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Proposed NFA Capital Requirement

  • #321
  • Aug 24, 2007 7:17am Aug 24, 2007 7:17am
I dont know, in my opinion, FX is very transparent. I have dozens of different price-feeds on esignal, additionaly, there are many free broker-feeds. If a dealer constantly fills me off-market, ill just take my business elsewhere. I think its pretty self-regulating. I also dont think brokers, who are in for the long haul, practice stop-hunting. The reputational risk would be much too high, and the retail-brokers are reeking it in big time as it is anyways, even without such practices.

Besides, i dont think FX will move towards a more regulated, exchange-traded direction any time soon. The players who have a say in this, the bigger sell and buy-side institutions, just dont have any interest in this. For them, its ideal as it is. No regulatory overhead means cheap transactions and flexibility, to conduct business in exactly the way it suits them. They trust each other, and the market is transparent.
  • #322
  • Edited 7:28am Aug 24, 2007 7:27am | Edited 7:28am
I don't think FX has to be exchange traded to keep detailed books. I'm not understanding why you see the two as being tied.

I've not yet been ripped off by any broker, but I think you trust random people with money a lot more than I do. Even the most established firm hires the bad-egg employee every once in a while, and any type of company can end up with a corrupt executive. I don't want to have to suffer for that as a customer, and if more regulation protects you, why wouldn't you want it?

I don't see why this market should be treated differently than any other, or differently than banking for that matter. I think banking is filled with audit accountability and oversight, and FX dealers of all kinds are inseparably tied to banking regardless of their business model. More oversight, more audits!!! :-D
  • #323
  • Aug 24, 2007 8:00am Aug 24, 2007 8:00am
Im not against it per se, i just dont think its going to happen.

I was strictly talking about quotes. I dont have transparency-issues with them. I was not talking about the risk that a broker goes under, i agree that there should be more and better regulations to protect clients from that.
  • #324
  • Aug 24, 2007 8:20am Aug 24, 2007 8:20am
Dear Client:

The Forex industry could be in for a major structural change — soon.

This change has the potential to benefit Forex Capital Markets, LLC (“FXCM”); however, we believe many forex brokers may not survive.

Our industry’s regulating agency, the National Futures Association (“NFA”), has proposed new financial requirements for every Forex Dealer Member (“FDM”). Spelled out in their “Request for Comments on Forex Proposals,” dated June 19, 2007, the NFA’s proposed requirements call for the following:

  1. All FDMs must maintain at all times a net worth of $5 million;
  2. Larger FDMs, particularly those that have a dealing desk, could potentially face net excess capital requirements significantly higher than the minimum under the proposed new rules;
  3. Where appropriate, the NFA may require an FDM’s annual financial statement to be certified by an independent public accountant.

FXCM’s current financial situation well exceeds NFA’s proposed requirements.

As of June 30, 2007, FXCM has over $44 million in adjusted net capital, and for the last six years we have had our financial statements audited by an independent, certified public accounting firm.

We believe the NFA is proposing these requirements because of the troubling number of insolvencies and near-insolvencies that have recently plagued the forex industry. According to the NFA:

  1. In 2003, a Forex Dealer Member misappropriated almost $2 million in customer funds, driving the company into bankruptcy. (The CFTC is currently attempting to salvage some of the customers' funds.)
  2. Since March of this year, eight different FDMs have fallen under the “early warning” requirement of $1.5 million.
  3. More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million.

Industry-wide, there is now concern that some Forex Dealer Members may be unable to meet their financial obligations to customers in the event the increased capital requirements take effect. A review of the current net capital positions of the 43 Forex Dealer Members available on the following CFTC web page clearly demonstrates that this concern is justified. View CFTC Web Page

As you can see from the financial data compiled by the CFTC, FXCM reports an adjusted net capital of over $44 million—far greater than the proposed financial requirement. Based on the most current available CFTC financial data, at least 22 FDMs would not be able to meet the new $5 million minimum net capital requirement. These firms are currently reporting net capital levels below $5 million. If the new capital level is imposed, these firms will either have to obtain more capital or close down. Because larger brokers may also face higher capital requirements, FXCM believes that several of these larger firms may also be unable to meet the new requirements, even though they presently have in excess of $5 million in adjusted net capital.

In the event that some of these firms close down—or worse, are shut down by the NFA—we are concerned that customer funds, or at least their timely and orderly repayment, could be jeopardized.

We realize that many forex traders have accounts with multiple forex brokers. That is why we advise you to make sure all your trading accounts are held at firms that are adequately capitalized.

