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  • #6,241
  • Jan 20, 2015 7:18pm Jan 20, 2015 7:18pm
Quoting Rjhr
Hello, I'm a reporter with The Wall Street Journal and I'm looking to interview anyone who is grappling with negative account balances after trading the Swiss franc through FXCM or other retail brokers. You can reach me via email: james dot ramage at wsj.com
I've just read that article at the wsj. It makes it sound like trading the swiss franc on margin was a perfectly normal thing to do and no-one had any idea this was going to happen.

1. We knew this was coming we just didn't know exactly how and when.
2. People trading CHF were playing chicken with the SNB. Trading an illiquid instrument on margin is about as risky as you can get.
3. Responsible brokers were limiting leverage (giving customers enough rope to hang themselves but not take everyone else with them). As for the brokers that exposed themselves to huge losses, well you have to question whether these people are fit and proper to look after other people's money.
  • #6,242
  • Jan 20, 2015 7:46pm Jan 20, 2015 7:46pm
Quoting william17
{quote} FXCM US does not have that on the website but you can find the following on their risk disclosure (http://www.fxcm.com/legal/trading-execution-risks/) Although the margin call feature is designed to close positions when account equity falls below the margin requirements, there may be instances when liquidity does not exist at the exact margin call rate. As a result, account equity can fall below margin requirements at the time orders are filled, even to the point where account equity becomes negative. This is especially true during...
Thanks for your informative answer. I am not unaware of its content. The purpose of the post was to obtain comment from an authoritative FXCM source and add some finality to repeated questionings and uncertainties. While it a matter of common sense to consult the documentation, with respect to constant revolving questionings and uncertainties, Jason Rogers would represent a more definitive voice.
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  • #6,243
  • Jan 20, 2015 8:07pm Jan 20, 2015 8:07pm
Quoting rayzz
The points are: 1. If they even took $250 in order to offset $-180k, it shows they are desperate. @ Shrike: u missed my point. 2. Negative balances with fxcm aus will likely be reset to zero because it happened to me in the recent past and they even emailed me saying that it is their policy to reset negative balance, and because they do a no debit balance policy that explicitly states so.
Rayzz,

Did you file in any complaints, such as the trade inquiry with FXCM Aus, or with other regulatory bodies? Both this and your previous experience? thanks.
  • #6,244
  • Jan 20, 2015 8:09pm Jan 20, 2015 8:09pm
Quoting Phylo
{quote} Thanks for your informative answer. I am not unaware of its content. The purpose of the post was to obtain comment from an authoritative FXCM source and add some finality to repeated questionings and uncertainties. While it a matter of common sense to consult the documentation, with respect to constant revolving questionings and uncertainties, Jason Rogers would represent a more definitive voice.
Can Jason Rogers kindly respond to #post 6,234.
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  • #6,245
  • Jan 20, 2015 8:28pm Jan 20, 2015 8:28pm
Under the Terms of Business, the Company does not commit to the negative balance policy. Specifically, we state that the client “may not be liable for debit balances directly resulting from trading activity.”
In addition, even if we were to apply this provision, we would not apply it for certain “Force Majeure Events.”
(1) “Force Majeure Events”, one such Force Majeure Event is defined as an “Exceptional Market Event” which, under the terms of the client’s trading agreement, includes excessive price movements and a loss of liquidity in the market;
(2) Force Majeure Events also include “any reason that prevents the company from performing any or all of its obligations” as well as “acts and regulations of any governmental or supra national bodies which [. . .] prevent an orderly market in relation to the client’s orders.” (the actions taken by the Swiss National Bank caused an exceptional price movement which forced the company’s liquidity providers to cease pricing, creating an unorderly market, which in effect prevented the company’s systems from limiting losses as they are ordinarily designed to do);
(3) If Client has entered into a white label or omnibus or under a credit arrangement with the Company;
Additionally, Clause 26.3, Company does not have liability for any losses in connection with execution of transactions.

Additionally, Under the Terms of Business, client is required to indemnify FXCM for losses.

If you have further questions or concerns please don't hesitate to contact us at [email protected], via live chat, or via phone at +1 212 897-7660


FXCM offers excellent execution and easy accessibility to our clients. We provide live support 24 hours a day, seven days a week.


Kindest regards,


---------------------

Looks like FXCM is slowly losing its reputation. I've been happy with them for many many years, and personally have experienced a situation where my acc went negative and they were very helpful in reseting my acc to zero..

But when the losses got too big too handle, I guess FXCM is starting to playing with the legality of their relationship with clients.

Jason should have a view on this, since this is an email sent by his colleque at New York. I'm based in Australia.

