FXCM Australia fund not segregated - terms of service agreement concern | Forex Factory

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Attachments: FXCM Australia fund not segregated - terms of service agreement concern
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FXCM Australia fund not segregated - terms of service agreement concern

  • #1
  • First Post: May 30, 2012 8:29am May 30, 2012 8:29am
Now this sounds really dodgy, i am planning to deposit alot of money on fxcm over the next 6 months to 1 year. I did a quick search on google and came across a post online. My heart sank after i read the whole terms of service agreement because the fulltilt poker site incident is still fresh in my mind.
Anyway i have contacted fxcm, the person i chatted with said he will contact their legal department and get back to me asap.


"Here is an updated terms of service agreement I just got from FXCM.

Title, i.e. ownership in all money you deposit will be transferred to FXCM.

Client money will no longer be segregated from FXCM money, and, in the case of an FXCM bankruptcy or insolvency, you will be treated as a general creditor.

If your account is inactive for a period of six years, your money will no longer be considered "client money."



Man if clients will be treated as creditors if things go wrong then i am withdrawing all my money as soon as i am able to log in to my fxcm.
Attached File(s)
File Type: pdf fxcm says that your money is their money.pdf   223 KB | 487 downloads
  • #2
  • May 30, 2012 8:42am May 30, 2012 8:42am
Quoting Deman-Uc
Now this sounds really dodgy, i am planning to deposit alot of money on fxcm over the next 6 months to 1 year. I did a quick search on google and came across a post online. My heart sank after i read the whole terms of service agreement because the fulltilt poker site incident is still fresh in my mind.
Anyway i have contacted fxcm, the person i chatted with said he will contact their legal department and get back to me asap.


[b]"Here is an updated terms of service agreement I just got from FXCM.

Title, i.e. ownership in all money...
Deman-Uc, worrying enough. Take out all your money ASAP. I never really trusted FXCM much (mainly because they are Market Makers). If you can, go with a full compliant STP/ECN broker to fullfill your expectations, like LCG FX. I can assure you this one is the real deal.

Regards,
MrJinks.
  • #3
  • May 30, 2012 8:46am May 30, 2012 8:46am
Funny that such a thing is even possible in Australia. I always thought ASIC can be taken seriously (although i never really researched it).

P.S. after reading the PDF, it appears that this document is from FXCM UK, and your points only affect professional clients(LLCs, funds and so forth) - which is rather standard. Retail clients funds will still be held according to FSA (UK) rules. Not sure what this document has to do with Australia.
  • #4
  • May 30, 2012 8:53am May 30, 2012 8:53am
The scary stuff here is that while fxcm is a publicly traded company and publishes financial statement, it is easy to manipulate financial statements. And if they get in trouble, you will be treated like a creditor.

I luckily escaped from Fulltilt poker before it went under and that experience was a wake up call. Mixing client money with monies that business uses to run its operation is bad bad bad... Anyway i am waiting for them to get back to me.
  • #5
  • May 30, 2012 9:01am May 30, 2012 9:01am
Quoting shrike

P.S. after reading the PDF, it appears that this document is from FXCM UK, and your points only affect professional clients(LLCs, funds and so forth) - which is rather standard. Retail clients funds will still be held according to FSA (UK) rules. Not sure what this document has to do with Australia.
It bothers me because only FXCM UK clients funds are held in segregated account. Seems like Australian client will be crewed if FXCM gets in trouble.
I have a good sum there now and i am planning to have a good size account with them in the next 6month.

Trust me, this will bother you if you have experienced a company you have your money with go under. When things go wrong, it happens so fast that you have no chance to react.
  • #6
  • May 30, 2012 9:17am May 30, 2012 9:17am
What makes you think your funds will not be segregated? Are you a LLC or fund or qualify as 'professional' in any other way?
  • #7
  • May 30, 2012 9:45am May 30, 2012 9:45am
Quoting shrike
What makes you think your funds will not be segregated? Are you a LLC or fund or qualify as 'professional' in any other way?
from my understanding, ASIC does not require that fxcm Australia segregate client funds...i have an individual account.

I just read the fxcm Australia terms of business, read the section below

Bankruptcy protection

"If FXCM becomes insolvent and client has a claim for amount deposited or profits earned on transaction hereunder, clients claim may not receive a priority. Without a priority, client is a general creditor, and client claims will be paid along with the claimss of other general creditors."

this does not sound good to me
  • #8
  • May 30, 2012 4:23pm May 30, 2012 4:23pm
Quoting Deman-Uc
Now this sounds really dodgy, i am planning to deposit alot of money on fxcm over the next 6 months to 1 year. I did a quick search on google and came across a post online. My heart sank after i read the whole terms of service agreement because the fulltilt poker site incident is still fresh in my mind.
Anyway i have contacted fxcm, the person i chatted with said he will contact their legal department and get back to me asap.


[b]"Here is an updated terms of service agreement I just got from FXCM.