If you have an account with a possibly endangered firm, we believe, depending on when the NFA proposal takes effect, that the time may be fast approaching to consider moving those funds while the opportunity still exists.

Our industry is changing, and the new proposed regulations are intended to put every FDM, and the industry itself, on a more secure financial footing.

We welcome the NFA’s proposed changes because the effect will ultimately lead to clients trading through regulated brokers that are better capitalized or have access to greater financial resources.

Please contact us if you have any questions regarding these changes.

We look forward to serving you.

If I Go Broke Trying Then I Will die happy.
  • #325
  • Aug 24, 2007 8:51am Aug 24, 2007 8:51am
Quoting Moe
Dear Client:

The Forex industry could be in for a major structural change — soon.

This change has the potential to benefit Forex Capital Markets, LLC (“FXCM”); however, we believe many forex brokers may not survive.

Our industry’s regulating agency, the National Futures Association (“NFA”), has proposed new financial requirements for every Forex Dealer Member (“FDM”). Spelled out in their “Request for Comments on Forex Proposals,” dated June 19, 2007, the NFA’s proposed requirements call for the following:

  1. All FDMs must maintain at all times a net worth of $5 million;
  2. Larger FDMs, particularly those that have a dealing desk, could potentially face net excess capital requirements significantly higher than the minimum under the proposed new rules;
  3. Where appropriate, the NFA may require an FDM’s annual financial statement to be certified by an independent public accountant.

FXCM’s current financial situation well exceeds NFA’s proposed requirements.

As of June 30, 2007, FXCM has over $44 million in adjusted net capital, and for the last six years we have had our financial statements audited by an independent, certified public accounting firm.

We believe the NFA is proposing these requirements because of the troubling number of insolvencies and near-insolvencies that have recently plagued the forex industry. According to the NFA:

  1. In 2003, a Forex Dealer Member misappropriated almost $2 million in customer funds, driving the company into bankruptcy. (The CFTC is currently attempting to salvage some of the customers' funds.)
  2. Since March of this year, eight different FDMs have fallen under the “early warning” requirement of $1.5 million.
  3. More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million.

Industry-wide, there is now concern that some Forex Dealer Members may be unable to meet their financial obligations to customers in the event the increased capital requirements take effect. A review of the current net capital positions of the 43 Forex Dealer Members available on the following CFTC web page clearly demonstrates that this concern is justified. View CFTC Web Page

As you can see from the financial data compiled by the CFTC, FXCM reports an adjusted net capital of over $44 million—far greater than the proposed financial requirement. Based on the most current available CFTC financial data, at least 22 FDMs would not be able to meet the new $5 million minimum net capital requirement. These firms are currently reporting net capital levels below $5 million. If the new capital level is imposed, these firms will either have to obtain more capital or close down. Because larger brokers may also face higher capital requirements, FXCM believes that several of these larger firms may also be unable to meet the new requirements, even though they presently have in excess of $5 million in adjusted net capital.

In the event that some of these firms close down—or worse, are shut down by the NFA—we are concerned that customer funds, or at least their timely and orderly repayment, could be jeopardized.

We realize that many forex traders have accounts with multiple forex brokers. That is why we advise you to make sure all your trading accounts are held at firms that are adequately capitalized.

If you have an account with a possibly endangered firm, we believe, depending on when the NFA proposal takes effect, that the time may be fast approaching to consider moving those funds while the opportunity still exists.

Our industry is changing, and the new proposed regulations are intended to put every FDM, and the industry itself, on a more secure financial footing.

We welcome the NFA’s proposed changes because the effect will ultimately lead to clients trading through regulated brokers that are better capitalized or have access to greater financial resources.

Please contact us if you have any questions regarding these changes.

We look forward to serving you.

Kudos to FXCM for addressing the issue. That brings the number to four that have come out publically in favor of this proposal: Gain, Interbank, I Trade FX and FXCM.
  • #326
  • Aug 24, 2007 9:34am Aug 24, 2007 9:34am
A few months ago the NFA filed a complaint against One World Forex that stated among other things, "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."
http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0359973&case=07BCC00017&contrib=NFA

Well, with each passing day One World appears to be vindicating the NFA’s assessment as they continue their death spiral downward. The last few weeks I have been flooded with tips about One World Forex. No other firm in the Dead Pool has generated more feedback. And all that feedback has been overwhelmingly negative. But I have been holding back waiting for a clearer picture to emerge. However, this thread at an obscure bulletin board has provided me with the Smoking Gun on One World:
http://www.goldenmoneytree.com/forum/viewtopic.php?t=692&postdays=0&postorder=asc&start=100