I've been preparing all emails, info from fxcm admins on internet, and every other articles which support that FXCM has a no negative balance policy.
  • #6,246
  • Jan 20, 2015 8:59pm Jan 20, 2015 8:59pm
Quoting rayzz
Under the Terms of Business, the Company does not commit to the negative balance policy. Specifically, we state that the client “may not be liable for debit balances directly resulting from trading activity.” In addition, even if we were to apply this provision, we would not apply it for certain “Force Majeure Events.” (1) “Force Majeure Events”, one such Force Majeure Event is defined as an “Exceptional Market Event” which, under the terms of the client’s trading agreement, includes excessive price movements and a loss of liquidity in the market;...
Rayzz,
May I know when did you receive this email from FXCM? I have not seen any yet.
  • #6,247
  • Edited 9:31pm Jan 20, 2015 9:07pm | Edited 9:31pm
It seems to me that the terms of business may apply to institutional clients. The risks that apply to non-professional traders are plastered all over its website and in many other document. Any legal body can see that their risk warning limiting a clients losses to the amount deposited is clear in most f not all their documentation. I just cant see FXCM going after clients that were wiped clean from this. I lost over $32K and ended with a balance of -85K. The negative balance has not yet changed.

I can't imagine FXCM going after retail clients after all the disclosures indicate their negative balance policy in their client agreement:

7. LIQUIDATION OF ACCOUNTS. In the event of (a) the death or judicial declaration of incompetence of Trader; (b) the filing of a petition in bankruptcy, or a petition for the appointment of a receiver, or the institution of any insolvency or similar proceeding by or against Trader; (c) the filing of an attachment against any of Trader’s accounts carried by FXCM, (d) insufficient margin, or FXCM’s determination that any collateral deposited to protect one or more accounts of Trader is inadequate, regardless of current market quotations, to secure the account; (e) Trader’s failure to provide FXCM any information requested pursuant to this Client Agreement; or (f) any other circumstances or developments that FXCM deems appropriate for its protection, and in FXCM’s sole discretion, it may take one or more, or any portion of, the following actions: (1) satisfy any obligation Trader may have to FXCM, either directly or by way of guaranty of suretyship, out of any of Trader’s funds or property in its custody or control; (2) sell any or purchase any or all Spot currency positions held or carried for Trader; and (3) cancel any or all outstanding orders, or any other commitments made on behalf of Trader. Any of the above actions may be taken without demand for margin or additional margin, without prior notice of sale or purchase or other notice to Trader, Trader’s personal representatives, heirs, executors, administrators, trustees, legatees or assigns and regardless of whether the ownership interest shall be solely Trader’s or held jointly with others. In liquidation of Trader’s long or short positions, FXCM may, in its sole discretion, offset in the same settlement or it may initiate new long or short positions in order to establish a spread or straddle which in FXCM’s sole judgment may be advisable to protect or reduce existing positions in Trader’s account. Any sales or purchases hereunder may be made according to FXCM’s judgment and at its discretion with any interbank or other exchange market where such business is then usually transacted or at a public auction or private sale, and FXCM may purchase the whole or any part thereof free from any right of redemption. Trader will not be responsible for debit balances directly resulting from trading activity.

Any assault on clients to repay debit balances after all the documentation that we agreed to will likely lead to class action lawsuits. Even their shareholders would not want this as it would make a bad situation even worse.

JMHO
  • #6,248
  • Jan 20, 2015 9:15pm Jan 20, 2015 9:15pm
Either last night or this morning. Didn't see the time and date.

What's strange is that we all know fxcm has a no debit balance - it explicitly is stated on their web, risk disclosure, even you can find cases going back to 2012 where negative balances were reset to zero by fxcm admin because they said it was fxcm policy for clients to never owe money..

But this email appears very desperate of them...it's impossible enough go after retail client's money, and this will further drive potential new customers away..

