What's the Future for FXCM?

Feb 10, 2018

It hasn't been an easy ride of late for the global brokerage company Forex Capital Market LLC or FXCM as they are more commonly known.

A dark history...

FXCM has had a long history of disciplinary actions involving, among other things, deceptive and abusive execution practices to benefit themselves to the detriment of its customers.

In August 2011, NFA (National Futures Association) issued a Complaint charging FXCM with retaining gains derived from positive price slippage; failing to adopt or carry out adequate procedures to ensure the efficient execution of all customer orders; failing to treat all customers equally when giving price adjustments; and failing to adequately investigate suspicious activity in all customers' accounts.

The decision resulted in FXCM having to pay $2,000,000 to the NFA as a monetary sanction while also being required to credit the accounts of its customers the amount of positive slippage which its customers experienced on their trades from and after June 18, 2008.

The CFTC (The U.S. Commodity Futures Trading Commission) order also required FXCM to pay a $6 million civil monetary penalty and restitution of $8,261,937 to its customers and former customers.

The NFA's Business Conduct Committee (BCC) has authorized a number of complaints against FXCM since then with the most recent in February 2017 which resulted in barring FXCM from membership and also barring its principals Dror Niv, William Ahdout, and Ornit Niv from membership and from acting as a principal of an NFA Member.

This effectively bars FXCM from ever operating in the United States, since NFA membership is required to operate in the United States as a forex broker.

FXCM and its principals were found guilty of engaging in fraudulent activities with respect to FXCM's retail customers by advertising that it used a No Dealing Desk order execution model – which it claimed was superior to the Dealing Desk model used by its competitors – when, in fact, it used what amounted to a Dealing Desk model by routing its customers' trades to Effex Capital, LLC (Effex), a liquidity provider that was purportedly independent but was actually supported and controlled by FXCM.

In exchange for the order flow FXCM directed to Effex, the complaint alleged that Effex paid rebates to FXCM that amounted at times to as much as 70% of Effex's profits from FXCM's order flow and which FXCM referred to internally as "P&L".

The complaint also charged FXCM, Niv and Ahdout with failing to observe high standards of commercial honor and just and equitable principles of trade by allowing Effex and its principal, John Dittami, to engage in abusive execution practices that denied FXCM's retail customers favorable price improvement and benefitted Effex and FXCM financially, and which resembled the asymmetrical price slippage practices for which FXCM was sanctioned by NFA in 2011.

FXCM, Niv, and Ahdout were also prohibited from registering with the CFTC and ordered to pay a $7 million civil monetary penalty and to cease and desist from further violations of the Commodity Exchange Act and CFTC Regulations.

FXCM confirmed to its shareholders in a February 2017 release that it reached a settlement with the NFA and CFTC and would exit the retail forex trading markets in the USA.

You can find a list of numerous other regulation violations on this Forex Scam Alerts article.

Things don't seem to be getting better as Tradingview stop support...

A statement released by Tradingview last week announced that they would no longer be supporting FXCM from the 1st of February 2018.

The statement read:

"Tradable, the firm that used to connect to brokers like FXCM will be ramping down its API service. If FXCM is your broker you will need to trade directly from FXCM platforms for demo and live trading. Please visit FXCM if you have any open positions you would like to manage at this time.

Note that this is not going to affect the data that we receive from FXCM. The market data will be provided the same way as before."

What does this mean for current FXCM customers...

Basically, you can still use FXCM prices but only on the FXCM platform no longer on Trading View. When talking to FXCM customer service they mentioned that they are "likely to have it back in the near future".

Update from FXCM 23/02/2018:

"FXCM is providing our new REST API to TradingView in order to connect directly at which time users will be able to continue trading their account directly from TradingView."

What does the future look like for FXCM?

Decembers report FXCM monthly metrics report released on the 5th of January showed some interesting findings:

December 2017 Customer Trading Metrics from Continuing Operations:

  • Customer trading volume in December 2017 is 22% lower than November 2017 and 20% lower than December 2016.
  • Average customer trading volume per day in December 2017 is 13% lower than November 2017 and 16% lower than December 2016.
  • Average client trades per day in December 2017 is 11% lower than November 2017 and 30% lower than December 2016.
  • Active accounts of 116,262 as of December 31, 2017, a decrease of 16,262, or 12%, from December 31, 2016.

These figures show a worrying decline in some key areas since December 2016, which is to be expected given the fraudulent activities.

Just last week the FXCM monthly metrics report for January was released which shows things may not be as bleak as they seem.

January 2018 Customer Trading Metrics from Continuing Operations:

  • Customer trading volume in January 2018 is 46% higher than December 2017 and 1% lower than January 2017.
  • Average customer trading volume per day in January 2018 is 27% higher than December 2017 and 5% lower than January 2017.
  • Average client trades per day in January 2018 is 18% higher than December 2017 and 28% lower than January 2017.
  • Active accounts of 114,893 as of January 31, 2018, a decrease of 1,369, or 1%, from December 31, 2017.

It's still unclear if or how the recent Tradingview announcement might affect the FXCM metric going forward. Only time will tell.

Do you use FXCM?

Will you be affected by the recent Tradingview update?

Let us know in the comment section below.

With Pip Love

Garry at Urban Forex


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