NFA levies $2,000,000 monetary sanction against FXCM and orders refunds to customers

For Immediate Release

For More Information Contact:
Larry Dyekman (312) 781-1372, [email protected]
Karen Wuertz (312) 781-1335, [email protected]

NFA levies $2,000,000 monetary sanction against FXCM and orders refunds to customers

August 12, Chicago - National Futures Association (NFA) has issued a Decision imposing a $2,000,000 monetary sanction against Forex Capital Markets LLC (FXCM) in settlement of a Complaint issued by NFA's Business Conduct Committee on August 12, 2011. The Complaint cited FXCM for retaining gains derived from asymmetrical 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; failing to adequately investigate suspicious activity in several customers' accounts; and - together with its principal Dror Niv - failing to supervise. FXCM is a Futures Commission Merchant, Retail Foreign Exchange Dealer, and Forex Dealer Member located in New York, New York.

In addition to the $2,000,000 monetary sanction, FXCM must credit the accounts of its customers the amount of asymmetrical positive slippage which its customers experienced on their trades from and after June 18, 2008 and provide verification to NFA of these credits. In the future, FXCM is prohibited from engaging in price slippage or margin liquidation practices, as described in the Complaint. FXCM must also enhance existing procedures to ensure efficient execution of customer orders and compliance with NFA's anti-money laundering requirements.

The complete text of the Complaint and Decision can be found on NFA's website (www.nfa.futures.org).

NFA is the premier independent provider of innovative and efficient regulatory programs that safeguard the integrity of the futures markets.View attachment Complaint_ForexCapitalMarketsLLC&DrorNiv_2011_0812.pdf

I wonder will this thead still be here in the morning.

pboyles said:

I wonder will this thead still be here in the morning.

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are you questioning t2w's integrity ?

pboyles said:

I wonder will this thead still be here in the morning.

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Bloody right it will.

counter_violent said:

Bloody right it will.

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FXCM are the broker that T2W chose to collaborate with for the development of the forex desk platform. Surely there has to be a degree of loyalty shown towards a strategic partner ?

You are trapped between a rock and a hard place on this one

the hare said:

FXCM are the broker that T2W chose to collaborate with for the development of the forex desk platform. Surely there has to be a degree of loyalty shown towards a strategic partner ?

I'm sure the interested parties will take a look and come to their own conclusions.

You are trapped between a rock and a hard place on this one

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I'm not trapped anywhere as you very well know.

Mods are volunteer members who act independently. Don't know how many times I have to tell you this...if I didn't know better and it was anyone else, i'd be thinking that you were a bit dim keep coming out with the same statement !

Have a lovely evening bunny.

Robust and sensible regulatory oversight is of benefit to all market participants.

counter_violent said:

Mods are volunteer members who act independently..

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Not quite true, you are volunteer members who impose the guidelines and rules as established by the sites owner.

There is a difference. The day that you act independantly in breech of those rules, you'll be replaced. For example, if you independantly decided to post kiddie porn, it probably wouldnt be tolerated... agreed ?

FXCM Response

SpecTrade said:

August 12, Chicago - National Futures Association (NFA) has issued a Decision imposing a $2,000,000 monetary sanction against Forex Capital Markets LLC (FXCM) in settlement of a Complaint...

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Hi SpecTrade,

Yesterday's action from the NFA primarily concerns positive slippage, and I would like to shed more light on how positive slippage with FXCM's NDD forex execution system used to work prior to August 2010 and how it has worked since then.

FXCM’s platforms display the best bid/ask spread streamed from the firm’s liquidity providers plus FXCM’s mark-up. Every FXCM NDD forex trade is automatically offset in a two-step process, designed to ensure that FXCM does not profit from a trader’s losses. In the first step of the execution process, a trader clicks on the price and the order is sent to FXCM. In the second step, FXCM automatically sends the client’s order to one of its liquidity providers to offset the trade.

FXCM’s execution system prior to August 2010 only offered price improvements to clients in the first step of the process. If a better price became available on FXCM’s platform in the fraction of a second after the client submitted the order but before the order was received by FXCM, the client would benefit from the price improvement. However, FXCM’s previous execution system did not provide clients with price improvements in the second step of the execution process, even if FXCM was able to offset the order at a better price, excluding FXCM’s markup. FXCM enhanced the execution system in 2010 so that clients now benefit from price improvements in both steps of a transaction for all order types.