Title, i.e. ownership in all money...
Hi Deman-Uc,

As Shrike mentioned (thanks ), the document you attached is for FXCM UK not Australia and only applies to professional clients.

It's important to note that all retail clients of FXCM UK benefit from segregated funds and the FSA funds protection scheme which is good for up to 50,000 pounds per client. By default all FXCM UK clients are designated as retail clients. That means you if have a self-traded account with FXCM UK, your funds are segregated. The only clients designated with professional status are those who invest in the managed accounts program. Only professional clients are allowed to invest in that program. For those who want to know if they qualify as a professional client, you can click here.

It's unfortunate that Australian regulations do not afford segregation the way the UK regulations do. We wish they did. That said, I notice that you live in New Zealand. You actually have the option of transferring your account from FXCM Australia to FXCM UK. That way you can benefit from UK regulation that affords segregated accounts and the FSA funds protection scheme. If that interests you, then you can email me at [email protected] and I can set that up for you.

Jason
  • #9
  • May 30, 2012 4:51pm May 30, 2012 4:51pm
Quoting mrjinks
I never really trusted FXCM much (mainly because they are Market Makers).
Hi Mr. Jinks,

FXCM is not a market maker on forex transactions. We use a No Dealing Desk fore execution model. You can click here for a short video on how it works.

While forex transactions with FXCM are executed via NDD, FXCM does make the market for CFD transactions for oil, gold, silver, and stock indices. It was originally our intention when launching CFDs a few years ago to make them NDD, but the transaction size requested by our traders was smaller than the minimum transaction size offered on exchanges for the underlying products.

That is one of the reasons why we offer CFD trading in large liquid products where risk can be managed appropriately through the underlying, rather than offering hundreds of possibly illiquid CFDs that could result in a significant risk for both ourselves and our clients. There may come a point in the future when CFDs will be NDD, and we look forward to that day. Regardless, our CFD products have no re-quotes or dealer confirmation.

Jason
  • #10
  • May 30, 2012 4:58pm May 30, 2012 4:58pm
Quoting Jason Rogers
It's unfortunate that Australian regulations do not afford segregation the way the UK regulations do. We wish they did. That way you can benefit from UK regulation that affords segregated accounts and the FSA funds protection scheme.
Jason
I notice you touting the benefits of segregated funds. Should I be worried that you are eerily silent about FXCM US?
Without VSA, you're playing checkers while the Smart Money plays chess.
  • #11
  • May 31, 2012 12:11pm May 31, 2012 12:11pm
Quoting HiddenGap
I notice you touting the benefits of segregated funds. Should I be worried that you are eerily silent about FXCM US?
Hi HiddenGap,

Sorry, it wasn't my intention to be silent about the US. Deman's questions related to Australia and the UK. But now that you mention it, US regulations do not provide US clients with segregated status the way UK regulations do. That means if you are a forex trader in the US and therefore required by law to trade through a US-regulated broker, it becomes all the more important to choose a financially sound broker.

FXCM's No Dealing Desk forex execution gives us another advantage here in providing safety for client funds. By immediately offsetting client orders with our liquidity providers, we avoid taking risk in the market ourselves. And as a publicly traded company listed on the New York Stock Exchange we are required to publish our latest financial information every quarter.

Jason
  • #12
  • May 31, 2012 7:12pm May 31, 2012 7:12pm
Quoting Jason Rogers
It's unfortunate that Australian regulations do not afford segregation the way the UK regulations do. Jason
Would you mind elaborating a bit more on the difference between the two Counties regulations.
Good Trading
  • #13
  • Jun 1, 2012 2:50am Jun 1, 2012 2:50am
Quoting Jason Rogers
Hi HiddenGap,

Sorry, it wasn't my intention to be silent about the US. Deman's questions related to Australia and the UK. But now that you mention it, US regulations do not provide US clients with segregated status the way UK regulations do. That means if you are a forex trader in the US and therefore required by law to trade through a US-regulated broker, it becomes all the more important to choose a financially sound broker.

FXCM's No Dealing Desk forex execution gives us another...
Hi Jason,

Does this mean because of the lack of segration of funds, clients outside the US will not receive their funds back should FXCM become bankrupt? Similar to how clients outside the US, did not a penny of the positive slippage that FXCM had kept.

Thanks

High Five
  • #14
  • Jun 1, 2012 12:33pm Jun 1, 2012 12:33pm
Quoting aud
Would you mind elaborating a bit more on the difference between the two Counties regulations.
Hi AUD,

Retail clients of UK-regulated brokers are protected by the Financial Services Compensation Scheme for up to 50,000 pounds in the event their broker defaults.

Australian and US regulators do not currently have a similar compensation scheme set up for their residents unfortunately. That is why if you live in Australia or the US, the financial strength of your broker is of utmost importance. As I mentioned above, FXCM is a publicly traded company listed on the New York Stock Exchange. That means, unlike smaller firms, we are required to report our latest financial data on a quarterly basis.

