Could This Be The End For FXCM | Forex Factory

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Could This Be The End For FXCM

  • #1
  • First Post: Jan 21, 2015 3:13am Jan 21, 2015 3:13am
http://nypost.com/2015/01/20/punitiv...fxcm-on-ropes/

One currency broker is paying a high price for money.

FXCM, which found itself on the wrong end of the Swiss franc trade last week when the currency made unprecedented gains against the euro, agreed to a two-year deal with Leucadia National that hikes up the interest rate every quarter and restricts how it can pay the loan, a regulatory filing Tuesday revealed.

The “punitive” deal, which uses the company’s assets as collateral, could force the company into bankruptcy, said Rich Repetto, an analyst at Sandler O’Neill. “[Leucadia is] looking to make sure they protect themselves as well as make a good return.”

If FXCM doesn’t pay back the loan early, the 10 percent interest rate rises by 1.5 percentage points every three months to a 17 percent cap, according to the filing. The broker can only pay back the loan from trading profits.

The broker will probably try to sell itself by April, according to an analyst’s report put out by Citigroup.

Leucadia is the parent company of Jefferies, the bank that bought Knight Capital after the broker went haywire in 2012.

FXCM shares plummeted almost 88 percent on Tuesday to $1.60, its first trading day since the franc soared.
  • #2
  • Jan 21, 2015 3:17am Jan 21, 2015 3:17am
Quoting PoundTrader
http://nypost.com/2015/01/20/punitiv...fxcm-on-ropes/ One currency broker is paying a high price for money. FXCM, which found itself on the wrong end of the Swiss franc trade last week when the currency made unprecedented gains against the euro, agreed to a two-year deal with Leucadia National that hikes up the interest rate every quarter and restricts how it can pay the loan, a regulatory filing Tuesday revealed. The “punitive” deal, which uses the company’s assets as collateral, could force the company...

looks so ..and traders going to leave quick especially with the way alpari is dealing with things..nobody will want to get money locked up
  • #3
  • Jan 21, 2015 3:42am Jan 21, 2015 3:42am
Quoting nAVIN2007
{quote} looks so ..and traders going to leave quick especially with the way alpari is dealing with things..nobody will want to get money locked up
SAD
  • #4
  • Edited 4:35am Jan 21, 2015 4:08am | Edited 4:35am
I think this is sad too!

Not many choices left for well known brokers that are regulated in the UK and STP/ECN. I am not too keen to open an account with brokers based in Cyprus or some other Island but really the choices are slim now with Alpari gone and FXCM looking like they will sold (client accouts at least).
  • #5
  • Jan 21, 2015 4:16am Jan 21, 2015 4:16am
One question I always asked is why are some brokers highly affected by the impact of CHF while other are not affected? Please can you explain the difference.
  • #6
  • Jan 21, 2015 5:23am Jan 21, 2015 5:23am
Quoting sutivserv
One question I always asked is why are some brokers highly affected by the impact of CHF while other are not affected? Please can you explain the difference.
They were running a B-book and cashed on on client's losses.

or

They were running a proper a-book or A/B hybrid and balanced / hedged their risk properly. They either cashed in or limited their losses relative to their total cashflow and reserves.

or

They were running a-book and were over-leveraged to their liquidity providers. This then creates a condition where now the losses that the client cannot cover must come from their pockets. Plus any penalties incurred by having insufficient margin. This is why Excel Markets went bust, even though they had A-book/STP. They were offering 1:400 leverage across all currency pairs (including CHF pairs) with no upper balance limit.

It is also possible to run a b-book and be on the 'wrong side', but that would have been unlikely.
Measure trends automatically with zero lag
  • #7
  • Jan 22, 2015 6:43pm Jan 22, 2015 6:43pm
  • #8
  • Jan 22, 2015 11:57pm Jan 22, 2015 11:57pm
WTF happened ? i withdrew all my money from oanda 7days before the CHF incident, and now Alpari,fxcm are gonna bankrupt? any other broker gonna down can someoone tell me what the hell happen now? I'm glad that i don't trade anymore but kinna sad that the Forex retail gonna collapse
  • #9
  • Jan 23, 2015 12:21pm Jan 23, 2015 12:21pm
Quoting Abcxyz77
WTF happened ? i withdrew all my money from oanda 7days before the CHF incident, and now Alpari,fxcm are gonna bankrupt? any other broker gonna down can someoone tell me what the hell happen now? I'm glad that i don't trade anymore but kinna sad that the Forex retail gonna collapse
It is important to stress that FXCM is not insolvent, has not filed for any form of bankruptcy, and is in compliance with all regulatory capital requirements in the jurisdictions in which we operate. That means our clients continue to trade, deposit, and withdraw which traders have been mentioning in our main discussion thread: http://www.forexfactory.com/showthre...=8960&page=325
  • #10
  • Jan 23, 2015 12:59pm Jan 23, 2015 12:59pm
Quoting sutivserv
One question I always asked is why are some brokers highly affected by the impact of CHF while other are not affected? Please can you explain the difference.
There's no good guy in this situation.

Bucket shops like Forex.com cleaned house. They were kind enough to only settle for their client's entire account instead of going through the trouble of pursuing them for negative balances. Since they use their own money to trade against their clients they're not accountable to outside sources like FXCM was. They can easily just forgive the negatives. You see Oanda putting up advertisements bragging about how they forgive negative balances when you know it's just luck and could have gone the other way on them.

The real question is why did FXCM have such a risky business model? Why didn't they make a deal with their liquidity provider (Pretty sure it was Citadel) that they can only have a maximum of their client's total account? Was that possible? Didn't they see all the morons loading up levered to the hilt on what they thought was a risk free eurchf long? If they're trying to play broker why didn't they hedge their clients positions if they were exposed to such huge losses? Black swan events happen and the excuse that it's an act of God is laughable. I doubt they recover much from going after clients for negative balances. Sometimes it's nobody's fault but your own.
  • #11
  • Jan 23, 2015 8:12pm Jan 23, 2015 8:12pm
Guys anyone having issues with withdrawing funds from FXCM account?
  • #12
  • Last Post: Jan 23, 2015 8:13pm Jan 23, 2015 8:13pm
Quoting UvaKail123
{quote} There's no good guy in this situation. Bucket shops like Forex.com cleaned house. They were kind enough to only settle for their client's entire account instead of going through the trouble of pursuing them for negative balances. Since they use their own money to trade against their clients they're not accountable to outside sources like FXCM was. They can easily just forgive the negatives. You see Oanda putting up advertisements bragging about how they forgive negative balances when you know it's just luck and could have gone the other...
:nerd:
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