Class Action Lawsuit Against FXCM

i would do both
u r right about the ,liquidity problem

hey man
waou floor trader,do u find trading online different from trading in the pits?

Hi Slight,

Trading begins every Sunday at 5:15pm ET (22:15pm GMT). You would not have been able to open, close or modify positions at the time you posted yesterday since trading had not opened yet. The trading hours are listed on the website http://www.fxcm.com/fxcm-trading-desk.jsp. Please let me know if you have any questions, and you can also post general questions on the FXCM Discussion thread as well.

-Jason

They will NEVER be able to centralize the FX market. They can try but they won't succeed simply because Spot FX is different from everything else and there is only so much you can do to "commoditize" it before you can put it on an exchange. It's MONEY!! How do you commoditize money itself when it is used to value everything else?

Read my previous comments again. I already outlined the reasons why centralized exchanges is not feasible for Spot FX. All the big players, basically the ones providing the liquidity will NEVER agree to it and if they don't agree to it, there is no market.

If you want a centralized FX exchange, go trade Forex futures. But if you want to trade Spot FX in an retail environment, you have to design your trading strategies to work with its various "imperfections" or become George Soros or Warren Buffet.

Hi tar,

You are absolutely correct about this.

In fact, I called Jake out on this on the Trade2Win forum, except he forgot to cover up his tracks on the original post where he left the account balance visible (which was well over $100k). The response was to cut off the accounts window from the following post and label them incorrectly (just in case the misleading point wasn't made).

-Jason

If the Big Banks and futures industry scoop the business by offering a more regulated and honest trading (do you think Goldman would try to screw AQR or Renaissance this way?) I'm 100% for it.

The one really important piece of a lawsuit is subpoena power.

Somebody really big can't get away as easily with small scale cheating since this could anger government regulators---or worse, big clients---whose wrath will hurt their profitability more.

BTW I'm in favor of a centralized exchange for spot currencies assuming we get equal quantization in trade size and liquidity as present.

http://www.100forexbrokers.com/stp-ecn-brokers

Really??!! Are you serious?!! Somebody really big can't get away as easily with bullcrap? It's the other way around, the bigger a broker is, the more afraid the government will be of touching it. Have you heard of Bernie Madoff? In case you don't know, he was one of the founders of NASDAQ! Were you aware for how long and how much that he was able to get away with until he finally got caught and that was on his OWN CONFESSION? It's scary to think that if he hadn't confessed, his Ponzi scheme would be still running today scamming people with his $60 BILLION "hedge funds".

Currency futures is fine but I don't want to trade it. Period. I want to trade Spot FX. As an investor, I like to be able to make that choice. Having a centralized exchange is not an option because of the nature of Spot FX. If you don't understand it, go pick up an International Finance 101 book and read about it. There are other ways to improve the Retail FX industry that works just as well. As a small investor, no matter where you go, you are always going to be dis-favoured vs. bigger clients. You don't think there is any corruptions and cheatings against small investors going on in Currency Futures industry? Don't be so naive.

At this point, we don't even know whether FXCM really did anything wrong. But judging from all those responses pushing for currency futures, I am smelling more and more of the scent of "Smear Campaign" by Currency Futures industry. Is it mere coincidence this guy decided to take on the biggest Retail FX broker by accusing them of non-trading related allegations? His allegations were about their software. He didn't even mention if he had actual proofs to back up his allegation in the article.

For those Currency Futures brokers who are taking advantage of this opportunity to promote the product, BUTT OFF!! You are NOT getting my money for me to trade in your complicated, paper-thin liquidity and high-margin market! For the same liquidity and leverage rates that I would face in Currency Futures market, I might as well trade stocks; it's lot less volatile and not complicated at all. There is a reason why Retail FX industry is lot more successful than Currency Futures market.

ECN, DD, MM.........!!

Unreal how people love to fool themselves

Thats not the first time I say it here....ECNs and Dealing Desks (or what ever you wanna call it) have the same difference of voodoo and black magic, and the difference is only in the name.