Jason
  • #15
  • Jun 1, 2012 12:43pm Jun 1, 2012 12:43pm
Quoting High.Five
Does this mean because of the lack of segration of funds, clients outside the US will not receive their funds back should FXCM become bankrupt?
Hi High Five,

US residents are required by law to trade through a US-regulated broker, but non-US residents can trade through a UK-regulated broker. In doing so they can benefit from UK regulations that provide segregated status to client funds meaning clients get priority in bankruptcy proceedings over other creditors. Also, as mentioned above, the retail clients of UK-regulated brokers are protected by the Financial Services Compensation Scheme for up to 50,000 pounds.

Jason
  • #16
  • Jun 2, 2012 1:23am Jun 2, 2012 1:23am
Here is another troubling section in the terms of business, which states that they can take risks with the money clients deposited with them. They can do business with our money, and if something goes wrong, we stand in line with other creditors. This is sick...

FXCM CAN LOAN OUR MONEY TO OTHER INSTITUTIONS


Deposited funds section on FXCM Terms of busness

Client hereby agrees that FXCM may, in FXCM's sole and absolute discretion at any time, apply and transfer from clients account to any of clients other account held with FXCM or an affliate of FXCM or other approved financial institution or its associates any of the moneys, currencies or other property of client held either individually or jointly with others to another regulated account of the same said client.
  • #17
  • Jun 2, 2012 1:38am Jun 2, 2012 1:38am
Quoting Jason Rogers
Hi Deman-Uc,

It's unfortunate that Australian regulations do not afford segregation the way the UK regulations do. We wish they did. That said, I notice that you live in New Zealand. You actually have the option of transferring your account from FXCM Australia to FXCM UK. That way you can benefit from UK regulation that affords segregated accounts and the FSA funds protection scheme. If that interests you, then you can email me at [email protected] and I can set that up for you.

Jason
Hi Jason, if i move my fund to fxcm uk, can i have my account currency in be denominated AUD?

Cheers,

Deman-uc
  • #18
  • Jun 4, 2012 2:38pm Jun 4, 2012 2:38pm
Quoting Deman-Uc
Here is another troubling section in the terms of business, which states that they can take risks with the money clients deposited with them. They can do business with our money, and if something goes wrong, we stand in line with other creditors. This is sick...

FXCM CAN LOAN OUR MONEY TO OTHER INSTITUTIONS


Deposited funds section on FXCM Terms of busness

Client hereby agrees that FXCM may, in FXCM's sole and absolute discretion at any time, apply and transfer from clients account to any of clients other account held with FXCM...
Hi Deman-Uc,

I can understand why you are concerned reading this kind of legal language. My suggestion would be to contact our Compliance department to get further clarification, because some sections of our Terms of Business contain required disclosures that must be included by all brokers regardless of whether they apply specifically to FXCM and how we operate. You can email the Compliance department at [email protected].

Quoting Deman-Uc
Hi Jason, if i move my fund to fxcm uk, can i have my account currency in be denominated AUD?

Cheers,

Deman-uc
Only FXCM Australia offers AUD-denominated accounts, since all Australian residents must open their account through FXCM Australia. The account denominations available through FXCM UK are USD, EUR, GBP, CAD, NZD, JPY and CHF.

Jason
  • #19
  • Jun 4, 2012 3:00pm Jun 4, 2012 3:00pm
Regardless of when a broker says that client funds are segregated from institutional capital, it doesn't mean that your money is safe. MF Global and Worldspreads both claimed that client funds were segregated - and when they both went down, client funds were gone with them.

The FSCS say they will continue to protect the first £50,000 of deposit funds. They are already struggling to meet the claims from failed investments in the UK - In the event of another large broker going down, I would not be 100% confident that they would continue to pay out claims on retail forex/spread betting.

Now this is just my opinion, but I do work in the industry and have seen several examples of representatives promising protection to client money, and as soon as something goes wrong, these reps vanish along with the funds.

I'm not trading with a six figure account, but if I was, I'd look to spread counterparty risk across more than one institution.

A few years ago we didn't have to question brokers upholding their contracts - but now it goes with the territory.
  • #20
  • Last Post: Edited 9:50am Jun 6, 2012 9:37am | Edited 9:50am
Quoting Lightrain
Regardless of when a broker says that client funds are segregated from institutional capital, it doesn't mean that your money is safe. MF Global and Worldspreads both claimed that client funds were segregated - and when they both went down, client funds were gone with them.

The FSCS say they will continue to protect the first £50,000 of deposit funds. They are already struggling to meet the claims from failed investments in the UK - In the event of another large broker going down, I would not be 100% confident that they would continue to pay...
Hi Lightrain,

You make a really good point. After what happened to MF Global, it's hard to believe anyone.

For what it's worth, those of you who are interested can always view FXCM's latest financial data at this link. And if you have any follow up questions related to this, you can email [email protected].

Jason
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