FXCM and CEO Drew Niv banned from US market by CFTC

Sure, as long as you don't lose all that $50.000 play money they give you

Hi Mr. Breakout, I know you are saying that I can still use Marketscope in a demo account and that would be great if I can. But I still have not been told that I can do that from the horses mouth (Jason Rodgers). If so I would need to open a demo account as I do not currently have one.

So Jason...will I be able to or not as a US trader have access to the Marketscope platform in some fashion?

Hi Aussi,

While I can't comment on the NFA or CFTC complaint specifically due to the nature of our settlement, I can say that we have settled with the NFA and CFTC without admitting or denying any of their allegations or claims. I can also say that Effex Capital is no longer pricing FXCM's NDD forex price feed. It's worth noting that FXCM would not have suffered more than $200 millon dollars in losses during the SNB flash crash had it been taking the other side of client trades – unlike so many of the DD firms in the industry.

I can also discuss with you FXCM's execution practices outside of the US. FXCM uses 16 liquidity providers to create a best bid best offer price stream for clients. LPs selected to price retail clients are forced to adhere to an extremely high standard of execution beyond just price – including consistently low rejection rates, low latency, minimum quote sizes and high fill ratios even during market events.

We have made our execution study public in the UK which can be viewed here and is a transparent comparison of FXCM's actual execution vs top tier futures brokers and the interbank market.

Thanks for your feedback, Steve

I apologize if I wasn't more clear on this point earlier. Since FXCM is closing it's US subsidiary, US clients will no longer be able to place live trades through our Trading Station platform. However, since the platform will remain operational for non-US traders through our global entities like FXCM UK and FXCM Australia, you can continue to use the Marketscope chart indicators you already downloaded by logging into Trading Station with a demo account:

1. FXCM UK demo
2. FXCM Australia demo

Thanks for these clarifications Jason.

FXCM Discusses Impact of U.S. Exit

NEW YORK, Feb. 12, 2017 (GLOBE NEWSWIRE) -- FXCM Inc. (NASDAQ:FXCM) ("FXCM" or the "Company") today provided additional information regarding the costs associated with its U.S. retail foreign exchange activities, which it has agreed to sell to GAIN Capital Holdings, Inc. ("GAIN"). None of FXCM's costs will be transferring to GAIN and FXCM expects significant cost savings from the wind down of its U.S. retail foreign exchange operations.
The table below provides information on net revenues, net income, and Adjusted EBITDA* for FXCM's U.S. subsidiary, Forex Capital Markets LLC, and the rest of its continuing operations for the nine months ended September 30, 2016 (unaudited):



Even without its U.S. customers, FXCM remains one of the largest global retail foreign exchange brokers, and FXCM anticipates that the increased focus on serving its international global customer base will drive growth and continued profitability improvement.

* Adjusted EBITDA is a non-GAAP measure that is not prepared under any comprehensive set of accounting rules or principles and does not reflect all of the amounts associated with the Company's results of operations as determined in accordance with U.S. GAAP. The Company believes this non-GAAP measure, when presented in conjunction with the comparable U.S. GAAP measure, is useful to investors in better understanding its financial performance as seen through the eyes of management and facilitates comparisons of historical operating trends across several periods. The Company believes that investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in its industry that present similar measures, although the methods used by other companies in calculating Adjusted EBITDA may differ from the Company's method, even if similar terms are used to identify such measure. Adjusted EBITDA provides the Company with an understanding of the results from the primary operations of its business by excluding the effects of certain gains, losses or other charges that do not reflect the normal earnings of its core operations or that may not be indicative of its future outlook and prospects. Adjusted EBITDA does not represent and should not be considered as a substitute for net income or net income attributable to FXCM Inc., each as determined in accordance with U.S. GAAP. Please refer to the following table for a reconciliation of Adjusted EBITDA to net income.



(1) Represents a $0.1 million charge for tax receivable agreement payments.

(2) Represents the provision for debt forgiveness of $8.2 million against the notes receivable from the non-controlling members of Lucid, $5.4 million of professional fees, including fees related to the Leucadia restructuring transaction, stockholder rights plan and investigations into historical trade execution practices, partially offset by $1.0 million of insurance recoveries to reimburse for costs incurred related to the January 15, 2015 SNB event and the cybersecurity incident.