First my sources combined with the users on this thread indicate that One World is having severe problems with customer transfers/withdrawals. The reason why is unclear. It could be due to One World’s changing bank accounts from Citi to Bank of America. Or it could be that One World’s books are such a shambles that we may have another CFG on our hands. There is no way to tell right now. However this customer of One World said the following:

“Day 21: Still haven't granted my redemption request. I am so angry now that I don't know if I should still expect to get my money. Last week Jack Walsh said they are having problems or that they still cannot accomplish international wires and blamed it on bank of america. They said hopefully they could do it within the next 40 minutes but until today, it still hasn't been deducted from my account. I don't know why they singled me out to do this to me. Is it because I'm far away and won't sue them because it would be more expensive than my $18,950 that I'm trying to withdraw? I called the NFA and the guy I spoke to states that it is no guarantee that I would get my money back, he says it depends on the agreement with one world that I signed. Well, there's an expensive lesson for not reading the fine print. In my country $18,950 is roughly 900,000 pesos. And that wasn't my entire account with them, I still have $2,756 that I don't know if they'll give back to me. It's my entire savings since I was a child. Although it won't hurt my lifestyle since I still live at home, IT SURE HURTS!
Am I just supposed to sit back and lose my money? I thought I was safe with an american nfa registered broker. The guy from the NFA said he would send a team over to one world but again, he says, there is no guarantee. He said I could file a complaint or he could send me an arbitration kit. This is so sad news for me, and a sad realization. Suddenly, my dreams of having time freedom and doing this full time comes shattering. How do I really know which broker to trust? Will I ever get my savings back?

Day 22: My boyfriend called one world again. They said to wait until next week because they are having management problems and that almost all accounts are under review and that my account is one of those under review. I'm guessing that next week, they'll tell me to wait until next month, and then until next year...I wonder what went wrong and wonder if this is finally the truth. the NFA hasn't gotten back to me yet.

Other traders have sent me private messages confirming the rough shape One World is in. The word on the street is that the situation at One World has become so dire that a large chunk of their sales force resigned because they hadn’t been paid for two months. Other traders are reporting non-responsive customer service, emails that go unanswered and phones that keep on ringing. All the signs of a firm in its last death throes…

The bottom line is when you can’t return a customer’s money when they ask for it you are finished in this business. One World may be able to limp on indefinitely but it is hard to see this firm making a comeback to respectability. Barring a fat sugar daddy willing to pump in ten million dollars this firm’s days appear to be numbered.
  • #327
  • Aug 24, 2007 10:44am Aug 24, 2007 10:44am
Get your facts straight about ACM. They are the only Swiss based broker regulated directly by the Federal Department of Finance of Switzerland. I can assure you that the FDF is as rigorous if not more as the NFA, also that the audit process of the FDF is a step ahead of the SFBC.

Regarding MIG, having spent some time directly with the key players and directors of this firm I can confirm that they have a high level of integrity. They may not offer the best conditions around, but they are honest in the way they manage their business.
  • #328
  • Aug 24, 2007 11:03am Aug 24, 2007 11:03am
Quoting jimba
Get your facts straight about ACM. They are the only Swiss based broker regulated directly by the Federal Department of Finance of Switzerland. I can assure you that the FDF is as rigorous if not more as the NFA, also that the audit process of the FDF is a step ahead of the SFBC.

Regarding MIG, having spent some time directly with the key players and directors of this firm I can confirm that they have a high level of integrity. They may not offer the best conditions around, but they are honest in the way they manage their business.
Ok Jimba what is ACM's registration number with the Swiss Federal Department of Finance? Do you have a link where this registration number can be verfied? No? Why is that? Because the SFDF, while they have put some anti-money laundering requirements in place, do not go in and independently regulate the manner in which forex broker dealers operate.
  • #329
  • Aug 24, 2007 11:55am Aug 24, 2007 11:55am
I think you lack some knowledge regarding the financial regulation environment of Switzerland. Having gone thru the SFBC regulation process for other business, I can assure you that the current SFBC parameters are not pertinent to the day to day operations of a FX broker.

The FDF is currently working on a new entity that will globalize the regulatory official bodies in Switzerland (except the private ones like the ARIF) and modernize the Swiss financial market regulation. The SFBC are at the same time working on new sets of regulations that will be specifically directed to FX brokers. Until then the SFBC is not adequately equipped to regulate them.

