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FXCM banned in the US and fined 7 million USD. He sells his clients
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FXCM banned in the US and fined 7 million USD. He sells his clients

created Paweł Mosionek7 February 2017

This is undoubtedly a historic move. FXCM, the largest retail Forex broker on the US market and a company listed on the NASDAQ stock exchange, has just received from the CFTC regulator (Commodity Futures Trading Commissiontotal ban on further operations in the USA. It is not the end. A similar ban was given to the current CEO of Drew Niv and co-founder William Ahdout, and the company itself was fined 7 million USD for defrauding the funds of its clients.

The CFTC showed that the FXCM broker in 2009-2014 was misleading and concealed the fact that there was a conflict of interest in trade between it and its clients, claiming that it was executing orders in the NDD (No Dealing Desk) mode. It turned out that the orders were sent to the so-called a bush company 100% owned by FXCM, which only allegedly was a "liquidity provider". Thus, the management board made false statements to the American regulator NFA (National Futures Association), in which it was argued that client transactions have no impact on the company's funds and that all risks are shifted to liquidity providers such as banks and other platforms or brokers. The broker himself opened positions opposite to his clients without securing them in the real market and at the same time created his "own market".

You did not have to wait long for FXCM to move. It was included preliminary an agreement with the Gain Capital broker, the owner of the famous Forex.com brand and thus their largest competitor, on the sale of all customers and the transfer of their bills. The company itself assures that it should not have any impact on trade of traders. The transaction has not yet been confirmed in 100%. Thus, the company has already decided to release 150 employees from 800 staff.

Full CFTC statement

FXCM also has a branch in Great Britain under that jurisdiction. It was opened when the new NFA regulations entered into force, thus excluding the possibility of accepting non-US residents by US brokers. The question is whether the UK regulator will carry out a similar check to the CFTC and if so, can similar consequences be expected?

As a reminder, this is not the first fine imposed on FXCM. In the previous years, 5 other financial penalties were imposed:

  • 2014 - USD 4 million in fines from FCA (Great Britain),
  • 2014 - EUR 200 fine from AMF (France),
  • 2014 - $ 200 fine from the NFA (USA),
  • 2011 - $ 2 million fine from the NFA (USA),
  • 2011 - $ 140 fine from the CFTC (USA).

The vast majority of penalties were imposed in connection with the so-called depleting traders' profits by manipulating slips and executing orders.

FXCM is struggling with serious problems since the memorable black Thursday of 15 in January 2015, where the debits of customers seriously damaged the financial position of the company when the Swiss franc was released by the SNB. The broker saved the loan from the company Leucadia National Corp., listed on the NYSE, which is still repaying. At the same time, the FXCM share price plunged from around $ 17 to $ 2. The current price per share is $ 6,85. We are curious how today's session will open ...

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About the Author
Paweł Mosionek
An active trader on the Forex market since 2006. Editor of the Forex Nawigator portal and editor-in-chief and co-creator of the ForexClub.pl website. Speaker at the "Focus on Forex" conference at the Warsaw School of Economics, "NetVision" at the Gdańsk University of Technology and "Financial Intelligence" at the University of Gdańsk. Twice winner of "Junior Trader" - investment game for students organized by DM XTB. Addicted to travel, motorbikes and parachuting.