Excuse my ignorance, but I am in full panic mode right now. I decided this year that I wuold start getting serious about my currency trading and had deposited a significant chunk of funds in my account. What does all this mean for my funds? I am in the US. Don't regulations require a certain amount of insurance? I was not in any CHF position, so I am not in any margin call.
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The problem with brokers is that they are the middleman, either as an ECN or a MM now, If a customer was long E/chf at say 1.20 and had a stop at 1.18, now if the next available price was 0.74 then the stop would hit at 0.74 and not at 1.18, that is how so many ended up losing their account and how brokers go bust. If the broker is an ECN then that 0.74 gets hit with on of their PB's so they owe to money to that PB, as a matter of fact the PB will hold trading capital for that broker so they get paid right away.
Now the broker has a problem, their PB took the money and the customer that put the trade on has a negative balance in his account of say 20,000 dollars, there is no way that the broker is going to get paid and they already lost the funds to their PB so they are bust.
That's why regulators require brokers to hold a certain amount of capital on hand, however the drop was so violent and there were so many short the Franc that the brokers ran out of cash in about 3 minutes.
The company now has to find 225 Million dollars and the NYSE has halted trading as the company is effectively insolvent.
Excuse my ignorance, but I am in full panic mode right now. I decided this year that I wuold start getting serious about my currency trading and had deposited a significant chunk of funds in my account. What does all this mean for my funds? I am in the US. Don't regulations require a certain amount of insurance? I was not in any CHF position, so I am not in any margin call.
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I called and spoke to FXCM this morning. The rep sounded like he was ready to have a nervous breakdown. His answer was...I don't know, I don't know, I don't know...voice was quivering. So it the stock is down 90% and halted usually = bankrupt.
The problem with FXCM is not retail part of business but the institutional one, most of retail flow FXCM was taking on his own book and only institutional flow was mostly hedged with banks and other LPs and this poses the biggest threat to FXCM, becasue positions were big and banks will be wanting to cover the debt.
{quote} I called and spoke to FXCM this morning. The rep sounded like he was ready to have a nervous breakdown. His answer was...I don't know, I don't know, I don't know...voice was quivering. So it the stock is down 90% and halted usually = bankrupt.
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at this point, all the info is with the management team. The reps knows less than we do now...
{quote} I called and spoke to FXCM this morning. The rep sounded like he was ready to have a nervous breakdown. His answer was...I don't know, I don't know, I don't know...voice was quivering. So it the stock is down 90% and halted usually = bankrupt.
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I'm in their Active Trade Group and spoke with someone on my Account Team. He had no information to share at this point and it's business as usual meaning you can trade, make withdrwals, etc.......Their stock is halted for trading.....I have had great support from them for over 2 years but not sure how they are going to look IF they make it through this.
Their problem is simple, they need 225Mn dollars and they need it now. They can't borrow it, the company is worthless, they can't have a rights issue, they are worthless.
Are they really going to find a buyer? They have a 225Mn hole and made 5 million a year in profit, any buyer would need to put that 225Mn in up front, is the company really worth that? It had a market cap of 500Mn last week, even with a 225Mn infusion it wouldn't cap much higher than 150-200Mn.
Then we have the question of current shareholders and directors, any buyer would want to take it private, no point otherwise, no buyer is going to dilute his holdings with previous shareholders if he doesn't need to. Current shareholders and directors would end up with nothing, can't see them voting for it.
If they only had one PB, that could be a buyer, they made 225Mn yesterday in an hour worth of trading, they could just reverse that and get the company for free.
{quote} I'm in their Active Trade Group and spoke with someone on my Account Team. He had no information to share at this point and it's business as usual meaning you can trade, make withdrwals, etc.......Their stock is halted for trading.....I have had great support from them for over 2 years but not sure how they are going to look IF they make it through this.
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Live feed still works, so hasn't gone tits up yet.
They will be until the NFA/CFTC shut them down for breach of capital requirement. As they haven't pulled the rug yet when the NYSE halted trading at 09:21 something could be in the works in the background.
The NFA/CFTC aren't stupid and they aren't known for taking risk.
{quote} I'm in their Active Trade Group and spoke with someone on my Account Team. He had no information to share at this point and it's business as usual meaning you can trade, make withdrwals, etc.......Their stock is halted for trading.....I have had great support from them for over 2 years but not sure how they are going to look IF they make it through this.
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i agree, I like them as a platform and broker. Never had complaints but if they do survive this, a lot of shit will change for the good or the bad.
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Joined Jul 2011
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Status: Market Junkie
|693 Posts
the thing is we don't know much cash is needed to meet requirements. FXCM does have cash on hand of their own money, so minus the losses from clients we don't know much that number really is.
{quote} i agree, I like them as a platform and broker. Never had complaints but if they do survive this, a lot of shit will change for the good or the bad.
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This whole mess will open the debate again about leverage. 50:1 is obviously still too high. An event like this bankrupted quite a few brokers. We haven't heard from hedge funds yet, I will guarantee you that a few went bust yesterday.