I don’t get my informations by looking at links and registrations numbers; I get them by sitting down and speaking directly with the regulators and the brokers I use.
  • #330
  • Aug 24, 2007 12:15pm Aug 24, 2007 12:15pm
I repeat, the SFBC is the only agency that grants licenses to financial firms that offer forex trading in Switzerland. However, firms that only offer forex trading in Switzerland are exempt. Nobody else grants such trading licenses and ACM doesn't have one.

However, it does appear that the winds of change are blowing in Switzerland according to FX Street:
http://weblog.fxstreet.com/2007/06/wind-of-importa.html


Hi Everybody

As you may probably already know, SFBC (Swiss Federal Banking Commission) is decided to regulate the Foreign Exchange business in Switzerland .
This process already started a couple of months ago and some important brokerages are already going through the process of getting SFBC’s approval.

One of my sources in Switzerland told me this morning that SFBC is implementing big changes in the way Swiss brokers use to work...

The restrictions that SFBC will require to brokers to implement to get their approval will probably force those not strong enough to disappear and this process could be faster than we think and could take place before the end of the year.

I’ll keep you posted about all this very interesting process.
Under my point of view, the fact that SFBC puts order in the Swiss Foreign Exchange business should be considered as a very good news for all the community, but we must remain alert over the whole process.
Francesc

So it could be that by the end of the year Switzerland will have instituted forex regulation at the retail level and the industry will not have to suffer any more Tradex Swiss AG style shenanigans.
  • #331
  • Aug 28, 2007 3:20am Aug 28, 2007 3:20am
The great consolidation has begun. A few days ago PFG purchased Dead Pool Member American National Trading Corporation. Expect more of these types of purchases in the months ahead as the FX world contintues to evolve in light of the proposed capital requirement increase:

August 23, 2007
Peregrine Financial Group, Inc. (PFG) today announced it is purchasing the assets of American National Trading Corporation (ANTC), which is headquartered in Los Angeles, CA. ANTC is a successful FCM which conducts business in futures, foreign exchange, and managed accounts.

PFG will transfer ANTC customer accounts as quickly as possible.

"PFG and ANTC are joining forces to better serve ANTC’s customers," said PFG Chairman and Chief Executive Officer Russell R. Wasendorf, Sr. "There are so many synergies, and we believe there will be significant benefits to ANTC customers including:

 

  1. Ability to utilize PFG’s proprietary online trading system, BEST Direct
  2. The opportunity to use multiple electronic trading platforms
  3. Unique and additional suite of managed futures and forex product offerings
  4. Auto trading systems and other exclusive electronic capabilities for clients."

PFG, one of the largest non-clearing U.S. FCMs, was registered in 1990 and has headquarters in Chicago, IL with customers, affiliates and brokerage offices in more than 80 countries. It has experienced rapid expansion in the past several years through organic growth as well as through strategic acquisitions.

ANTC was founded in 1988. It is led by Chairman Don Varden and President Guy Zummo in Los Angeles, CA.

  • #332
  • Edited 7:07am Aug 28, 2007 6:35am | Edited 7:07am
Its interesting to note that the company which took over American National Trading Corporation, Peregrine was a few years ago, having exactly the same problem maintaining net capital as required by the CFTC, and this was at the time, when the requirements were a lot less stringent. And yet, the company is still trading years later, has now plenty of net capital to cover the current requirements, and is fact in a similar situation as FXCM as to its capabilities to cover any proposed net capital requirement changes.
As of 07/06/2007 http://www.cftc.gov/files/tm/fcm/tmfcmdata0706.pdf
Inserted Code
Peregrines Net Capital : 13,758,638 
Requirement           :  5,000,000 
Excess                :  8,758,638
Requirement Cover     :  2.75x
American Trading      :  2,159,273 
Requirement           :  1,000,000 
Excess                :  1,159,273
Requirement Cover     :  2.16x
Here's how some other brokers compare normalised with their ability to meet the requirements.