Unless you are a bank, sovereign fund, Hedge fund etc, or a guy with a account double digit (preferable triple digit) ending with a M you will never see the real market.

Your money will always stay in the bucket, and even FXCM spin about sending it direct to the banks is ....surprise!!.....false.

FXCM like many others, belong to big institutions, and the fact that they rout your order to their liquidity provider/taker (more taker than provider) is just a reverse brokerage scheme were small accounts are aggregated together in a big one, for the bank to use it for any purpose they want including forex speculation.

Your acctual individual trades, all happens inside the virtual machine that your broker provides meaning the bucket

Spreads and commissions are just peanuts, the real money is made transferring accounts to the mother institution (beyond broker) which is not easy to pinpoint.

That's what I've said in my very first post. Unless you are a bank, or big corporations or George Soros, as a small investor, you will always be short-changed, no matter which market you are in. Even with centralized exchanges, you don't think brokers have manipulated prices, front-run or delayed executions for their clients?

Since centralized exchange is out of question for Spot FX, ECN is the best alternative. At least the brokers get compensated by commissions fast and have relatively less incentive to do price manipulations.

I never liked FXCM ever since i read REFCO and FXCM in same sentence

FULL DETAILS

http://forexmagnates.com/full-detail...s-action-suit/

They will never... 10 years ago we could have said, they will never reduce leverage in FX, they will never implement FIFO, they will never make hedging illegal.

I think it is rather moot to say they will never do this or that. They are part of the group that has run up 14 Trillion in debt and claim to be smarter than everyone.

It's not for me to say whether it is possible or not, but to bring to light it is being discussed. You can say never until you are blue in the face, you could write 9000 comments to them in which no one really listens to. We have already experienced this have we not?

Under the current scheme of things, they are over-burdened. They don't have enough funding to police things as they sit now. One way to possibly impose this is the Interbank market. But have we forgotten about that?

(This doesn't mean new rules won't have to be written, I would refrain from the word never tho.)

Thought I'd paste it. For the record.