It is important to note: By the end of 2010 FXCM enhanced its execution system to offer price improvements on all trades. You may remember from my forum posts last August that I announced positive slippage for limit and limit entry orders on this thread. All orders now eligible to receive positive slippage, and all price improvements are subject to available liquidity.

The settlement amount and the client price improvement credit will have no negative impact on FXCM's financial balance sheet because several founding partners of FXCM have reimbursed the company for the credit and the fines. As of June 30, 2011, FXCM Inc. had over $200 million in cash and no debt.

FXCM's goal is to have a fair and transparent system, and we are proud to offer an execution system that passes on any price improvements. FXCM has compiled statistics from July 1, 2010 until now to display the percentage of orders positive slipped and negatively slipped, and which orders most frequently experience each. The percentage of orders between positive and negative slippage has been roughly equal.




And we have broken this down even further to display the number of orders on a monthly basis positively and negatively slipped:


Limit and limit entry orders are the most likely to experience positive slippage which is why we highlight using limit and limit entry orders in the execution center on our website. You can find even more data on slippage broken down per order type in the complete report here: Slippage Statistics

Please let me know if you have any additional questions. I will do my best to answer them as thoroughly as possible.

Jason
FXCM

the hare said:

Not quite true, you are volunteer members who impose the guidelines and rules as established by the sites owner.

What a wonderful word this is. It allows mods to use discretion and be flexible which i'm sure you will agree is the best policy given that every situation may be different in some respects.

There is a difference. The day that you act independantly in breech of those rules, you'll be replaced. For example, if you independantly decided to post kiddie porn, it probably wouldnt be tolerated... agreed ?

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Why would I or anyone else do that on a trading related site ?

counter_violent said:

Why would I or anyone else do that on a trading related site ?

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Well as you are aware, people have. The reasons are not really important, its the principal, if you choose to do something independantly, that breech's the sites guidelines, it wont be tolerated.

A better and more interesting question is why would a forums community manager choose to reverse a ban for a member previously banned for posting kiddie porn ? or am I being mischevious to ask such a thing ?

Out of interest, just hypothetically, if FXCM's solicitors apply pressure to T2W to remove this thread, what would your reaction be ? would you just accept that, or would you resign on principal.

Re: FXCM Response

Jason Rogers said:

Hi SpecTrade,

Yesterday's action from the NFA primarily concerns positive slippage, and I would like to shed more light on how positive slippage with FXCM's NDD forex execution system used to work prior to August 2010 and how it has worked since then.

FXCM’s platforms display the best bid/ask spread streamed from the firm’s liquidity providers plus FXCM’s mark-up. Every FXCM NDD forex trade is automatically offset in a two-step process, designed to ensure that FXCM does not profit from a trader’s losses. In the first step of the execution process, a trader clicks on the price and the order is sent to FXCM. In the second step, FXCM automatically sends the client’s order to one of its liquidity providers to offset the trade.

FXCM’s execution system prior to August 2010 only offered price improvements to clients in the first step of the process. If a better price became available on FXCM’s platform in the fraction of a second after the client submitted the order but before the order was received by FXCM, the client would benefit from the price improvement. However, FXCM’s previous execution system did not provide clients with price improvements in the second step of the execution process, even if FXCM was able to offset the order at a better price, excluding FXCM’s markup. FXCM enhanced the execution system in 2010 so that clients now benefit from price improvements in both steps of a transaction for all order types.

It is important to note: By the end of 2010 FXCM enhanced its execution system to offer price improvements on all trades. You may remember from my forum posts last August that I announced positive slippage for limit and limit entry orders on this thread. All orders now eligible to receive positive slippage, and all price improvements are subject to available liquidity.

The settlement amount and the client price improvement credit will have no negative impact on FXCM's financial balance sheet because several founding partners of FXCM have reimbursed the company for the credit and the fines. As of June 30, 2011, FXCM Inc. had over $200 million in cash and no debt.

FXCM's goal is to have a fair and transparent system, and we are proud to offer an execution system that passes on any price improvements. FXCM has compiled statistics from July 1, 2010 until now to display the percentage of orders positive slipped and negatively slipped, and which orders most frequently experience each. The percentage of orders between positive and negative slippage has been roughly equal.