Inserted Code
COMPANY     | Net capital |  Required  | Excess    | Multiple
FX Solutions| 17,295,130  |  2,064,386 | 15,230,744  | 8.38
GFT         | 49,664,118  | 6,904,864  | 42,759,254  | 7.19x
OANDA       | 49,222,317  |  9,172,410 | 40,049,907  | 5.37
Gain Capital| 18,930,914  | 4,341,150  | 14,589,764  | 4.36x
I-TRADE-FX  | 3,957,357   |  1,000,000 | 2,957,357   |>3.96x
FCM         | 44,626,492  | 12,977,713 | 31,648,779  | 3.44x
Peregrine   | 13,758,638  |  5,000,000 |  8,758,638   | 2.75x
InterbankFX | 8,584,434   |  3,719,721 | 4,864,713   | 2.31x
1-World     | 2,308,460   |  1,000,000 | 1,308,460   |>2.31x
AMTC        | 2,159,273   |  1,000,000 | 1,159,273   | 2.16x
The pretext of this thread is dead firms walking ... as I've posted before, if anything this is simply consolidation for those that can't meet the requirements, and adjusting the books for most so that more of the companies capital is available for 'net capital'.
Its also interesting to note Peregrines regulatory actions :
http://www.nfa.futures.org/basicnet/...d=0232217&rn=Y
http://www.nfa.futures.org/basicnet/...14&contrib=NFA
http://www.nfa.futures.org/basicnet/...09&contrib=NFA
http://www.nfa.futures.org/basicnet/...2&contrib=CFTC
(fined for not meeting net capital requirements in 2000)
--------------------------------------
from : http://www2.oanda.com/cgi-bin/msgboa...519;p=6#000089
Quote
Originally posted by forexfigure:
[qb]
Quote
Originally posted by FXstreet:
[qb] Hi WhipSawFX
I was not aware that Forexfigure was the same guy than FXstreet's forexscholar.
I do not approve such practices of replying threads in different web sites as it does not leave clear what is your real interest when creating a thread.
Forexfigure, can you please explain why you opened same thread at Oanda, FF, forexnews, FXstreet.com...?
As I said, I do not like nor approve such practices
Francesc [/qb]
It is important information. For too long a lot of this has been swept under the rug in the retail forex industry. A lot of traders have been burned as a result. Whistle blowing is often greeted with harsh responses from those who want to keep all this information secret. But I feel the more places I can blow the whistle at the better it is for the industry. [/qb]
I've asked you a number of times, what you meant by this statement. Are you sweeping your ineptitude under the rug ? And what and who are you whistle blowing for ?
http://en.wikipedia.org/wiki/Whistleblowing
Quote
A whistleblower is an employee, former employee, or member of an organization, especially a business or government agency, who reports misconduct to people or entities that have the power and presumed willingness to take corrective action. Generally the misconduct is a violation of law, rule, regulation and/or a direct threat to public interest — fraud, health, safety violations, and corruption are just a few examples. For instance, Jeffrey Wigand is well-known in the United States for exposing the Big Tobacco scandal, revealing that executives of the companies knew that cigarettes were addictive and that they added other carcinogenic ingredients to the cigarettes.
Which company do you work for ? and what are they doing wrong ?
from : http://nondealingdesk.com/showthread.php?t=1988&page=3
Quote
Moderator: It's appropriate this thread be ended with "badass's" comment but it shouldn't dissuade members from reading the rest of the thread because I think it has been highly instructive. It's interesting that badass's IP address is only 12 miles West of Forexscholar's which is only 5.4 miles West of FXCM's Manhattan offices. Like badass, I'm sure the inner circle at FXCM wishes this fear campaign (whoever started it) hadn't gotten as much attention as it has.
http://img174.imageshack.us/img174/6637/graphdm8.png
Found the above graph interesting from FXCM's Alexia page.
http://www.alexa.com/data/details/tr...e&url=fxcm.com
I would encourage everyone to read the thread over at http://nodealingdesk.com/
http://nondealingdesk.com/showthread.php?t=1988
Here's the last post in it
Quote
I am closing additional posts to this thread because the ones that have been recently posted here distract from its central purpose. This thread is a must read for those who are visiting the forum for the first time. I suggest new visitors start reading it from the very beginning. It started almost immediately after I published a commentary on my blog related to FXCM's offer of no dealing desk trading.
It's interesting to note that neither Forexscholar and Basdass returned to the forum to refute their "outing" so there's little doubt in my mind that they are, in fact, shills for FXCM whether employed by FXCM or not. It's also been brought to my attention that identical posts suggesting that all FCMs with less than $5M in Adjusted Net Capital should be abandoned because the NFA is going to shut them done have been posted on a half dozen other forums. The poster, Forexsavior, obviously has little imagination otherwise he wouldn't have come up with a name with such a striking similarity to the one he used here.
From the very beginning of this forum, I have tried to get brokers to openly discuss the dealing vs non-dealing desk issue and [apart from Justin at EFX and Steve at MBtrading who obviously speak for non-dealing desk trading] no broker or broker representative has come forward to defend dealing desk brokerage. Had Forexscholar [and for that matter Badass] clearly identified themselves, stating the nature of their affiliation with FXCM, their comments would have been very instructive. Unfortunately, they chose to hide their real identities behind manufactured personas. I can only conclude that this is the case because there isn't a broker out there who can defend the indefensible. Members, of course, are intelligent enough to draw their own conclusions.
Personally, I dont think he's a shill for FXCM, or anyone else. But its funny as hell, and some coincidence. If FXCM or another company were doing anything like this, they would have employed someone way smarter than this cutnpaster. But why would anyone post the exact same thread on every forum he can find :
http://www.forex-tsd.com/general-dis...quirement.html
http://www.forexnews.com/fxforum/for...693&PN=1&TPN=3
http://www.forexfactory.com/showthre...=35930&page=17
http://www.talkgold.com//forum/showthread.php?t=177822
http://nondealingdesk.com/showthread.php?t=1849
http://www.fxfisherman.com/forums/fo...dead-pool.html
http://www.elitetrader.com/vb/showth...threadid=97890
http://www.piptrader.com/forum/forum...?TID=1051&PN=1
http://forums.babypips.com/rate-my-b...orex-fcms.html
http://www.forex-tsd.com/general-dis...quirement.html
http://www.moneytec.com/forums/f79/n...590/page6.html
http://www.traderscommunity.com/trad...opic.php?88476
  • #333
  • Aug 28, 2007 11:12am Aug 28, 2007 11:12am
The NFA rule proposal says nothing about a firm's ratio of capital to excess net capital. It is very simple, they want firms to have over $5 million due to the higher risk associated with being poorly capitalized (see the CFG case). It's that simple.
  • #334
  • Aug 28, 2007 12:43pm Aug 28, 2007 12:43pm
Well it's clear that the NFA proposal is having an impact in the industry already. For the second time in a week a smaller firm in the Dead Pool has announced merger plans. They wouldn't be doing this if they had the capital to stay in business on their own. This shows you how serious an issue this is. The pressure is being wratched up and the time is fast approaching when those firms below $5 million will have to either join the borg, or die.