The Plaintiff, William H. Sanders, claims to have lost over $150,000 to FXCM over the years due. Two main topics the lawsuit deals with is the Demo accounts which serve to attract clients while not simulating real market conditions and when clients do switch to live they receive completely different execution and the execution itself where it is claimed that FXCM is in fact a market maker which actively goes after profitable clients. The main excerpts are below:
Plaintiff, William H. Sanders, just like thousands of other customers, was lured into transacting business with Defendant, FXCM, buying and selling foreign currencies in what is known as the foreign exchange (“Forex”) market, but little did Sanders, or any of the others, know that FXCM intended to, and did, systematically bilk them out of their account money through an elaborate scheme of fraudulent tricks, devices, and artifices. What was represented to Sanders and others as a foreign currency trading platform developed upon professed principles of “fairness, honesty, and integrity,” which was supposedly rooted in providing customers with a true market trading experience, totally devoid of dealer intervention and market manipulation, was in truth a platform predicated upon deceit and trickery that systematically looted the accounts of customers who, like Sanders, placed their trust in FXCM.
The scheme deployed by FXCM was complex and varied, utilizing aggressive and pervasive marketing and advertising campaigns, including television, internet, seminars, webinars, and other media, portraying FXCM as a foreign currency trading platform where investors could trade foreign currencies in a true market environment. The advertisements were specifically targeted to convey a sense of trust and transparency to potential FXCM customers and to gain the customers’ confidence in FXCM’s trading platform. To further bolster customers’ confidence in its platform, FXCM enticed customers to use FXCM’s practice or demo account (hereinafter, the “Demo Account”) to simulate an FXCM trading experience. But the Demo Account, just like the myriad advertisements, misled customers about the true nature, functionality, and performance of the platform. Once lured into opening an account, customers were subjected to a staggering array of stratagems and ploys, some using extremely sophisticated computer software based upon complex algorithms and high-speed computers, to deceive the customers into believing that their trading was being affected by normal market forces, while in reality FXCM traded against its own customers.
And the so-called “Demo Account” – which was held out by FXCM as the sine qua non to persuade prospective customers to trade with FXCM – was the most cunning and crippling canard of all. By trading through the “Demo Account” without being at financial risk, the customer was allowed to experience direct market pricing, free from FXCM dealer interference or manipulation. The switch pulled by FXCM on how trading occurs once the customer opens a “live” account and starts trading with real money, is nothing short of a modern-day equivalent of the classic street con game known as “Three-card Monte.” Once “live” trading began, direct market pricing was replaced by profound dealer interference and trade manipulation.
To further its fraudulent practices, FXCM associated with software developers and programmers to create and deploy one of the most sinister software applications ever imagined, the central component of which included a back-end administrative console that provided FXCM an arsenal of system commands to facilitate FXCM’s fraud on customers. For example, through this console, FXCM can prevent the customer from closing out a profitable trade; hold up a trade so that FXCM can pirate the profit by trading against the customer; or manipulate the price of the market by utilizing “flash” trades to artificially move a market to close out a customer’s “stop order.” FXCM deployed these technological tricks to separate customers, like Sanders, from their money.
Defendant further deceives customers by failing to disclose its dishonest practices in its disclaimers contained in Defendant’s customer agreements. Buried in the fine print of Defendant’s lengthy, misleading, contradictory, and largely incoherent computer-generated customer agreement, Defendant purports to innocuously “disclose” and “disclaim” to the customer that, at times, the Defendant may act as a “principal” in transactions, which may result in the customer’s not getting the “best price” on certain trades. In fact, Defendant does not act as a “principal” in a “market” at all; rather, the Defendant acts as a well-armed and unscrupulous adversary to its customer, with superior knowledge, a technological advantage, one which ignores its own Code of Conduct, and which intentionally defrauds unwitting customers.
Defendant has worked with software companies and individual software programmers to modify its back-end systems and middleware to enable it to engage in the dishonest trading practices described below. Defendant has modified its trading platform so that many of these dishonest trading practices are applied to a customer’s account by automated computerized algorithms. Through this association, Defendant has also modified its trading platform to include a sophisticated back-end administrative console which provides Defendant and its employees a series of system commands designed, each accessible through a drop down menu, to execute many of the dishonest trading practices described below. All of these software modifications have been implemented by Defendant to prevent customers from making money and to cause customers to lose money to Defendant.
Defendant’s dishonest trading practices include, but are not limited to, the following:
a. Slow Server Command: When a customer is engaged in profitable trading activity, Defendant routes the customer’s account to a “slow server,” causing trade execution to be slowed down, and allowing Defendant the time to hijack any potential profit in the trade by buying and selling in-between the customer’s order and the real market, with Defendant’s taking any profit and leaving the customer victimized with no money for his or her effort;
b. False “Error” Messages: Defendant uses its administrative back-end software to prevent the customer from closing out a profitable trade and instead causes the trading system to generate any one of a series of “error” messages to the customer, blocking the customer’s efforts to finalize what would have been a profitable order;
c. Flash Trades: Defendant, in a practice known as “stop hunting,” manipulates the market price of the traded currency, including printing bogus “flash trades” which move the “market” to trigger the customer’s stop order for a given trade, essentially closing the customer out of that trade;
d. Arbitrary Margin Rules: Defendant arbitrarily changes the margin rules on Fridays for an ensuing week without any notice to the customer, which results in the customer’s being deprived of any trading advantages or leverage opportunities they may have, and again causing the customer’s account to be closed out in favor of Defendant;
e. Abuse of “Slippage”: Defendant, in a practice known as “slipping a trade,” takes advantage of “slippage” in a given trade. “Slippage” is the change in price between the time when a price is quoted and a market order is placed. It is customarily caused by market movement while the trade is being executed. The incidence of “slippage” should roughly be equal in favor of the customer and the broker. Defying all laws of probability, in almost every case, Defendant’s customers suffer losses as a result of “slippage” at grossly greater percentages than Defendant does, which can only be explained by Defendant’s manipulation of pricing; and
“Slow Fill” and “No Fill” Commands: Defendant often fails to execute valid and profitable trade orders entered by the customer and instead causes the trading system to generate a “slow fill” or “no fill” message to the customer as the customer attempts to close out a profitable trade, preventing the customer from making a profit while generating illicit profits for Defendant.

