Breaking News: CFTC charges FXCM with undercapitalization | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

FXCM gets another CFTC fine, while Drew Niv leaves FXCM UK board 17 replies

CFTC Charges Deutsche Bank AG with Multiple Swap Reporting 1 reply

Breaking News: NFA charges ZuluTrade 0 replies

Undercapitalization & FX jobs 1 reply

FXCM's CFTC Financial Data 18 replies

Attachments: Breaking News: CFTC charges FXCM with undercapitalization
Exit Attachments

Breaking News: CFTC charges FXCM with undercapitalization

  • #21
  • Sep 2, 2016 5:44am Sep 2, 2016 5:44am
What happened is as clear as daylight from the CTFC statement:

FXCM failed to immediately notify the CFTC when it knew or should have known that its adjusted net capital was less than that required under the applicable CFTC regulation and that it was, therefore, undercapitalized. In fact, FXCM never affirmatively gave notice to the CFTC, and it was only after the National Futures Association (NFA) and the CFTC initiated contact that FXCM provided notice of its capital deficiency.

So FXCM broke the law by not initiating contact with the CTFC or NFA the moment they knew about their shortcomings in terms of cash. FXCM however very fast secured a loan to solve the undercapitalization issue, but this didn't matter because the failure to notify their regulator was already done.

What's gonna happen remains to be seen but this is serious stuff and it could have ended far far worse for the customers and the CTFC knows it very well. It's like when there's shots fired in your direction - the "pop" "crack" and "bang" are distant shots, it's the "zing" sound that is above your head and will eventually get you. And that zing was on Jan 15 2015 for FXCM clients.
Best regards, Zef
  • #22
  • Sep 4, 2016 10:13am Sep 4, 2016 10:13am
Quoting ZeF
FXCM failed to immediately .... it was only after the National Futures Association (NFA) and the CFTC initiated contact that FXCM provided notice of its capital deficiency.
FSCM says they 'promptly' notified. So, I suppose if the regulators can call you before you call them, it fails the definition of 'immediately' .
  • #23
  • Sep 4, 2016 10:56am Sep 4, 2016 10:56am
Quoting johnnycash
In my opinion there are 2 possible reasons why all this happening: a) some idiot with initiative just started with CFTC or b0 (more realistic version) US retail FX business is shared between few brokers only, so if to drive that amount of customers to futures trading - it's quite significant boost in revenue for main futures firms. Remember that with e-micro possible to get 1:100 leverage compared to 1:50 with FX broker. I wouldn't be surprised if FXCM one day becomes futures only company.
Bingo! Ive already jumped over. Writing is on the wall imo so why delay the inevitable. Lucky for me, the place I went to is giving me the option to trade both futures and spot fx(im guessing until it ultimately gets outlawed). But I like futures a lot. Its much cheaper to trade and like you said the added leverage is nice.
  • #24
  • Sep 4, 2016 1:47pm Sep 4, 2016 1:47pm
Quoting ZeF
What happened is as clear as daylight from the CTFC statement: FXCM failed to immediately notify the CFTC when it knew or should have known that its adjusted net capital was less than that required under the applicable CFTC regulation and that it was, therefore, undercapitalized. In fact, FXCM never affirmatively gave notice to the CFTC, and it was only after the National Futures Association (NFA) and the CFTC initiated contact that FXCM provided notice of its capital deficiency. So FXCM broke the law by not initiating contact with the CTFC or NFA...
NO FXCM notified CFTC/NFA IMMEDIATELY as soon as they found out that they fell short of the net capital requirement. CFTC/NFA was on site IMMEDIATELY when that happened. It's AFTER CFTA/NFA has been notified that FXCM secured a loan to cover the shortfall. CFTC knows this but is persecuting FXCM on purpose to carry out this witchhunt to wipe out the retail forex industry.

ALL FXCM has to do is to prove proof that CFTC/NFA was notified and was aware of the shortfall when it happened and they will be fine. Even if they are not fine, they will show it's CFTC that's in the wrong not them.
Make your losses in demo. Earn your profits live.
  • #25
  • Sep 4, 2016 3:41pm Sep 4, 2016 3:41pm
There is no way to know who is telling the truth, FXCM or the regulators.

What does the word " immediately" means in this case ?