Royal Forex Trading LLC. Future Plans


Dear Valued Client,

I am pleased to announce that there has been a very big development for Royal Forex Trading. Before that, I wish to bring to your attention the minimum adjusted net capital requirement proposed by the National Futures Association (NFA). The NFA recently circulated a proposal calling all the FCM's to adjust their minimum net capital requirement from $1 million to $5 million to avoid risks to the customers.


Royal Forex Trading fielded many inquiries for several days and we addressed the issue in our last corporate newsletter. We believe the NFA is taking appropriate measures if they decide to increase the net capital limit for FCMs. Bottom line; this eliminates many inexperienced brokers.


RFXT’s management has been in the industry for many years and we believe we have adequate resources as well as a full fledged backup plan.

In the midst of all this, we have been approached by several companies inviting us to form a partnership. After further due diligence, we are very close to striking a deal with a company whose name cannot be mentioned at this juncture. This entity has an 8 year track record and does not hold a single complaint with the NFA. Their net capital is well over $5 million and they are licensed to do business in many continents.


In the past few weeks, we have been holding several conferences and meetings to finalize the deal. Upon completion of the deal, the following will occur:

Ø Royal Forex Trading will join as a division of a much larger entity.

Ø Royal Forex Trading will officially re-locate to Wall Street, the Hub of major financial institutions.

Ø Royal Forex Trading will retain its Service Desk.

Ø Royal Forex Trading will in the very near future be providing various other products like including Crude, Gold and Silver CFD’s, Currency Options as well as many other new and exciting products.

Ø Royal Forex Trading will be opening branches around the world.

Ø Royal Forex Trading will continue to provide superior execution and excellent customer support.

Ø Royal Forex Trading will be developing an Institutional Desk.


In the end, you as a client will benefit immensely from this merger and that is what we have always wanted; world class service for our clients.

I thank you from the bottom of my heart for all the trust you have put in us and I appreciate the excellent feedbacks we received during this "critical" phase. As we promised, our main goal and mission is and will always be to satisfy our clients beyond expectation.

Thank you
--
Rayan Elannan
President & Co-founder
Royal Forex Trading LLC
  • #335
  • Aug 28, 2007 6:22pm Aug 28, 2007 6:22pm
http://www.forexfactory.com/news.php?do=news&id=44513

looks like FXCM has weighted in on this!
Relax and be happy.
  • #336
  • Aug 28, 2007 7:04pm Aug 28, 2007 7:04pm
Quoting merlin
http://www.forexfactory.com/news.php?do=news&id=44513

looks like FXCM has weighted in on this!
WOW. I have to say that I'm very shocked by this news release. I'm not a fan of FXCM, but this seems ethically questionable at best. They are using a Press Release to try to scare people out of many firms that are not in danger at all to try to recapture the clients. I think it is very interesting in light of what WhipSawFX posted above that this comes out, and it makes all of the information about the postings warning about net capital on all of the boards very suspect (and you really have to think about what the moderator on www.nondealingdesk.com posted). Let's keep in mind that FXCM was around in the early days of forex where "spiking" the market 100 pips to sweep all customer stops was not questioned. Where does one think that they got all of their "capital"?