Just doesn't make sense.
  • #6,249
  • Jan 20, 2015 9:16pm Jan 20, 2015 9:16pm
Their Terms of business include the "force majeure" clause but it is not mentioned whatsoever in their risk disclaimer that simply states ""As a result, account equity can fall below margin requirements at the time orders are filled, even to the point where account equity becomes negative. This is especially true during market gaps or volatile periods. FXCM will not hold traders responsible for deficit balances in this scenario." IMO, they had to include under what scenario they WILL hold traders responsible in the Risk Disclaimer as well because right now you have contradiction between the two legal disclosures. It's getting interesting to see how this will be resolved!
  • #6,250
  • Jan 20, 2015 9:51pm Jan 20, 2015 9:51pm
"force majeure" is related to an Act of God; an unforeseen disaster. This situation was a result of poor risk management which other brokers got in front of to protect their clients and their assets. Also, many other brokers have already taken proper steps to remedy the situation and keep to their terms of their agreements by resetting negative account balances. I am sure FXCM will do the same if they are to maintain their reputation. They are larger and may require more time to sift through their books.
  • #6,251
  • Jan 20, 2015 10:35pm Jan 20, 2015 10:35pm
Quoting euler123
"force majeure" is related to an Act of God; an unforeseen disaster. This situation was a result of poor risk management which other brokers got in front of to protect their clients and their assets. Also, many other brokers have already taken proper steps to remedy the situation and keep to their terms of their agreements by resetting negative account balances.
I agree with most of your statement. SNB removing the floor should not be considered force majeure, it was bound to happen sooner or later so I think the FXCM guys are grasping at straws. But let's see what happens
  • #6,252
  • Jan 20, 2015 11:10pm Jan 20, 2015 11:10pm
I've said in a few posts that they WILL go after the clients that have negative accounts. It's their only option. They can't pay off the loan without at least trying to get back some of the 225M that clients lost. Look at their balance sheet and cash flow if you don't believe it.

I know what their prospectus says, and I think they will somehow find a loophole to go after their clients.

It's really a "yes or no" question, " Are you going to wipe out the negative balances?" and Jason didn't answer the question with a "yes or no".

They are a publicly traded company. The fact that they are being so secretive really confuses me. The terms of the loan are leaking out little by little, where I believe it should be public record. They still have shareholders, but their actions are like they think they are a private company.
  • #6,253
  • Jan 20, 2015 11:36pm Jan 20, 2015 11:36pm
Quoting TheGrind
I've said in a few posts that they WILL go after the clients that have negative accounts. It's their only option. They can't pay off the loan without at least trying to get back some of the 225M that clients lost. Look at their balance sheet and cash flow if you don't believe it. I know what their prospectus says, and I think they will somehow find a loophole to go after their clients. It's really a "yes or no" question, " Are you going to wipe out the negative balances?" and Jason didn't answer the question with a "yes or no". They are a publicly...
I agree, at least they will try, but I don't think they are going to take the clients to court, even they are, I don't believe they can win.
  • #6,254
  • Jan 20, 2015 11:42pm Jan 20, 2015 11:42pm
Quoting TheGrind
I've said in a few posts that they WILL go after the clients that have negative accounts. It's their only option. They can't pay off the loan without at least trying to get back some of the 225M that clients lost. Look at their balance sheet and cash flow if you don't believe it. I know what their prospectus says, and I think they will somehow find a loophole to go after their clients. It's really a "yes or no" question, " Are you going to wipe out the negative balances?" and Jason didn't answer the question with a "yes or no". They are a publicly...

Let's see what happens but going after retail clients will not be easy. This video is just one example of "never owe a deficit as a result of trading" promotional campaign
Inserted Video
. NEVER is the key here and it goes against the force majeure clause in their "Terms of Business" thus greatly undermining their legal standing on the matter. And this video is only one example of their "No debit balance policy". So, I understand that FXCM would love to collect that $225 million asap but I doubt they can do so and the consequences of going after the clients may be greater than the amount they realistically hope to collect. That is why they have not announced anything yet IMO, they are trying to figure out what route to take- the gracious and forgiving white knight or ruin their reputation by chasing after retail traders.
  • #6,255
  • Jan 20, 2015 11:55pm Jan 20, 2015 11:55pm
Quoting william17
{quote} Let's see what happens but going after retail clients will not be easy. This video is just one example of "never owe a deficit as a result of trading" promotional campaign https://www.youtube.com/watch?v=Vr2vnM9O0oA. NEVER is the key here and it goes against the force majeure clause in their "Terms of Business" thus greatly undermining their legal standing on the matter. And this video is only one example of their "No debit balance policy". So, I understand that FXCM would love to collect that $225 million asap but I doubt they...
I totally agree with what you are saying on the surface. But in reality, Jason was asked point blank and this was his response..

Quoting Jason Rogers
{quote} Hi maokun, Our audit team is currently working through trade audits from the EUR/CHF move and they will be in contact as audits are completed. I don't have any additional details, but will let you know once available for me to share. Jason
Everyone says, it would cost too much money to go after the negative clients, but at what point IS IT cost effective? Would you spend 25M to get 200M back? I think most of us would.