One nano second after FXCM was margin called? One minute, five minutes, one hour, four hours?

I would say if they took more than a few minutes ( lets say 10 or 20) they broke the law.

But who knows, maybe FXCM spent some time trying to find a loan under the table in order to not even get the regulators involved.

How long would FXCM take to execute a margin call on your account?

I had multiple margin calls in the past and let me tell you that my account was zeroed in the nano seconds time-frame !!
So, you think you have rights? LOL
  • #26
  • Sep 5, 2016 1:36am Sep 5, 2016 1:36am
Quoting Forexia
{quote} NO FXCM notified CFTC/NFA IMMEDIATELY as soon as they found out that they fell short of the net capital requirement. CFTC/NFA was on site IMMEDIATELY when that happened. It's AFTER CFTA/NFA has been notified that FXCM secured a loan to cover the shortfall. CFTC knows this but is persecuting FXCM on purpose to carry out this witchhunt to wipe out the retail forex industry. ALL FXCM has to do is to prove proof that CFTC/NFA was notified and was aware of the shortfall when it happened and they will be fine. Even if they are not fine, they will...
If the CTFC wants to close FXCM and indeed the rest of the US serving retail industry as you and others fear, they will do it, with or without sound reasoning. After all it is they who issued the license for FXCM to operate in the first place? Personally, I'm not a client of FXCM nor do I fall under US law so this concerns me from a spectator standpoint. However I do feel for all the hundreds of thousands of US citizens who lost their money, and continue to do so in the Forex Market. This market is nothing short of an alternative to gambling (which is also heavily regulated in the US and I assume illegal outside Nevada?) and desperate people will continue to get in more debt by "becoming traders". So if you can't heal the addicts, then go after the dealers who facilitate the gambling - e.g. the retail fx industry.

And tbh, FXCM has plenty of skeletons in their closet ($ millions in fines from the FCA for spread manipulation, etc.) as well, so it's not like the CTFC will bring down an innocent law-abiding company offering innovative products to needy customers.

Quoting lukeb
{quote} FSCM says they 'promptly' notified. So, I suppose if the regulators can call you before you call them, it fails the definition of 'immediately' .
Yes what does "promptly, immediately, as soon as, etc." means? No idea. It seems it's up to the courts to decide. But I have a heavy sentiment that the CTFC won't go into a legal dispute without prior analysis of the situation, to at least make sure they are on the right side of the dispute.

Quoting lukeb
{quote} FSCM says they 'promptly' notified. So, I suppose if the regulators can call you before you call them, it fails the definition of 'immediately' .
Here's a quote from the actual CTFC.gov site:

"FXCM never affirmatively gave notice to the CFTC, and it was only after the National Futures Association (NFA) and the CFTC initiated contact that FXCM provided notice of its capital deficiency"

So it seems like FXCM never noticed the CTFC, and it was only after the CTFC initiated contact, that FXCM acknowledged capitalization shortcomings. Someone is lying here and I fail to see the reasons for a government agency to lie, short of an organized witch hunt. That is entirely plausible too.

If I would have to put my money on the liar, I would wholeheartedly put it on FXCM - or any other party disputing the CTFC for that matter.
We're just have to going to wait and see what the courts decide.
Best regards, Zef
  • #27
  • Sep 5, 2016 2:35am Sep 5, 2016 2:35am
Quoting ZeF
{quote} If the CTFC wants to close FXCM and indeed the rest of the US serving retail industry as you and others fear, they will do it, with or without sound reasoning. After all it is they who issued the license for FXCM to operate in the first place? Personally, I'm not a client of FXCM nor do I fall under US law so this concerns me from a spectator standpoint. However I do feel for all the hundreds of thousands of US citizens who lost their money, and continue to do so in the Forex Market. This market is nothing short of an alternative to gambling...
People lose money all the time with investment. Investment itself is a gamble, WHY single retail forex out? WHY don't they go after the mutual fund companies, the brokerage houses like Goldman Sachs that loses Billions??!! WHY are they going after the retail Forex industry? I will tell you why. It's because for the very first time, people are trading with their own money and taking control of their own investment instead of sheepishly handing them over to the "Big Boys" banks and the brokerage houses to play with and "they" don't like it and don't want to see it becoming a trend. They want to nip it in the butt before it becomes too big just like how they destroyed the stock daytrading industry. Any time when you want to have any autonomy over your own investment, "they" won't like it and will do everything they can to stop it.

