com describes a Bucket Shop as follows:

Describes a brokerage facility that books (takes the opposite side of) retail customer orders without actually having them executed on an exchange. The term comes from the practice of placing an order in a bucket rather than transmitting it to an exchange as a broker would normally do. Bucket Shops were popular during the 1920's at a time when many stocks traded at over $100 a share and the average salary was $1,000 a year, making investment in the stock market too expensive for most people. The most sophisticated bucket shops, known as bucketeers, were hard to distinguish from legitimate brokerage offices, having their own ticker tapes and chalkboards. The bucketeers would often take opposite positions in the market to ensure that their customers could not win.

Forex bucket shops essentially do the same thing and simply pocket the money right up front without even bothering to go into the market to offset customer trades. Instead, the firm simply creates dummy statements showing customers they are making money and that as a result they should send in more money. Then after they have milked the customer enough they'll send out another dummy statement showing them they have lost it all. Or they just fold up shop and run like the wind.

Such were the sales practices of such prominent dead forex firms walking as Forward Forex, Trend Commodities Limited, Worldwide Clearing and FX Option1 Inc. Add to this list another con-man, and newly baptized convict, Udo Rotmistrenko. Udo was a licensed Commodity Trading Advisor registered with the CFTC. The NFA granted him his license in March of 2000:
http://www.nfa.futures.org/BasicNet...ntityid=0300565

Udo was the sole proprietor of Rittmeister Capital Management and his specialty was managed forex funds. But by June 2, 2004, the only thing he would be managing was how to find enough spare change to make his lone phone call from prison. For on that day he would be arrested by the feds for forex fraud. The details of Udo's case can be found here: http://www.usdoj.gov/usao/nys/press...entencingpr.pdf

For the condensed version here is essentially what Udo did; courtesy of the Fraud Digest: http://frauddigest.com/fraud.php?ident=3485

On March 31, 2005, Rotmistrenko pled guilty to twelve counts of wire fraud and twelve counts of mail fraud. During his guilty plea, Rotmistrenko admitted that, from 1999 to 2003, as then-CEO and president of Rittmeister Capital Management in New York City, he fraudulently induced investors to wire and mail him funds by giving the investors inaccurate information regarding his company’s profit history. Rotmistrenko did so by giving the investors account statements that falsely inflated the profits the investors were earning and by using investor funds to pay his personal expenses without disclosing those expenditures to the investors. According to the Indictment, Rittmeister held itself out to the investing public as a brokerage firm that managed investments for retail customers in the foreign currency exchange (“forex”) market.

In order to induce potential customers to invest funds through Rittmeister, Rotmistrenko and Rittmeister sales representatives made false and fraudulent representations regarding Rittmeister’s trading history in the forex market. Specifically, they falsely represented to retail customers that Rittmeister historically generated large profits, as high as in excess of 43 percent per year, for its customers through forex trading. In fact, Rittmeister generated little or no profits for Rittmeister’s customers through trading in the forex market. Furthermore, sales representatives told retail customers that Rittmeister’s customer investment funds were used to invest in the forex market, when, in fact, the company failed to transfer a large majority of investor funds to any forex trading firm for the purpose of executing forex trades. Rather, a substantial amount of investor funds were diverted to pay Rotmistrenko's personal expenses, and to pay Rittmeister’s operating expenses. To hide the fact that a large portion of the customer funds Rittmeister received was being diverted to pay Rittmeister’s operating expenses and for Rotmistrenko's personal benefit, Rotmistrenko created and sent clients false and fraudulent account statements that represented trading activity and profits and/or losses incurred on trades in client accounts. In truth, Rittmeister failed to generate any trading profits for the customer accounts. Rotmistrenko diverted customer funds from Rittmeister’s bank accounts in various ways, including the following: (i) approximately $319,000 was withdrawn in cash; (ii) approximately $146,900 was paid to an associate; (iii) approximately $24,900 in checks was made payable to Rotmistrenko; (iv) in excess of $30,000 was used for car payments and other car expenses; (v) approximately $38,000 was used to pay college tuition for Rotmistrenko's wife; and (vi) funds were used to pay for numerous hotel, motel and restaurant bills, wedding expenses, and gym memberships.