(3) Represents the net bad debt recovery related to client debit balances associated with the January 15, 2015 SNB event.

(4) Represents $2.4 million of professional fees relating to investigations into historical trade execution practices partially offset by $0.4 million of insurance recoveries to reimburse for costs incurred related to the January 15, 2015 SNB event and the cybersecurity incident.

Disclosure Regarding Forward-Looking Statements

In addition to historical information, this release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and/or the Private Securities Litigation Reform Act of 1995, which reflect FXCM's current views with respect to, among other things, its operations and financial performance in the future. These forward-looking statements are not historical facts and are based on current expectations, estimates and projections about FXCM's industry, business plans, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict including, without limitation, risks associated with FXCM's plans to shut down its US subsidiary and a potential sale of its US customer accounts, risks associated with FXCM's strategy to focus on its operations outside the United States, risks associated with the events that took place in the currency markets on January 15, 2015 and their impact on FXCM's capital structure, risks associated with FXCM's ability to recover all or a portion of any capital losses, risks relating to the ability of FXCM to satisfy the terms and conditions of or make payments pursuant to the terms of the finance agreements with Leucadia, as well as risks associated with FXCM's obligations under its other financing agreements, risks related to FXCM's dependence on FX market makers, market conditions, risks associated with FXCM's litigation with the National Futures Association and the Commodity Futures Trading Commission or any other potential litigation or regulatory inquiries to which FXCM may become subject, risks associated with potential reputational damage to FXCM resulting from FXCM's plans to shut down its US subsidiary, and those other risks described under "Risk Factors" in FXCM Inc.'s Annual Report on Form 10-K, FXCM Inc.'s latest Quarterly Report on Form 10-Q, and other reports or documents FXCM files with, or furnishes to, the SEC from time to time, which are accessible on the SEC website at sec.gov. This information should also be read in conjunction with FXCM's Consolidated Financial Statements and the Notes thereto contained in FXCM's Annual Report on Form 10-K, FXCM Inc.'s latest Quarterly Report on Form 10-Q, and in other reports or documents FXCM files with, or furnishes to, the SEC from time to time, which are accessible on the SEC website at sec.gov.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our SEC filings. FXCM Inc. undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

About FXCM Inc.

FXCM Inc. (NASDAQ:FXCM) is a publicly traded company which owns 50.1% of FXCM Group, LLC (FXCM Group).

FXCM Group is a holding company of Forex Capital Markets LLC, (FXCM US), Forex Capital Markets Limited, inclusive of all EU branches (FXCM UK), FXCM Australia Pty. Limited, (FXCM AU), and all affiliates of aforementioned firms, or other firms under the FXCM group of companies [collectively "FXCM"]. FXCM Group is owned and operated by FXCM Inc. (NASDAQ:FXCM) and Leucadia National Corporation (NYSE:LUK). Leucadia National Corporation is a multi-billion dollar diversified holding company engaged through its consolidated subsidiaries in a variety of businesses.

FXCM is a leading provider of online foreign exchange (FX) trading, CFD trading, spread betting and related services. The company's mission is to provide global traders with access to the world's largest and most liquid market by offering innovative trading tools, hiring excellent trading educators, meeting strict financial standards and striving for the best online trading experience in the market. Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. In addition, FXCM offers educational courses on FX trading and provides trading tools proprietary data and premium resources. FXCM Pro provides retail brokers, small hedge funds and emerging market banks access to wholesale execution and liquidity, while providing high and medium frequency funds access to prime brokerage services via FXCM Prime.

Trading foreign exchange and CFDs on margin carries a high level of risk, which may result in losses that could exceed your deposits, therefore may not be suitable for all investors. Read full disclaimer.

