Proposed NFA Capital Requirement

IG Group's market cap is £1.2 billion. CMC is probably worth as much as well, so they wil have no problems meeting the requirements.

ODL raised £10 million in a private placement recently, so it may be okay as well.

Clearly a lot of these firms will go; the rationale of the likes of Deutsche, ABN Amro in Europe and others who will follow imminently is looking sound.

What are the chances of a lot of these firms ending up as technology providers to big banks?

One problem is that so many of the US firms are 'tarnished'.
 
Quote from forexsavior:

It's Official: NFA Hikes Minimum Cap Requirement to $5 Million

Only days after the President of the NFA told the Congress he wanted them to raise the minimum capital requirement to $20 million the CFTC signed off on the NFA's current minimum capital requirement request to $5 million. And they are not waiting around till 2008. Firms need to have the money in the bank by DECEMBER. That's right around the corner.

With the forex industry rapidly changing before our very eyes I wanted to put together a much more comprehensive list of the industry's financial status. Therefore, I have included every single registered Forex Dealer member and listed their Adjusted Net Capital. Since I first started posting about the NFA proposal over a dozen firms have gone out of business. Two others have merged and several others are staring death in the face. It is astonishing that firms like Hamilton Williams (Velocity FX) can operate only $4,000 above the minimum needed to stay in business. How on earth can such a firm survive a few months from now when they're practically pushing up the daisies already? Here is the direct link for the CFTC capital reports: http://www.cftc.gov/marketreports/financialdataforfcms/

Firms Under $5 Million
All these firms are reporting adjusted net capital below the $5 million mark as of the latest CFTC report. Some should be able to raise the necessary capital. Others clearly will not. Which ones can and can't will be anybody's guess. Already one of these firms, One World Capital, is not allowing customers to withdraw money.

Hamilton Williams ($1,004,000)
IG Financial Markets ($1,010,000)
Advanced Markets ($1,042,000)
One World Capital ($1,078,000)
Direct Forex ($1,117,000)
SNC Investments ($1,130,000)
Wall Street Derivatives ($1,220,000)
I Trade FX LLC ($1,801,000)
Solid Gold Financial ($1,955,000)
CMC Markets ($2,330,000)
MB Trading ($2,393,000)
GFS Futures & Forex ($3,259,000)
E FX Options ($3,342,000)
Forex Club ($3,715,000)
Easy Forex ($4,731,000)

Firms Under $20 Million
These firms all meet the coming minimum adjusted net capital requirement. However, there are other capital requirements as well that as market makers these firms (HotSpot excepted in some cases) will need to meet in addition to the minimum $5 million. Clearly firms like Money Garden are not in the clear just yet.

Money Garden ($5,162,000)
HotSpot FX ($5,990,000)
IKon ($7,130,000)
ODL Securities ($10,822,000)
CMS Forex ($11,849,000)
IFX Markets ($12,293,000)
PFG Forex ($12,781,000)
FX Solutions ($15,077,000)

Firms Over $20 Million
These are the most well capitalized firms in the industry and two years from now may very well be the only firms left in the industry if Dan Roth and the NFA have their way and increase cap requirements to $20 million.

Interbank FX ($25,178,000)
Gain Capital (29,061,000)
Forex Liquidity ($39,909,000)
FXCM ($50,465,000)
Oanda ($50,837,000)
GFT Forex ($54,662,000)

Firms No Longer in Business
These are the firms that have gone out of business since I began posting on the forum. That's a quarter of the industry in just a few months. And one of those firms, Nations LLC has gone into bankruptcy and customers can't get their money back, and may never get their money back.

Bacera Corporation
Cal Financial Corporation
FiniFX
Forward Forex
FX Option1 Inc.
Nations Investments
Performance Capital International
Spencer Financial
Tradex Swiss AG
Trend Commodities
United Global Markets
Worldwide Clearing


Firms that Merged
These are the firms that could not make the new capital requirement on their own and decided to merge with larger players as a result.

American National Trading Corp (Merged with PFG)
Royal Forex Trading (Merging with IKON)

Summary
It is a very turbulenet time in the forex industry. My advice is what it has always been, do not trade with a poorly capitalized firm. And if you must, at least wait until after the December 17, 2007, deadline before putting any money on deposit with any firm that is not meeting the current minimum capital requirement.
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Mr. Angry I wouldn't be so sure that UK firms like CMC, IG Index, and IFX will stay in the U.S. market. They may have high market caps but that does not translate into instant free floating capital to send wherever they please. Do these firms really want to set aside $15 million in capital for a U.S. registration when none of these firms have made much of an impact in the U.S. market in the first place? I doubt it. I suspect these guys will probably just cancel their NFA registrations and focus on the European and Global market. I think that makes better business sense.

In any case customers shouldn't be effected much at the British firms. The smaller firms are the ones customers should be avoiding right now.
 
Quote from maninjapan:

Sorry, i might hae missed it, but where does MIG fit in at the moment?
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MIG is not regulated. I would be very wary of trading with any unregulated firm.
 
I'll try and ring them all this week and ask them. IFX is now part of City Index, which white labels Saxo. CMC wants to be a global player and not sure it would pull out of US ahead of its IPO, whenever that occurs. ODL is a strange company - I know a few guys there, but don't hear too much of what its up to.
 
for that ForexSaviour. I was wondering instead of creating higher min capital requirements, why dont they creat segregation requirements. Client Fund insurance, trust accounts etc......
 
Quote from forexsavior:

Mr. Angry I wouldn't be so sure that UK firms like CMC, IG Index, and IFX will stay in the U.S. market. They may have high market caps but that does not translate into instant free floating capital to send wherever they please. Do these firms really want to set aside $15 million in capital for a U.S. registration when none of these firms have made much of an impact in the U.S. market in the first place? I doubt it. I suspect these guys will probably just cancel their NFA registrations and focus on the European and Global market. I think that makes better business sense.

In any case customers shouldn't be effected much at the British firms. The smaller firms are the ones customers should be avoiding right now.
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The point though is that your dead pool is highlighting firms were people could lose their margin/deposit. Whether or not IG or CMC withdraw from the US market or not I am pretty convinced they would be in a position to repay customers. It would make no business sense not to repay at all and they can easily afford it.
 
Anything like CFDs on indices, stocks or commodities is forbidden by regulation in the US, so this would reduce firms like CMC to FX only over there..
 
Quote from maninjapan:

for that ForexSaviour. I was wondering instead of creating higher min capital requirements, why dont they creat segregation requirements. Client Fund insurance, trust accounts etc......
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Good question, but the NFA has punted on it sad to say
 
Quote from maninjapan:

for that ForexSaviour. I was wondering instead of creating higher min capital requirements, why dont they creat segregation requirements. Client Fund insurance, trust accounts etc......
More...

The NFA pointed out in one of their recent letters (I forget which and don't feel like looking for it) that current US bankruptcy laws make "segregated accounts" a misleading way to protect customer funds. i.e. in bankruptcy proceedings the customer funds would almost definitely be tapped regardless of whether they were segregated.
 
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