In fact, Udo is quite the sportsman. Not only did he use customer funds to bankroll his trips to the gym but he used them to pay for scuba diving lessons too! A simple googling of old Udo shows him to be a member of the "2001 Rec Scuba Rogues" http://www3.sympatico.ca/johnfrancis/rogues.htm. You can see his mugshot under the name "chaoswolf." Wonder how many pips all that scuba gear cost his investors? And boy could I spend hours and hours coming up with appropriate metaphors for Udo's membership in a club titled "Scuba Rogues..."

But alas Udo won't be breaking out his wetsuit anytime soon because on June 17, 2007, Udo was sentenced to 51 months in prison by Judge Deborah Batts. Ouch. Rarely do forex fraud criminals get such harsh prison sentences. What gives? Well, this was not your typical clumsy regulatory action. This case was initiated and prosecuted by the United States Attorney of the Southern District of New York. This was the office that gave America Rudy Giuliani. In short, these guys don't mess around. And that is an important thing to remember because prior to Udo's being arrested he had been given a clean bill of health by the NFA. What does that mean? It means that doing a background check is no guarantee that you're dealing with a legit firm.

In short, there is only one way to avoid the bucket shops and that is to avoid any and all unregistered firms and to avoid anyone that isn't showing a healthy balance sheet. Am I saying that firms with just a couple million dollar are bucket shops? Of course not. But since we know forex fraud is primarily taking place with smaller firms why take the chance? In short, until the industry gets flushed by regulators investors should be wary of any firm that isn't showing a healthy balance sheet else you stand a chance of being eaten alive by the Chaoswolves of the world.

This seems to be a dead link.
http://www3.sympatico.ca/johnfrancis/rogues.htm.

do you have a valid one? thanks

The institutional investor should have nothing to do with it, since that wasn't in your earlier criteria.

Did you check to see if they each had parent or sister companies (the companies on your list)? If you did not, then that should not be a category for verifying health OR you should check on it for all of them. Otherwise, it is subjective.

The burden of proof is not on him, since MB is meeting the current obligation.

The burden of proof of financial insolvency is on you, since you are making the accusation.

You're just playing hypotheticals, hoping to see his hand. He doesn't have to show you anything beyond what is required. I don't know anything about that company, but a quick google found me at least some verification of what he says. That doesn't prove anything in the end, but it does at least lend credence to what he's saying.

You're holding one piece of paper (the report), waving it around, and demanding that other people go beyond that piece of paper to satisfy a hypothetical future requirement (one that will likely go into effect, but is in fact not in effect). That is a witch hunt. He has no obligation to show you anything just because you say that you think the 5 million will pass.

By your logic, every company should put up 10 million or their full amount of money, even though they're not required to, because your implication is that they must be hiding something if they would not, aka the "You must be guilty, or you would have allowed us to search your house" argument that people use to talk about civil rights being violated. There are a number of business reasons I can think of that they would not want to do this, only some of which have anything to do with a shady act.

I would be satisfied if you took, say, a week, and tried to see if any of those companies had a financial parent or such. That would be of more use than some of the report posts you have put up.

Good to see this thread is still hopping. By the way I'm having trouble with that scuba link too. keep up the good work forexsavior!

Sure there is. The REQUIREMENT, you moron, is for $1 million right now. There is NOT ONE THING THAT YOU CAN SAY that would convince anyone that a firm is REQUIRED OR SHOULD show more than that right now. If a firm has a large company backing it, then OBVIOUSLY WHEN THEY NEED TO SHOW A BIGGER NUMBER IF A NEW LAW SHOULD PASS, it won't be a probably. Just because Hotspot shows over $5 million now doesn't mean anything except that's what they want to show. I suspect that they could show $40,000,000, so I wouldn't feel uncomfortable using them IF I like them, which I don't. Same is true of the company that you so obviously have targeted since the start, which is EFX/MBTF. Justin spelled it out very well.