If they are REALLY concerned about how people are losing money in Forex market, WHY don't they regulate it better by mandating forex to be traded on an exchange just like any other products so individual investors will be able to trade on equal playing field against the "Big Boys" instead of subjecting to unscrupulous market makers and their tactics?
Make your losses in demo. Earn your profits live.
  • #28
  • Sep 5, 2016 2:49am Sep 5, 2016 2:49am
FXCM in general is a good broker. However, the underlying trends in the market and specifically regulators' continuous unsupportive attitude towards FX brokers will change the scenery completely in the next couple of years. Partly the industry deserves this because you have many Israeli and Russian run brokers who don't care what the regulations and guidelines say. Clients' best interests are also often forgotten. A very good example is binary options business where sales guys do a lot of aggressive cold calling by simply picking numbers from the phone book.
  • #29
  • Edited 3:33am Sep 5, 2016 3:09am | Edited 3:33am
Quoting Forexia
{quote} People lose money all the time with investment. Investment itself is a gamble, WHY single retail forex out? WHY don't they go after the mutual fund companies, the brokerage houses like Goldman Sachs that loses Billions??!! WHY are they going after the retail Forex industry? I will tell you why. It's because for the very first time, people are trading with their own money and taking control of their own investment instead of sheepishly handing them over to the "Big Boys" banks and the brokerage houses to play with and "they" don't like it...
In forex customer funds are not segregated. This fact alone means that forex brokers MUST be under MORE SCRUTINY than other financial institutions.
If I had money with FXCM you can be sure I would want them to toe the line and then some ...
Also, forex brokers are obcenely profitable (over time ALL customer funds become broker revenue), it's TOTAL GREED ON THEIR PART NOT TO ABIDE TO THE REGULATIONS
(fxcm, are you reading this (: )
  • #30
  • Sep 5, 2016 5:34am Sep 5, 2016 5:34am
Interestingly enough, FXCM just finally signed an agreement with their creditor Leucadia, which lended them $300 million after the USD/CHF unpeg, according to which the credit’s maturity has been extended by a year to 16 January, 2018. Until the credit is fully repaid, all FXCM distributions and sales proceeds will be used for the repayment of the principal and interest.
What I'm curious about is how come all this - the CTFC lawsuit, the dismissal of the other class action lawsuit and now this agreement - are happening over the span of a few weeks, after months and months of no news.
  • #31
  • Sep 5, 2016 12:31pm Sep 5, 2016 12:31pm
Quoting mlawson71
Interestingly enough, FXCM just finally signed an agreement with their creditor Leucadia, which lended them $300 million after the USD/CHF unpeg, according to which the credits maturity has been extended by a year to 16 January, 2018. Until the credit is fully repaid, all FXCM distributions and sales proceeds will be used for the repayment of the principal and interest. What I'm curious about is how come all this - the CTFC lawsuit, the dismissal of the other...
May I ask, News where, sir? Do you mean in this forum?

Cheers!
  • #32
  • Sep 5, 2016 10:24pm Sep 5, 2016 10:24pm
Quoting mlawson71
Interestingly enough, FXCM just finally signed an agreement with their creditor Leucadia, which lended them $300 million after the USD/CHF unpeg, according to which the credits maturity has been extended by a year to 16 January, 2018. Until the credit is fully repaid, all FXCM distributions and sales proceeds will be used for the repayment of the principal and interest. What I'm curious about is how come all this - the CTFC lawsuit, the dismissal of the other...

I remember reading the Leucadia FXCM deal last year and the situation we are seeing now was supposed to happen only if FXCM was not able to keep the deal.

So I guess FXCM was unable to pay the loan !!!!

And according to the deal Leucadia got pretty much half of FXCM.