Jaclyn Sales, 646-432-2463
Vice-President, Corporate Communications
[email protected]
[email protected]

I managed to survive the SNB, basically un-touched. But it did really make me nervous. Like you I've got a lot invested in mt4 (it sounds like they are forcing a change to mt5 ) and moving to someone like Interactive is not something I'm really interested in doing. Don't want to go the futures route either... Don't know, don't want to be invested in an unregulated zone with no recourse and don't want to risk monies that more and more are getting earmarked for retirement. going to be 50 this year, been at this now for almost 20 years. Where did the time go?

If you figure something out shoot me a message, all my models and work are basically sitting idle, I'd like to fire the servers back up, and get back at it.

Rebates on EFFEX liquidity deal Where did they go?

External liquidity provider EFFEX Capital was presented by FXCM as being an independent counterparty but it has become clear that FXCM had been supporting the liquidity provider, and the firm had been paying rebates to FXCM of up to 70% of Effex Capitals profit.

In 2013, the National Futures Association (NFA) began investigating EFFEX Capital, coinciding with the time at which Business Development Director Solvej Rendtorff joined the firm from CFH Group. At that time, the NFA inspection was interrupted by apparent misleading information provided by FXCM CEO Drew Niv and other employees at FXCM.

There is no information yet as to where these rebates were collected, however if it transpires that these went to an entity outside of FXCM, that would be a very serious felony and could carry criminal prosecution. FinanceFeeds will continue to investigate this and will report on any Securities and Exchange Commission filings that indicate the nature of these transactions.

We spoke to an institutional FX expert in New York today, who had some definitive views on this. While EFFEX had an unfair advantage versus other liquidity providers by knowing where other providers were pricing, CFTC and NFA could not nail FXCM for much on the effect of this setup on clients and this is why the fine is so small said this particular source.

In the end maybe some other liquidity providers did not get the flow because of EFFEX but EFFEX got the trades by showing the best price to clients.

We spoke to a further source in New York who explained with regard to the liquidity deal Clients got a better service out of it in the end. It was still the best price winning the trade. Did EFFEX reject some trades when it was in their favour or fill trades going against market movements, of course they did.

In London, FinanceFeeds spoke to a management consultancy this morning which has experience in advising on corporate policy with regard to Tier 1 liquidity provision within banks. A senior partner at the firm explained I do not see how this is any different from any bank liquidity provision practices in this business. You always reject trades off market against the maker and fill the one against the client. Fair or not, it is not for me to judge but this is how FX has always functioned. If people want to change the rules, ok lets do it going forward but why any authorities would fine people for accepted market practices is beyond me.

A senior industry figure in North America this morning explained to FinanceFeeds In the end it is just the CFTC & NFA witch hunt against the industry in my view. GAIN & Oanda are last standing but the CME will win in the end and those guys will have to be an exchange soon or send the business to the CME. Never underestimate the power of the Chicago derivatives industry!

This situation is worse than IBFXs internalization debacle

The consequences of FXCMs activities with regard to misleading its entire client base with regard to how execution of trades has been conducted are potentially far more grave than other examples of execution transgressions in the past.

Looking at IBFXs contretemps with the NFA in 2013, in which it received a $600,000 fine, the circumstances were on the face of it similar, but with much less offensive consequences.

IBFX has also been banned from the US, An examination by the NFA ensued, which initially focused on IBFXs activities for the two-year period of 2010 and 2011, relating to price movements which occur between the time at which an order is placed by a customer and executed by the company.

As a result of this particular investigation, inadequacies in recordkeeping were discovered and the NFA was unable to fully evaluate the companys trade execution practices.

According to the material detailed in the NFAs complaint, IBFX used two models to execute its retail FX transactions. One was STP, and the other being a practice known as warehousing.

According to the NFA report at the time, and the parlance of the legal document on which the NFAs complaint was registered, warehousing occured whereby IBFX acted as the counterparty for trades whose value was less than the notional volume threshold level lnterbank had established for STP trades. Interbank would aggregate the warehoused trades for risk management purposes and earn revenue from the bid/ask spread and from beneficial market moves that the aggregated warehoused trades experienced.

For the vast majority of trades, IBFX would warehouse the trades, and for the remainder of trades, IBFX used the STP model, which accounted for a very small percentage of the firms trading volume and applied when the contract size was at or over the specific notional volume threshold set by the firm for its warehouse trades.

