I'd guess fxcm never saw that one coming.
FXCM Booted Out on the Street!!
- Thread starter CBC
- Start date
Interesting section from the CFTC complaint regarding FXCM company statements posted on the Forex Factory message board:
"FXCM did not disclose HFT Co as a market maker to the retail public until late 2012. Even then, at that time, in response to an individual posting about HFT Co on an online bulletin board called "Forex Factory," FXCM obfuscated HFT Co's relationship to FXCM.
The Forex Factory post, anonymously written by "fx insider," stated: "So I just heard something interesting from a friend about FXCM' s 'no dealing desk'. Apparently their largest liquidity provider by far is a small firm named [HFT Co], which is owned by FXCM itself and was set up solely to act as counterparty to FXCM clients. They sit on top of FXCM' s liquidity pool with last look so that for every FXCM trade, they can choose whether to take it or pass it on to normal liquidity providers. Can anyone confirm this? It would be interesting to know how much information is shared."
Two days' later, FXCM posted its response on Forex Factory, stating: "While FXCM does own a liquidity provider, the name of that company is Lucid Markets. It's an institutional level liquidity provider in the forex market and to date had provided no liquidity to FXCM's retail no dealing desk execution." FXCM then implied that it was restricted from identifying HFT Co to the public as one of its market makers, stating: "Non-disclosure agreements mean that we don't normally name the 17 liquidity providers that stream prices on our No Dealing 6 Desk feed." In fact, there was no non-disclosure agreement between FXCM and HFT Co, and, as noted above, FXCM had disclosed ten of its other market makers to the public.
FXCM's response also implied that HFT Co did not, as "fx insider" put it, have a unique ability to "choose whether to take" FXCM trades, and that FXCM lacked an ownership interest in HFT Co: "While the majority of liquidity providers in this list are banks, there are also some hedge funds and other financial institutions, one of which is [HFT Co]. However FXCM does not own them, nor do they have control over what orders can go to other liquidity providers." To the contrary, because HFT Co did have both real-time read of book of FXCM's other market makers and the ability to win all ties, "fx insider" was correct in stating that HFT Co had the power to choose to take whatever trades it wished."
"FXCM did not disclose HFT Co as a market maker to the retail public until late 2012. Even then, at that time, in response to an individual posting about HFT Co on an online bulletin board called "Forex Factory," FXCM obfuscated HFT Co's relationship to FXCM.
The Forex Factory post, anonymously written by "fx insider," stated: "So I just heard something interesting from a friend about FXCM' s 'no dealing desk'. Apparently their largest liquidity provider by far is a small firm named [HFT Co], which is owned by FXCM itself and was set up solely to act as counterparty to FXCM clients. They sit on top of FXCM' s liquidity pool with last look so that for every FXCM trade, they can choose whether to take it or pass it on to normal liquidity providers. Can anyone confirm this? It would be interesting to know how much information is shared."
Two days' later, FXCM posted its response on Forex Factory, stating: "While FXCM does own a liquidity provider, the name of that company is Lucid Markets. It's an institutional level liquidity provider in the forex market and to date had provided no liquidity to FXCM's retail no dealing desk execution." FXCM then implied that it was restricted from identifying HFT Co to the public as one of its market makers, stating: "Non-disclosure agreements mean that we don't normally name the 17 liquidity providers that stream prices on our No Dealing 6 Desk feed." In fact, there was no non-disclosure agreement between FXCM and HFT Co, and, as noted above, FXCM had disclosed ten of its other market makers to the public.
FXCM's response also implied that HFT Co did not, as "fx insider" put it, have a unique ability to "choose whether to take" FXCM trades, and that FXCM lacked an ownership interest in HFT Co: "While the majority of liquidity providers in this list are banks, there are also some hedge funds and other financial institutions, one of which is [HFT Co]. However FXCM does not own them, nor do they have control over what orders can go to other liquidity providers." To the contrary, because HFT Co did have both real-time read of book of FXCM's other market makers and the ability to win all ties, "fx insider" was correct in stating that HFT Co had the power to choose to take whatever trades it wished."
I doubt that any one vehicle is significantly more transparent that another. It has more to do with who gets caught with their pants down, and flames out their naked butt. Isn't that right, Jason!
Jason Rogers
ET Sponsor
Hi Traderob and Turveyd,
Please note that if you live outside the US, then your FXCM account is most likely not set up under our US entity, even if your account is denominated in US dollars and you receive live customer support from our staff in the US. If you are able to trade CFD products on your FXCM account such as GER30 (DAX) or XAU/USD (Gold), then your account is most likely with FXCM UK or FXCM Australia, since CFD trading is not available through FXCM US.
That said, I encourage you to contact our 24-hour live customer support to confirm the exact FXCM entity through which you are trading. Part of our settlement with the NFA and CFTC was to close our US subsidiary, but there will be no changes for clients outside of the US.
Since FXCM US has not been a contributor to overall profits for the firm over the past few years, FXCM will target significant cost cutting by closing the US entity. Specifically, withdrawing from this business will free approximately $52 million in capital. We will use the proceeds from any sale of the US accounts, as well as the large amount of regulatory capital currently tied up, to reduce the balance of our loan from Leucadia. With the reduction of this loan balance, along with sales of non-core assets that were previously announced, FXCM could be in a position to fully pay off the Leucadia loan before the end of this year.
With this exit, FXCM will be in a better position to service our international customers and focus on our profitable subsidiaries including FXCM UK. It's also worth noting that funds held with FXCM UK are insured for up to £50,000 per client by the Financial Services Protection Scheme.
FXCM's full financials can be found here: http://ir.fxcm.com/
We will announce its Q4 and Full year 2016 financials in the next few weeks.
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.
In our UK execution study, we outline the criteria FXCM uses to rank liquidity providers which you can see listed in question 13 of the FAQ. Our 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.
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That's kind of cool. You can call your move the FeXit.
So, Jason is much more involved in this than previously assumed. He is not merely the messenger of bad news but one of the bad apples himself.
Thanks for sharing, interesting tidbit
Thanks for sharing, interesting tidbit
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You cannot comment on the ruling because you are bound by the settlement? You yourself lied and are even mentioned in the complaint and you dare to spread this as if nothing happened? For heaven's sake, do you have no decency, sir?
PS: your UK entity gives better prices in 91.xx% cases than interbank rates? Give me a break. Yes, interbank rates are generally good for 20,50,or 100 mil,often even more. Those are often several pip wide spreads for good reason. You are showing prices for like 50k or 100k or even smaller trades. In light of that it should hugely surprise why you only beat interbank prices 91.xx% of times. More crap and misleading customers
PS: your UK entity gives better prices in 91.xx% cases than interbank rates? Give me a break. Yes, interbank rates are generally good for 20,50,or 100 mil,often even more. Those are often several pip wide spreads for good reason. You are showing prices for like 50k or 100k or even smaller trades. In light of that it should hugely surprise why you only beat interbank prices 91.xx% of times. More crap and misleading customers
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