US Bankruptcy Code

This is something for ALL traders who have money on any USA Forex brokers. YOUR MONEY IS NOT SAFE FROM BANKRUPTCY!

Here is a quote from a letter from a NFA and CFTC registered/regulated broker given to a friend regarding his account:

"... Under the U.S. Bankruptcy Code, your funds may not receive the same protections as funds used to margin or guarantee exchange-traded futures and options contracts, which receive a priority in bankruptcy. Since that same priority has not been given to funds used for off-exchange forex trading, if XXXXX becomes insolvent and you have a claim for amounts deposited or profits earned on transactions with XXXXX, your claim may not receive a priority. Without a priority, you are a general creditor and your claim will be paid, along with the claims of other general creditors, from any monies still available after priority claims are paid. Even customer funds that XXXXX keeps separate from its own operating funds may not be safe from the claims of other general and priority creditors."

Bottom Line: NFA, or CFTC or funds kept separate are no guarantees of safety of your monies! Retail Forex Trading is not safe unlike FUTURES and OPTIONS contracts.

Be warned, be guided and be smart!

Right now, I am very sorry to all those who have money at FXLQ; this letter serves as a bad news for them.

We know that...

Examples:

Your trading account is not insured under any state or Federal insurance program or by any other entity.
You should therefore familiarize yourself with the protections accorded money or other property you
deposit for foreign currency contracts. The extent to which you may recover your money or property may
be governed by specific legislation or trading rules. Under the U.S. Bankruptcy Code, your funds may not
receive the same protections as funds used to margin or guarantee exchange-traded futures and options
contracts, which receive a priority in bankruptcy. Since that same priority has not been given to funds used
for off-exchange forex trading, in the unlikely event OANDA were to become insolvent and you have a
claim for amounts deposited or profits earned on transactions with OANDA, your claim may not receive a
priority. Without a priority, you are a general creditor and your claim will be paid, along with the claims of
other general creditors, from any monies still available after priority claims are paid. Even customer funds
that OANDA keeps separate from its own operating funds may not be safe from the claims of other general

and priority creditors.


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Disclosure Regarding Bankruptcy Protections
The transactions you are entering into with CMS are not traded on an exchange. Therefore, under the U.S. Bankruptcy Code, your funds may not receive the same protections as funds used to margin or guarantee exchange-traded futures and options contracts, which receive a priority in bankruptcy. Since that same priority has not been given to funds used for off-exchange forex trading, if CMS becomes insolvent and you have a claim for amounts deposited or profits earned on transactions with CMS, your claim may not receive a priority. Without a priority, you are a general creditor and your claim will be paid, along with the claims of other general creditors, from any monies still available after priority claims are paid. Even customer funds that CMS keeps separate from its own operating funds may not be safe from the claims of other general and priority creditors.

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We don't know that?

We had better read our account documents...

Isnt that interesting?

A Mother Company creates child forex brokers. Takes money from clients, then mother company charges broker a huge operation fee. Broker declares bankruptcy.

Operation Fee may come in the form of "Loans" the mother company lent the child company as "Capitalization Fund" at 10% a month interest, or it could be in the form of exorbitant transaction fees, ie, per every position the traders make, the Mother company charges 10 pips of commission vs the child broker and after some time, child broker declares bankrupt. etc...

End of story: traders lose money

I wonder if this is what happened to FXLQ and perhaps will happen in the future when brokers merge together or is acquired by larger companies

Great info BKing. I assume the same or lessor rights are given to clients at overseas-based brokers in the event of bankruptcy.

This is making me consider ever more seriously the segregated bank account feature at my ECN..