By the way, I've received about 50 privates over the last two weeks from people saying that they know Forexsavior is an industry plant, ignore him, etc. I don't have to ignore him since most of you already are. I just love pointing out how recklessly obvious he is.

Nice job Shrike. He's totally proving who he works for here.

Why should he? I don't get it? Why don't you put your personal taxes up here and let us see if you are rich enough to know what you are talking about, or just the hit man for one the firms losing business to the others? I am aware of NO law that states that a privately held company is required to show ANY public statement of their financial backing, but I do know their track record, and I'm quite sure that these guys run a tight ship. MB...please...NEVER show this clown a financial statement. We all know you rule and he's a tool. The world backs you and not him, I can see it in the private messages that I have received.

That's the best quote on this WHOLE board. Well said. Well said.

I've absolutely had it. I've seen hit jobs on companies on bulletin boards in the past, and I always thought it was in good fun, but I do realize that when it is a hit job and not based on anything substantial, it effects other people's lives.

There is ONLY one reality here as your "list" relates to MBTF/EFX. IF the proposed rule is passed in its current state and then IF MBTF/EFX fails to meet the new guidelines, then you were right. That's it. We're five months away from that point at a minimum, and I don't want to deal with you for that long, so I'm done for now, back at a time of my own choosing. I'd love to personally bet you on this one, but I know that you'll never come forward and give anyone your contact information because it is blatantly obvious what you are about. Another board has practically proven that you work for FXCM, and I noticed that once they did, you apologized for the conversation, acknowledged that EFX was a fine company, and then only continued to post on the other 20 boards that you have been spewing this nonsense. They even tracked your IP address (and that of a second person who was "agreeing" with you) to very near the FXCM location. I'm assuming you are acting rogue to protect the company, because I doubt that even the top brass at FXCM want to go down like this.

Having said all of this, I love your little stories about CEO's disappearing out of country when the NFA comes knocking at their deal-desk door (that never gets old), but for you to imply (or focus so strongly) on MBTF/EFX's financials gives you zero credibility on these boards. ZERO. Anyone that does a small amount of due diligence about the backing of MBTF/EFX can see how large the organization is. Justin's Hotspot/Knight analogy was spot-on.

The only true test of this is not if they are "lowering their speed" (great analogy, Justin) today in preparation for a speed limit change, but if they meet the requirement IF it should pass for 2008. If you would stop your nonsense and accept the fact that these firms have ZERO obligation and therefore no need to do anything right now, you'd come across as more credible. But then again, if I was the Hatchet Man for a firm, I don't think "coming acorss as credible" would be my concern. It would be "trying to distribute unwarranted fear to get people to shake loose and come to my firm." And that is obviously what you are going for. I suppose in the business world, anything that picks up your business is good, so good luck with that. But I would bet that about 5% of the people that read this board at this point are buying what you are selling, so maybe go back to your paid bosses and try a different tact. You can always advertise your firm in magazines if this doesn't stop the masses from leaving your company.

Thanks FX Chant for your much needed and welcome rebuke on this topic. I have an account at MB Trading/EFX, and I'm still pretty new, but I personally don't have any concerns about trading there.

I have wondered about this "forexsavior." Primarily, what is his interest in spending all of this time posting these messages? Is it all just out of the goodness of his heart, that he wants to "save" us? Is he really that selflessly giving, or just have a lot of time on his hands? Doesn't he have a job or something? I don't know, but with the inordinate amount of time he seems to spend posting here, it kind of makes you wonder what his true motivations are.

Oh well, in the end I don't really care, but it is entertaining to check up on all this from time to time...

Hi.

So, er.