I've never really cared much about FXCM either way, other than I knew that I would never use them, but I think this should be viewed as a BIG RED FLAG about them in general. Spreading fear about an issue that is not resolved by the NFA at all is not the responsbility of a platform. It's one thing to compete, but the problem with firms like FXCM from the start has been that they have very little in the way of standards in the industry. I would hope that the NFA would equally investigate whether these guys were behind the wave of boards posted over the last several months. I think that's a bigger problem than the capital issue itself. If they set out to scare the public from an "anonymous" source and then planned to turn up the fear factor with their own "press release" as the year pushed on, well, I would think that there would be a court that would frown on it.

By the way, there was a link between FXCM and Refco. Refco's ownership of FXCM was just recently sold, so now someone owns a piece of their company that they had no control over. This whole thing just smells badly, in my opinion. Hopefully, the NFA digs around and gets to the bottom of it.
FXChant Singing the World of Forex
  • #337
  • Aug 29, 2007 12:09pm Aug 29, 2007 12:09pm
Quoting fxchant
I would hope that the NFA would equally investigate whether these guys were behind the wave of boards posted over the last several months. I think that's a bigger problem than the capital issue itself.
LOL! You keep believing that FX Chant. Meanwhile, the rest of the industry is moving on to address the capital requirement issue. It's been commented on in the media, it's been commented on by numerous firms, it has spurred two mergers already. This issue is not going away and I'm glad to see a lot of the major FX firms going on the record as supporting this proposal. And this statement by FXCM is the strongest of any firm to date:

Dear Client,

The Forex industry could be in for a major structural change — soon.

This change has the potential to benefit Forex Capital Markets, LLC (“FXCM”); however, we believe many forex brokers may not survive.

Our industry’s regulating agency, the National Futures Association (“NFA”), has proposed new financial requirements for every Forex Dealer Member (“FDM”). Spelled out in their “Request for Comments on Forex Proposals,” dated June 19, 2007, the NFA’s proposed requirements call for the following:

• All FDMs must maintain at all times a net worth of $5 million;

• Larger FDMs, particularly those that have a dealing desk, could potentially face net excess capital requirements significantly higher than the minimum under the proposed new rules;

• Where appropriate, the NFA may require an FDM’s annual financial statement to be certified by an independent public accountant.
FXCM’s current financial situation well exceeds NFA’s proposed requirements.

As of June 30, 2007, FXCM has over $44 million in adjusted net capital, and for the last six years we have had our financial statements audited by an independent, certified public accounting firm.

We believe the NFA is proposing these requirements because of the troubling number of insolvencies and near-insolvencies that have recently plagued the forex industry. According to the NFA:

• In 2003, a Forex Dealer Member misappropriated almost $2 million in customer funds, driving the company into bankruptcy. (The CFTC is currently attempting to salvage some of the customers' funds.)

• Since March of this year, eight different FDMs have fallen under the “early warning” requirement of $1.5 million.

• More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million.

Industry-wide, there is now concern that some Forex Dealer Members may be unable to meet their financial obligations to customers in the event the increased capital requirements take effect. A review of the current net capital positions of the 43 Forex Dealer Members available on the following CFTC web page clearly demonstrates that this concern is justified. View CFTC Web Page

As you can see from the financial data compiled by the CFTC, FXCM reports an adjusted net capital of over $44 million—far greater than the proposed financial requirement. Based on the most current available CFTC financial data, at least 22 FDMs would not be able to meet the new $5 million minimum net capital requirement. These firms are currently reporting net capital levels below $5 million. If the new capital level is imposed, these firms will either have to obtain more capital or close down. Because larger brokers may also face higher capital requirements, FXCM believes that several of these larger firms may also be unable to meet the new requirements, even though they presently have in excess of $5 million in adjusted net capital.

In the event that some of these firms close down—or worse, are shut down by the NFA—we are concerned that customer funds, or at least their timely and orderly repayment, could be jeopardized.

We realize that many forex traders have accounts with multiple forex brokers. That is why we advise you to make sure all your trading accounts are held at firms that are adequately capitalized.