Edited to add.... Look at their balance sheet and cash flow. There is no possible way to payoff the loan without addition funds... meaning, some part of the 225M.
  • #6,256
  • Jan 21, 2015 12:07am Jan 21, 2015 12:07am
@TheGrind- I am saying they will not collect anything near $200 million no matter how much money they spend. Also, I am sure lawyers are already salivating at the thought of a class-action lawsuit AGAINST fxcm in case the company decides to go after retail traders that may result in judgment against FXCM for unfair practices or whatever. But let's wait and see, no matter how much we discuss that we will get nowhere right now. Have a good one!
  • #6,257
  • Jan 21, 2015 12:14am Jan 21, 2015 12:14am
Quoting TheGrind
{quote} I totally agree with what you are saying on the surface. But in reality, Jason was asked point blank and this was his response.. {quote} Everyone says, it would cost too much money to go after the negative clients, but at what point IS IT cost effective? Would you spend 25M to get 200M back? I think most of us would. Edited to add.... Look at their balance sheet and cash flow. There is no possible way to payoff the loan without addition funds... meaning, some part of the 225M.
Maybe they just want to buy themselves some time and use it to find a better loan...
  • #6,258
  • Jan 21, 2015 1:14am Jan 21, 2015 1:14am
Quoting william17
Their Terms of business include the "force majeure" clause but it is not mentioned whatsoever in their risk disclaimer that simply states ""As a result, account equity can fall below margin requirements at the time orders are filled, even to the point where account equity becomes negative. This is especially true during market gaps or volatile periods. FXCM will not hold traders responsible for deficit balances in this scenario." IMO, they had to include under what scenario they WILL hold traders responsible in the Risk Disclaimer as well because...
Generally speaking, my understanding of "force majeure" clauses is that they are intended to relieve a given party of liability in the event of a qualifying event. Although I haven't read all the legal text to see what the context of the "force majeure" clause is, the gist of it appears that FXCM is relieved of any and all liability in the case of a qualifying event. The SNB decision appears to fully fall into the definition of a "force majeure" event, so FXCM is not liable for any damages a client may have experienced as a result of the "force majeure" event. These clauses are generally boilerplate language and are designed to protect a party to a contract from acts by third parties over which it has no control, so it really isn't part of any under-handed routine on FXCM's part -- it's just standard CYA language. (Note: I don't see this particular language in the U.S. "Terms and Conditions," but there is similar language there).

But that, I think, is an entirely separate issue from whether the client is liable to FXCM in the event of "force majeure." The email supposedly sent to Rayzz (Post 6242) is conflicting in this regard. While on the one hand it says that "FXCM will not hold traders responsible for deficit balance in [a] scenario ... [where] account equity becomes negative ... ," (language that is present in the "No Dealing Desk Forex Execution Trading Risks"), it also goes on to say that "[u]nder the Terms of Business, client is required to indemnify FXCM for losses." (language present in the "Terms and Conditions").

So, on the one hand, language in the risk disclosure says that clients won't be held responsible where, during "market gaps" or "volatile periods," the trader experiences "deficit balances"; on the other, the "Terms and Conditions" indicate that clients are "required to indemnify FXCM for losses."

The Terms and Conditions indicates that the laws of New York will apply (at least for U.S. clients), so a New York contract lawyer would be in the best position to research the issue of how New York law would apply. Some states would resolve any conflict in contract provisions against the writer of this sort of contract. And naturally, at least for U.S. clients, there may be other governmental entity regs as well as the conditions of previous enforcement/compliance actions in play that would disallow FXCM attempts to collect negative equity balances in light of what is presented to clients in the risk disclosure.

So, obviously this presents somewhat of a legal pickle for FXCM, and I am sure they've got lawyers pouring over their law books seeing what they can and can not do in attempt to collect these negative balances, since their ability to collect them affects their overall financial state of affairs ... .

(I am also surprised that there isn't an arbitration clause in here somewhere (maybe I missed it); most businesses like to avoid court battles and have arby clauses in their contracts to avoid that ... .)
Fireworks are fun ... as long as you don't blow your fingers off.
  • #6,259
  • Jan 21, 2015 2:37am Jan 21, 2015 2:37am
The broker will probably try to sell itself by April, according to an analyst’s report put out by Citigroup.

http://nypost.com/2015/01/20/punitiv...fxcm-on-ropes/
GBP/USD
  • #6,260
  • Jan 21, 2015 2:58am Jan 21, 2015 2:58am
Well, the silence from fxcm is a question mark.

I guess their first step is to move around the money from related accounts to cover as much as the negative balance.

They're doing this whilst building a case to get money from clients. Meaning they'll pick certain clauses that support them to retrieve money from clients. And it's tough as the risk disclosure explicitly states the no debit balance policy, and the promotional video posted above is also a good evidence.

Id be surprised if they forgive negative balances. their reputation is on the line.

fxcm needs clients. If they go after clients money they'll get none back and no new clients will come to them. But if they forgive negative balances, honour some stop losses or even give some money back because clients werent evem able to close trades manually at that time, then theyll have a chance to build client book.

wall street journal at least is eyeing this forum so fxcm needs to behave tactfully
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