Now that Swiss Regulators have pulled the sheet up over Crown Forex’s rigamortis racked cadaver it is time to ascertain the cause of death. Was it fraud? Was it incompetent management? Was it a complete lack of regulatory oversight? Was it a faulty business model? Or was it all of the above?
A good place to start is a thread that was started over at FX Fisherman by a former customer of Crown Forex in March of 2007, back when Crown Forex was strutting through the snow capped valleys of Switzerland with the cocky assurance that they had the world in the palm of their hand.
Been trading on Crown Forex for some time now, and sure enough, discovered that the old adage "if if it too good to be true, it probably isn't" holds true once again.
The Lure: One pip spreads on all 7 majors
The Bait: Demo trading with near perfect execution ('made' 125k just messing around on demo one session, when the price was bouncing about 15 pips either way.. and trading 100 lot orders)
The Hook: Far from instant execution.. and even the worst requote system I have seen in my limited broker experience (4 different ones).
The Reel: Even during relatively 'slow' markets, my RFQ (request for quote) would take upwards of 10 to 15 SECONDS before execution. Mind you, this is when the price wasn't moving AT ALL. No, the dealers would sometimes just wait to see if it moved against my request, and fill... or, in my direction, and requote!! Did you hear that? Wait FIFTEEN seconds when the price was stagnant to see which way it would move. If it moved FOR me, requote. If against, instant fill (before I could cancel... which they wouldn't always allow anyway, in keeping with the above scam)
The Net: Even if at times I would accept the requote, if the market was still moving IN THE DIRECTION I anticipated, I would get subsequent requotes... and again, each time it could literally take 5 or more seconds to 'see' if the market was continuing in my direction. For those of you not understanding the implications, allow me to boil it down. The supposed ONE pip spread in effect at times became 7, 8, 10 or MORE pips!!
In the Boat: I even have a screen shot of a requote where they are offering a price TWO pips above even the current market price. Wow, how gullible do those dealers think I am?
Flopping on the bottom of the boat, gasping for air: This may be a naive revelation... many may already suspect or know this to be fact. No matter. My conclusion of this all leads me to believe this: Crown Forex, and I am sure many others out there, are not dealing off your position. Meaning, when you buy, they aren't selling at the same time. And vice versa. No, since 80 to 90% or more of forex traders quit, go bust, or give a substantial amount of money to the market, I am convinced that the dealers are taking the other side of your position, assuming you don't know what you are doing and won't last long any way. Does any one else here see a conflict of interest? Seems to me, your dealer should be on your side, trying to keep you in the game, because in theory they SHOULD be making their money on the spread, high volume, and obviously longtime customers. In fact, I am convinced, that is not the case. They are not on our side, "working" for us so to speak (remember, spot Forex dealing is very competitive, so let's not forget who the CUSTOMER is!); in fact, quite the opposite.
Our only retaliation? Hurt their business by informing the community of forex traders, thereby reducing the lure of "one pip spread" to the scam that it is. You are better off finding yourself a dealer with quick fills of 2 to 3 pips, than to open an account with Crown Forex, as their spreads effectively are much, much larger than this.
Any firm that is promising a guaranteed one point spread should automatically be written off for suspicion of fraud. It just isn’t possible in the forex market. Something has to give. And in Crown Forex’s case they reneged on their promise by constantly requoting their customers and refusing to allow them to deal on their phantom one point spreads.
But this wasn’t the only fraudulent marketing tactic of Crown Forex. Go to their own website and you can see a variety of bogus promises, such as, “Secured Funds.” Secured Funds? This is a company that hasn’t allowed it customers to withdraw their funds for months! If that is security I hate to see what their idea of “non-secured” funds is.
So in determining cause of death it does appear fraud is one likely cause. But another likely cause is incompetent management and employing a faulty business model. If you are serious about being a long-term forex dealer you simply don’t operate without a legitimate license. Yet, Crown Forex set up its base of operations in the notorious Swiss forex market, which over the years has become a haven for fraud and corporate malfeasance. They were never subject to audits, capital requirements or basic financial standards that other brokers around the world are subject too. This allowed their management team to get sloppy and cut corners, which they are now paying dearly for.
In the end Crown Forex got what it deserved. Sadly, too many innocent customers are being hurt in the process. Once again, traders should beware trading with any firm that doesn’t have a license. In Switzerland, that means a banking license for anyone offering forex. Not a pending license, or a pending application, but AN ACTUAL LICENSE. And right now there are no major Swiss brokers who have actually gotten a banking license to date.
That's great that the swiss regulation will be better (bank license for the FX brokers),
but regarding the fund's security the swiss banks protect the deposits till maximum 30.000 CHF only !
The CFTC has just released their latest net capital figures. AMIFX saw its net capital double. And with their new website it looks like they have gotten an injection of cash from somewhere. Forex Club’s net capital also jumped by over 50%. Our final pool of contestants is beginning to take shape.
The following firms have net capital below $20 million
MB Trading $15,227,000
Easy Forex $15,544,000
GFS Forex $15,957,000
I Trade FX $16,088,000
Ikkon Royal $16,548,000
Alpari $19,690,000 Advanced Markets $19,873,000
The following firms have net capital above $20 million
Forex Club $22,409,000
PFG $26,005,000
CMS Forex $29,255,000
Interbank FX $39,945,000
FX Solutions $43,785,000
GFT Forex $76,055,000
FXCM $98,456,000 Gain Capital $107,390,000 Oanda $169,501,000
As always conduct your due diligence and make sure the firm you are trading with will be able to comply with the new $20 million capital requirement going into effect in the months ahead.
Please pardon my ignorance, but what happens on May 19, 2009?
Ignored
To May 19th all of these firms: MB Trading $15,227,000
Easy Forex $15,544,000
GFS Forex $15,957,000
I Trade FX $16,088,000
Ikkon Royal $16,548,000
Alpari $19,690,000 Advanced Markets $19,873,000
Must increase their net cap up to 20M or out of market.
I'm sure most of them will do that.
What happens to the brokers who get below 20$ Mil and aren't under NFA regulations anymore...? Why do they close, aren't there some unregulated brokers that are running ??
FXDD is not an FCM and are not subject to net capital requirements. Only NFA regulated FCMs (is that redundant?) are subject to these regulations. I would imagine that the trading balance number reflects the total client equity that they have on their books
Whats up with FXDD anyways. They have FCM/NFA membership status 'Pending' since a year. Looks like they didn't withdraw their application but there is some sort of problem?
I've heard a lot of other traders had good luck with them as well. Who else likes them? I'm sure paper work and processes take time to get into the NFA right? I can't even imagine what is involved.
Why would Advanced markets list $19,873 million? I've never heard of them, but it would seem to make sense that they would find another $400k to get off the maybe/maybe not list.
Proposed NFA Capital Requirement