Can anyone actually give a final word on

a) how substantiated any claims on any broker are and how relevant or irrelevant all of this discussion is

and

b) does anyone have any details / points about the unregulated brokers, FXDD in particular, since I have read they are an FCM,but not listed under that report. They appear to be a subsid of
http://tradition.ch/company/presentgroup.asp

All in all - is all of this constantly reappearing fear around brokers in the aftermath of Refco very real or just very scared?

I'm blue-eyed so I am indeed asking without really knowing anything and basically want to know whether I should start living a paranoid lifestyle or just go on assuming that every $ or EUR I make is and will eventually be mine for the withdrawing.

Or to put it differently: I wouldn't look very happily upon making 500000% just to find out the broker holding that profit goes bust and 5 years go byebye in a heartbeat

So avoiding that would be nice, preferably, since I feel I just might be one of the few where it might make a difference whether they or the broker lose the money ;p

why shouldn't that question be asked? Most private company I do business with are not asking to hold my money in custody. That CFTC Report shows they don't have much money. And since they are coming on to the bulletin board to insist they do have a lot more money I think it is fair to ask them, can you show us please?

TRADITION SECURITIES AND FUTURES INC
N
NFA
06/30/2007
784,791
147
TRADITION SECURITIES AND FUTURES INC
N
NFA
06/30/2007
784,791
500,000
284,791
0
0
147 TRADITION SECURITIES AND FUTURES INC N NFA 06/30/2007 784,791

http://www.nfa.futures.org/BasicNet/...tityid=0271289

$784,791 looks like they do not meet the new requirement then.

I didn't say it shouldn't be asked, I asked if you ask that of every private business that you do business with. As a private business, they're not required to show you jack. You decide based on their reputation, your research, and what you know, and your tolerance for risk.

That may be. I can think of private businesses that hold my money in other ways. I think the problem is, you want to think of this as an investment, which it isn't.

It shows that they currently have as much as the NFA thinks they need to function in this market as their current status. You don't have any idea how many clients they have, etc. Suppose they had one client (I know that's not true, but bear with me). Would you say they had enough money then? What if they had a million clients?

Bottomline, you're subjectively deciding, but according to the regulation, they have enough money to function. You have to decide for yourself if you think that's the case, if you think the regulation will go to 5 million, and if you think they have enough/any backing to make a new regulation. They aren't required to show you anything on their books, nor should they in my opinion. They're not a public business nor an investment fund in the way that many people (myself included) think of an investment fund. I wouldn't want to show them my tax statements/bank statements for the past five years just to prove I can afford to purchase a mini account on the forex, because they have no right to it.

No, they're coming on the boards to respond to a claim by an individual who is making an accusation, then demanding proof he is not entitled to. They're not coming on of their own volition to solicit business in this thread.

Savior has only really presented one bit of information relevant to the conversation - the CFTC report. Everything else, the stories, the allegations, etc. is window dressing to panic people or get them thinking in his direction. You can tell by his including of "Cletus Trading" beside his list and the way he phrases things. He is trying to imply those companies are incompetant/shady, when in fact, the ones that still exist haven't done anything wrong as far as he, you, or I know. Many of the stories he tells about fraud, if you READ the full NFA reports, show that the companies were committing fraud long before they were undercapitalized. He never actually mentions that though, because he's trying to imply a direct link between fraud and capitalization requirements. I can pull several examples of bigger companies with high capitalization committing fraud, I can find some examples of companies that became undercapitalized that left the market and didn't commit fraud. So in the end, did he prove anything?

The fact of the matter is that MB and other companies on his list are meeting the current requirements. If a new requirement comes along, they'll have to decide what to do at that point. Some won't make a new requirement, some will. But they don't have to prove ANYTHING until that point, because the regulation doesn't exist.

It's up to you to decide if you have enough information to go with them.

That sums up Forexfun's attitude Chips. In one sentence he tells you to "do your research" in the next he tells you essentially "its none of your business." forexfun in all likelihood works in the cubicle next to Justin at EFX. Beware any advice from this guy...