If you have an account with a possibly endangered firm, we believe, depending on when the NFA proposal takes effect, that the time may be fast approaching to consider moving those funds while the opportunity still exists.

Our industry is changing, and the new proposed regulations are intended to put every FDM, and the industry itself, on a more secure financial footing. We welcome the NFA’s proposed changes because the effect will ultimately lead to clients trading through regulated brokers that are better capitalized or have access to greater financial resources.

Please contact us if you have any questions regarding these changes.

We look forward to serving you.

Best regards,
Sales & Client Services
Forex Capital Markets, LLC
Financial Square
32 Old Slip, 10th Floor
New York , NY 10005
1-888-50-FOREX (36739)
[b][email protected][/b]
www.fxcm.com
  • #338
  • Aug 29, 2007 12:54pm Aug 29, 2007 12:54pm
Here's a couple of snipets I stumbled upon whilst looking up the regulatory history of the best capitalised forex firms.

In November 2005, FXCM was fined $110,000 to settle a complaint brought against them by the NFA claiming violation of Rule C.R.2-36(b)(1) which is defined as "Cheat, defraud, deceive forex customers" . FCM in no way admitted or denied the charge, and made the settlement with the NFA. You can find the details here :
BASIC Case Summary

In January 2006, the NFA did a follow up audit. The follow on audit revealled that FXCM had not abided by the agreement which had the resolved the previous regulatory action. Thus the NFA initiated another complaint against FXCM, which is as yet unresolved (I believe) for violation of Rule C.R.2-36(b)(1) which is defined as "Cheat, defraud, deceive forex customers"
The audit also identified potential failings of "FXCM's anti-money laundering program (AML) "as evidenced by the high number of accounts FXCM opened for Nigerian nationals, without identifying those accounts as high risk for potential money laundering." [quote from http://www.nfa.futures.org/basicnet/...px?seqnum=1023 ]
You can find the details here :
BASIC Case Summary
The particular concern about Forex companies opening accounts for Nigerian nationals is that Nigeria is the origin of a number of internet scams commonly called the "Nigerian 419 Scam" If you dont know what the Nigerian 419 scam check out the the following very entertainment link :
Ebola Monkey Man: Nigerian 419 Scam

I personally wouldnt go near any Forex Dealer Merchant that had been subject to regulatory action, let alone bought to book for violation of Rule C.R.2-36(b)(1). I've done a check and found the following 3 firms have not been subject of any regulatory action, and are the best capitalised.

GLOBAL FUTURES & FOREX LTD (http://www.GFTforex.com/)
http://www.nfa.futures.org/basicnet/...d=0279553&rn=N

OANDA ( http://fxtrade.oanda.com/ )
http://www.nfa.futures.org/basicnet/...d=0325821&rn=N

FX SOLUTIONS LLC (http://www.fxsol.com)
http://www.nfa.futures.org/basicnet/...d=0312620&rn=Y

Inserted Code
COMPANY      | Net capital| Required  | Excess     | Multiple
GFT          | 49,664,118 | 6,904,864 | 42,759,254 | 7.19x
OANDA        | 49,222,317 | 9,172,410 | 40,049,907 | 5.37
FX Solutions | 17,295,130 | 2,064,386 | 15,230,744 | 8.38
Does anyone else knows of any FDM's with no regulatory problems and are well capitalised ?


disclaimer : I in no way qualified to say that fxcm is Cheating, defrauding, or deceiving forex customers, or that they ever have. However, our regulatory body the NFA have made complaints that they have.
  • #339
  • Aug 29, 2007 2:13pm Aug 29, 2007 2:13pm
Wow, if Forex Savior works for FXCM then who do you think WhipSawFX works for? I have seen the same post on several forums today. WhipSaw, you're bringing up OLD news and frankly I'm not sure how relevant it is.
  • #340
  • Aug 29, 2007 3:04pm Aug 29, 2007 3:04pm
Quoting forexsavior
And this statement by FXCM is the strongest of any firm to date
Of course it is, they're trying to swipe business by spreading fear. That's why this letter seems to be circulating everywhere. They didn't merely say "We have 5 million, we're good", they went on to disparage other companies. They didn't stop there with smaller firms, they also implied larger firms would have problems too (I wonder why larger firms would have problems, but they're ironclad on the basis of the numbers, or so they imply)

They're trying to swipe business. I guess they're legally in the right, ethically though...

And I have no idea who Whipsaw works for - he doesn't seem to like FXCM, but he posted 3 companies with high funding who he implies would be okay.
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