I'm so glad I took my money out as soon as the SBN problem became public.
So, you think you have rights? LOL
  • #33
  • Sep 6, 2016 12:32am Sep 6, 2016 12:32am
Quoting mlawson71
Interestingly enough, FXCM just finally signed an agreement with their creditor Leucadia, which lended them $300 million after the USD/CHF unpeg, according to which the credits maturity has been extended by a year to 16 January, 2018. Until the credit is fully repaid, all FXCM distributions and sales proceeds will be used for the repayment of the principal and interest. What I'm curious about is how come all this - the CTFC lawsuit, the dismissal of the other...
My curiosity exactly especially that CFTC complaint just HAPPENED to be right after the SEC banned leveraged forex trading. hmmmnnn...
Make your losses in demo. Earn your profits live.
  • #34
  • Sep 7, 2016 3:51am Sep 7, 2016 3:51am
CFTC and SEC take at least a year before filing an enforcement action. Investigation, communication with the company, document requests, negotiation, then filing. They probably started their investigation since early last year.
  • #35
  • Sep 7, 2016 2:56pm Sep 7, 2016 2:56pm
Quoting Forexia
{quote} My curiosity exactly especially that CFTC complaint just HAPPENED to be right after the SEC banned leveraged forex trading. hmmmnnn...

The SEC did not ban leveraged forex trading, nor does it have the authority to do so. It banned BDs from offering "Retail Forex Accounts" to their customers without sufficient assets to be classified under USC as "qualified" or "pool." Retail FX, is not going anywhere. The problem is that you don't have enough Retail FX Broker options out there in the US.

In fact, now would be a good time for a company to launch itself as true Retail FX ECN/STP Exchange with a Client Agreement that explicitly states that the Exchange only engages in "Electronic Order Matching (EOM)" and has "No Fiduciary Responsibility to any Member within its Liquidity Pool." That would not be a Retail Forex Brokerage. That would be a new breed of animal called a Retail Forex Exchange, something completely non-extant in the United States today.

It would seem to me that Phillips Capital, would be in the prime position of going ahead with approving a spin-off that was FDM only. Since Phillips Capital, will continue offering Retail Forex in the United Kingdom and other countries, then they must have a desire to want to be in the Retail space. So, why not make the investment here in the United States as an FDM only and become the first true Retail Forex Exchange. They could then add Plain Jane options to the mix and blow the doors off of both FXCM and Oanda.

Phillips, did you hear that?

Do the right thing

You are in the perfect position to make it happen


http://www.phillipcapital.com/



If you guys were smart, you would start a letter drive campaign to Phillips Capital, demanding they spin-off an FDM only Retail Forex Exchange.


Or, do you want Bucket Shops for the rest of your Retail Careers?



http://www.phillipcapital.com/contact-us

F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #36
  • Sep 7, 2016 3:47pm Sep 7, 2016 3:47pm
Quoting iDoubleStoch
{quote} The SEC did not ban leveraged forex trading, nor does it have the authority to do so. It banned BDs from offering "Retail Forex Accounts" to their customers without sufficient assets to be classified under USC as "qualified" or "pool." Retail FX, is not going anywhere. The problem is that you don't have enough Retail FX Broker options out there in the US. In fact, now would be a good time for a company to launch itself as true Retail FX ECN/STP Exchange with a Client Agreement that explicitly states that the Exchange only engages in "Electronic...
This is what Retail Forex traders have been lobbying for YEARS, a TRUE Forex exchange where everything is traded on an central exchange with brokers just doing order matching like other financial instruments. The problem is NO institutions are getting onboard with this. They all hide behind this need for "anonymity" to refuse to trade on an open exchange with the rest of the financial community and they don't give a shit about us retail traders. They are the ones who want everything OTC and as long as everything is OTC, bucket-shop market makers like forex.com will still continue to exploit us retail traders.

This is WHY I say banning leveraged forex trading or limiting them to high-asset clients only doesn't do anything for us retail traders; as long as everything is OTC, those kind of abuse and exploitation of retail traders will still continue. If those regulators REALLY want to do something for us retail traders, they would stipulate everything to be traded on an central exchange. Of course those regulators live in the pockets of those "Big Banks" so they don't give a shit about us retail traders as usual.
Make your losses in demo. Earn your profits live.
  • #37
  • Sep 7, 2016 3:53pm Sep 7, 2016 3:53pm
Quoting iDoubleStoch
{quote} It would seem to me that Phillips Capital, would be in the prime position of going ahead with approving a spin-off that was FDM only. Since Phillips Capital, will continue offering Retail Forex in the United Kingdom and other countries, then they must have a desire to want to be in the Retail space. So, why not make the investment here in the United States as an FDM only and become the first true Retail Forex Exchange. They could then add Plain Jane options to the mix and blow the doors off of both FXCM and Oanda. Phillips, did you hear...
And Philip Capital does not even deal with Canadian residents and nor does Nadex (your previous marketing) so it's hardly close to what retail forex industry is offering which is a global financial instruments with traders from all around the world being able to trade in forex.
Make your losses in demo. Earn your profits live.
  • #38
  • Sep 7, 2016 9:09pm Sep 7, 2016 9:09pm
Quoting tasco
CFTC and SEC take at least a year before filing an enforcement action. Investigation, communication with the company, document requests, negotiation, then filing. They probably started their investigation since early last year.