Under the STP model, after a customer clicked on the bid or offer price, which included lnterbanks predefined markup, IBFX would fill the customers order but only after the firm had filled the offsetting position (contra-fill) with a liquidity provider.

The NFA attempted to analyze IBFXs execution data on all STP transactions from January 2010 up to the time the firm was acquired in late 2011. However, while the firm ultimately was able to provide historical markup information since June 2010, the NFA was unable to complete its analysis because historical markup data prior to June 2010 was not available, and for certain types of STP transactions (split fill transactions) since June 2010, Interbanks record of historical markup changes could not be reconciled to specific trades.

As a result, NFA was unable to analyze all of the firms STP transactions. We understand that IBFX was selling off smaller trades to an external market maker, however it did not ever make any statement that all of its trading was A-book, and then go against the customers positions.

Thats it, curtains ahead

Bearing in mind that this execution model has a global presence and that customers and introducing brokers will likely never trust FXCM ever again, there is a distinct likelihood that the firm will not recover from this.

For the prime brokerages that provide price feeds and liquidity, the risk managers are probably now engaged in curtailing any OTC counterparty credit agreement to FXCM in case the company folds and cannot meet its counterparty credit commitments especially in these days when Tier 1 banks will not extend counterparty credit to even the most stringently run and well capitalized firms. This would be a clipping of the wings from the institutional side, and it is likely that customers will flock away in their droves.

It is unlikely that any retail traders will be able to successfully sue FXCM, because actual damage to their trading accounts as a result of market making or trading against customers would be extremely hard to prove, but certainly the authorities could continue to probe and continue to find reasons to go after the company and its executives for violating laws.

Even if no customer actually attempts litigation procedure, the reputational damage is enough to create a divestment on a global scale, hence when all of these factors are borne in mind, it looks like curtains ahead for one of the worlds largest and long-established brokerages.

Anyone want to open a retail FX brokerage in America?

If I had an extra $20M sitting around, I would hire a bunch of the former fxcm employees, get decent regulatory counsel, and then set one up.

IG Group GAIN Capital is getting FXCM's business in the US and paying them $500 per client account with some conditions applied. That deal was finalized almost immediately after the NFA banned FXCM. I assume the employees wont also be moving in as well?

EDIT: As Jason Rogers pointed out below, the buyer is GAIN Capital. My apologies for conflating the two.

Hi MLawson,

To clarify, it is GAIN Capital, not IG, with whom FXCM has entered into a definitive agreement for GAIN to acquire the client base of FXCM's US operations. The transaction is subject to regulatory approval. FXCM and GAIN are working to determine the timing for the account transfer and expect to provide further information in that regard in the coming days.

The transfer is of US accounts, not staff, so there will be no changes to FXCM customers outside of the United States. We will for the interim period continue to service our US customers and to provide top quality trade execution pending the customer-account sale and business withdrawal. FXCM will also be working diligently to be sure that an account transition to GAIN's retail brand, FOREX.com, will be orderly, expeditious and seamless.

Hi USATrader007,

While I can't comment on the CFTC complaint specifically due to the nature of our settlement with them, I will say FXCM stands by our No Dealing Desk (NDD) model.

Consider what happened on January 15, 2015 with the SNB flash crash:

The majority of retail forex traders were long EUR/CHF when the Swiss National Bank made their surprise announcement to abandon the 1.2000 exchange rate floor they had established for the pair. Had FXCM been on the other side of client trades, we would have made money when EUR/CHF dropped and retail traders took massive losses on their long positions.

The moved wiped out those clients' account equity as well as generated negative equity balances owed to FXCM of over $225 million. The caveat of our NDD model is that traders are offset one for one with a liquidity provider. When a client entered a EUR/CHF trade with FXCM, FXCM Inc. had an identical trade with our liquidity providers. During the historic move, liquidity became extremely scarce and shallow, which affected execution prices. This liquidity issue resulted in some clients having a negative balance.

While clients using NDD forex execution did not cover their margin call with us we still had to cover the same margin call with our liquidity providers. As a result, FXCM ended with a regulatory capital shortfall. Accordingly, FXCM needed to get a loan to cover this balance, which we did. For anyone that still thinks FXCM is running an FX dealing desk on our NDD model, the SNB event demonstrated that is not the case.