Tha above points would sound familiar to anyone who has ever traded with FXCM.
And it will be interesting to see how FXCM is going to defend all this.
It all seem valid points.

Increasing leverage and introducing FIFO does NOT change the core essence of the SPOT FX market; it just discourages small investors more from entering the market but forcing everybody to trade SPOT FX on an arbitrary "centralized exchange" does and that's why it won't succeed.

It's not for you to say whether it is possible or not, I am telling you it's not. Introducing a centralized exchange for SPOT FX WILL and will NOT succeed because it does not respect the nature of the product, SPOT FX itself. SPOT FX is NOT suitable to be traded on an centralized exchange. Why? Read my previous reply to you dated "February 13, 2011 10:23 PM"

The most of what they are going to create is going to be another Currency Futures market but for Spot FX with super-thin liquidity and high margin that nobody wants to trade in and all of us small investors will have no choice but give up our business and go back to our day job slaving for those Big Banks.

Frankly, I won't be surprised if they try to shove a "centralized exchange" down our throat though. After all, since when did those regulators who really live in the pockets of those Big Banks, gets compensated by Currency Futures industry ever give a crap about us small FX traders? To them, we are a nuisance. In the ten years that CFTC started overseeing the Retail FX industry, they didn't enact ONE piece of regulation that really protected the needs and interests of small investors like us. Instead they came out with one after another regulations to limit and reduce the competitiveness of the Retail FX industry. So the more I see it, the more this is just a "Smear Campaing" to take on the largest FX broker in the industry to get the ball rolling.

If CFTC REALLY do care about the Retail FX industry and they really want small investors to succeed, they will see ECN is the best in all worlds. It doesn't touch on the turf of the Big Players and it allows the brokers to make some money without jipping their clients.

I am curious, then how did FXCM become the largest FX broker in the industry? If I am a client, and if I see this is being done to me, I would've pulled my money out in a week or latest in a month and in the meantime, I would've stopped trading because I am obviously not making any money from it. I wouldn't have continued trading over years after years and waited until I accumulated a loss of $150,000 to do something. Does this make sense to you??? It's not like there is no alternatives out there. Given that he lost that much money, it means he had some capital to begin with, so he could've even tried other non-MM dealers out there. Why didn't he pull out sooner and try others? Any sensible, profit-driven traders with no alterior motives would.

And if FXCM treats all of their clients like this, then again my question: how does FXCM manage to not only stay in business for so long but become the largest broker in FX industry? They should have no clients left and would've closed shop long time ago.

As a former FXCM client, I can identify with everything being alleged here, and I do believe FXCM is guilty of everything. All that bullcrap (which they claim doesn't occur) was why I ended up closing my account there. I have none of those kinds of problems with my current broker.

I hope they get these bastards, but the loss of business will be the main penalty that will hurt them, rather than just a fine or a judgment in court.

One of the reasons they get away with it is because they are very smart how they do it. Getting slipped to your detriment for example: if they slipped you on 100% of your trades, it would become obvious quickly and yes you would leave quickly. But what if they only slip you say 75% of the time? And what if the slips are only 1/2 of a pip? You might notice, but you'd probably think it was just your imagination, or "that's just trading", or whatever.

These people are not stupid; they aren't going to make it that obvious. They are very smart about how they do this kind of crap. I have no way of proving they did this to me, but at the same time I am 100% convinced it did occur. If you trade frequently enough and have been around the block a bit, you can intuitively tell after a while if a series of slips are "just trading" or if there's some other bullcrap going on. Again, no way to prove it, but apparently I'm not the only one with that experience...

uuuh huh