LOL !!! Come on guys lets stop being so self centered.

Look to the facts.

From the 5 trillion Forex turns every 24hours what is the percentage retailers participation ?

The players who make the forex market happen don't need you and your 50K account.

The last thing banks need is a place where they will have to show their hand.

They will never form a central exchange or participate on one if created.

In equities where there is actually centrals, the big boys created dark pools in order to not have to show their hand!

Sometime we retailers take ourselves way too seriously : ) )
So, you think you have rights? LOL
  • #39
  • Sep 7, 2016 9:26pm Sep 7, 2016 9:26pm
Quoting Forexia
{quote} This is what Retail Forex traders have been lobbying for YEARS, a TRUE Forex exchange where everything is traded on an central exchange with brokers just doing order matching like other financial instruments.
You've been lobbying for it for YEARS but you have never had anyone on the other end of the telephone willing to TALK to you about it. I've done that for you. All you have to do is wake up and realize that somebody out there is NOW willing to at least have a real conversation with you about something different than a "Brokerage" model.

Now, if you can't see the distinction and differential between dreaming about something and actually having the MEANS to make it a reality, then I feel for you. I don't need a Retail Trading Account anymore. However, there are plenty of Retail Forex Traders out there getting hammered by the current paradigm of "Broker" interrupted trading. Maybe your "Broker" is "fair," "honest," "trustworthy," "reliable," "transparent," "un-involved in your trades," "never tweaks your price feed," "never artificially widens the spread just before the news or the report," "always maintains a functioning trading platform and never locks you out of your account," "never hijacking the spreads by locking down the bid or the ask when you need that to happen the least," - maybe your Retail Forex "Broker" is the one true STP/ECN.... oh, what the hell am I talking about, there is no such thing as a "Broker" in Retail Forex that offers true "STP or ECN" anything.

How about pick up the phone and make a telephone call. You have a name and a contact number. Make good use of it and do something (finally) to get yourself into a genuine Retail Forex Exchange and let the liquidity providers worry about "liquidity." That's their job. YOUR job is to LEARN how to trade with:

Timing
Direction
Magnitude
Probability

That, along with a real STP/ECN Retail Forex Exchange will help to grow your account balances more than anything else in this world.

Just make the call and join the revolution. Everybody wins here and nobody loses - except - Bucket Shops.

Now, you were saying something about liquidity?
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #40
  • Sep 7, 2016 9:40pm Sep 7, 2016 9:40pm
Quoting ForexOracle
The last thing banks need is a place where they will have to show their hand. They will never form a central exchange or participate on one if created. In equities where there is actually centrals, the big boys created dark pools in order to not have to show their hand! Sometime we retailers take ourselves way too seriously : ) )

- Where does Nadex obtain its liquidity
- How did the CME come into existence
- When did Supply and Demand go out the window with common sense
- More importantly, when did Supply ever drive Demand for an emerging market

What are they teaching in Business School these days anyway and what the hell do I know about Trading. They currently hold $29 billion in client/customer assets. Do you not believe they want to increase that. I am 100% certain that somebody said the CME was a bad idea when it first got started. In fact, some people still don't like the CME.

What is the alternative exactly. To spend the rest of your Retail Trading Career on a Bucket Shop Platform that just might lock itself down or spread itself so wide that you can't dream of taking advantage of pending move, or enter/exit a position because you can't even login to your account.

We've got an actual Financial Services Company carrying $29 billion in client/customer assets willing to talk about something different and somebody has a problem with that?

Get in the game and make the call, please.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
0 traders viewing now