How does our NDD model work?

FXCM uses 16 liquidity providers to create a best bid best offer price stream for clients. LPs selected to price retail clients are forced to adhere to an extremely high standard of execution beyond just price including consistently low rejection rates, low latency, minimum quote sizes and high fill ratios even during market events.


We discuss in our UK execution study the criteria we use to rank our liquidity providers which you can see listed in question 13 of the FAQ. FXCM's liquidity providers are ranked based on compliance to these standards which we identify as providing the best customer experience possible. Being a top ranked liquidity provider is important. Liquidity providers with the best pricing according to these rules may gain an advantage over other liquidity providers which could result in a large increase in orders captured. Poorly performing liquidity providers are ranked lower for order flow and ultimately could be removed from our platform until they return to compliance.

Also, the results of this study show FXCM UK retail client order prices to be better for FX than futures prices (74.97% of the time) and interbank prices(91.56% of the time).*

_________________________________

* The study does not in away way attempt to represent that FXCM maintains a particular capacity or performance level. The figures in this study are provided for information purposes only, and are not intended for trading purposes or advice. FXCM is not liable for any information errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Past results are not indicative of future performance.

Material Assumptions
FXCM's Retail Clients are defined as individual, joint, and corporate accounts trading on our retail price stream.

The comparison to each of the Futures and Interbank data is made at the time that the FXCM client order is executed. Normal market slippage and slippage due to rejections by liquidity providers are already included by the time the FXCM client order is executed. However, there is an assumption that there is no slippage on the Futures or Interbank market data.

In order to maintain consistency, Futures Market data and Interbank data used the same acceptable ranges in market trades. The summary of findings is based on the assumption that the maximum acceptable difference between the FXCM price and the Interbank/Futures market price is 5 pips in either direction.

Fees that a participant would pay on the Futures or Interbank market, such as CME Exchange Fees, NFA Fees, FCM Fees, Clearing Fees, and other commissions, were excluded from the study. Similarly, FXCM Commissions are excluded from the study.

[quote=Jason Rogers;9571496]{quote} Hi USATrader007, While I can't comment on the CFTC complaint specifically due to the nature of our settlement with them, I will say FXCM stands by our No Dealing Desk (NDD) model. Consider what happened on January 15, 2015 with the SNB flash crash: The majority of retail forex traders were long

Hi virtual Jason,
Enough about SNB..give us more details about this:Rebates on EFFEX liquidity deal Where did they go?

External liquidity provider EFFEX Capital was presented by FXCM as being an independent counterparty but it has become clear that FXCM had been supporting the liquidity provider, and the firm had been paying rebates to FXCM of up to 70% of Effex Capitals profit.

In 2013, the National Futures Association (NFA) began investigating EFFEX Capital, coinciding with the time at which Business Development Director Solvej Rendtorff joined the firm from CFH Group. At that time, the NFA inspection was interrupted by apparent misleading information provided by FXCM CEO Drew Niv and other employees at FXCM.

There is no information yet as to where these rebates were collected, however if it transpires that these went to an entity outside of FXCM, that would be a very serious felony and could carry criminal prosecution. FinanceFeeds will continue to investigate this and will report on any Securities and Exchange Commission filings that indicate the nature of these transactions.


TO ALL EUROPEAN AND ASIAN COUNTRIES>>>> GET OUT NOW!!! CLOSE ALL ACCOUNTS WITH FXCM!

looks like FXCM is gonna break the all time World Guinness Record as the most banned and fined broker of all times

LOL I didn't know The Guinness Organization keeps a record in that category. I feel so sorry for Drew Niv and his family right now. He must be feeling like "when it rains it pours" right now, the poor guy. Would be interested to read his memoire if he ever wants to write one to find out what really happened from his point of view. Would probably make a good movie too. We all know how well financial movies sell. It's about time that somebody makes a movie about us retail FX.

you're a good man , but that guy really is not one to feel sorry about - just ask all the traders who have been his victims for too long