And we have broken this down even further to display the number of orders on a monthly basis positively and negatively slipped:

Limit and limit entry orders are the most likely to experience positive slippage which is why we highlight using limit and limit entry orders in the execution center on our website. You can find even more data on slippage broken down per order type in the complete report here: Slippage Statistics

Please let me know if you have any additional questions. I will do my best to answer them as thoroughly as possible.

Jason
FXCM

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horse bolted door stable

the hare said:

Well as you are aware, people have. The reasons are not really important, its the principal, if you choose to do something independantly, that breech's the sites guidelines, it wont be tolerated.

A better and more interesting question is why would a forums community manager choose to reverse a ban for a member previously banned for posting kiddie porn ? or am I being mischevious to ask such a thing ?

New to the job if memory serves me...prob a bit of confusion...who knows...who cares.

Out of interest, just hypothetically, if FXCM's solicitors apply pressure to T2W to remove this thread, what would your reaction be ? would you just accept that, or would you resign on principal.

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The thread stays as far as i'm concerned as I think this sort of "in the public domain" type information may be of interest to the members.

You will of course have noticed that FXCM rep Jason Rogers has stated how business is now done compared to a previous time including a raft of statistics to pour over.

Is there really anything else to talk about !

counter_violent said:

Is there really anything else to talk about !

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Not at this time of night

Peter

counter_violent said:

Is there really anything else to talk about !

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I see you've dodged the question

and just in case you missed it, what will you do if Mr Sharky acts in his own best interests and deletes this thread ?

the hare said:

I see you've dodged the question

and just in case you missed it, what will you do if Mr Sharky acts in his own best interests and deletes this thread ?

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He will have acted "independently" of the mods.

Peter

wackypete2 said:

He will have acted "independently" of the mods.

Peter

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Not difficult is it Pete

the hare said:

are you questioning t2w's integrity ?

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No, not their integrity, just their ability/willingness to withstand the level of legal threats that a company like this could use.

Re: FXCM Response

If you can't do the time don't do the crime. If you think you can hide this information by getting this thread deleted you will be seriously mistaken.

I'm not sure what you're worried about, plenty of your competitors have/will be caught as I'm sure you were all at it. In the end your reputation won't be any worse than the rest.

Jason Rogers said:

Hi SpecTrade,

Yesterday's action from the NFA primarily concerns positive slippage, and I would like to shed more light on how positive slippage with FXCM's NDD forex execution system used to work prior to August 2010 and how it has worked since then.

FXCM’s platforms display the best bid/ask spread streamed from the firm’s liquidity providers plus FXCM’s mark-up. Every FXCM NDD forex trade is automatically offset in a two-step process, designed to ensure that FXCM does not profit from a trader’s losses. In the first step of the execution process, a trader clicks on the price and the order is sent to FXCM. In the second step, FXCM automatically sends the client’s order to one of its liquidity providers to offset the trade.

FXCM’s execution system prior to August 2010 only offered price improvements to clients in the first step of the process. If a better price became available on FXCM’s platform in the fraction of a second after the client submitted the order but before the order was received by FXCM, the client would benefit from the price improvement. However, FXCM’s previous execution system did not provide clients with price improvements in the second step of the execution process, even if FXCM was able to offset the order at a better price, excluding FXCM’s markup. FXCM enhanced the execution system in 2010 so that clients now benefit from price improvements in both steps of a transaction for all order types.

It is important to note: By the end of 2010 FXCM enhanced its execution system to offer price improvements on all trades. You may remember from my forum posts last August that I announced positive slippage for limit and limit entry orders on this thread. All orders now eligible to receive positive slippage, and all price improvements are subject to available liquidity.

The settlement amount and the client price improvement credit will have no negative impact on FXCM's financial balance sheet because several founding partners of FXCM have reimbursed the company for the credit and the fines. As of June 30, 2011, FXCM Inc. had over $200 million in cash and no debt.

FXCM's goal is to have a fair and transparent system, and we are proud to offer an execution system that passes on any price improvements. FXCM has compiled statistics from July 1, 2010 until now to display the percentage of orders positive slipped and negatively slipped, and which orders most frequently experience each. The percentage of orders between positive and negative slippage has been roughly equal.

And we have broken this down even further to display the number of orders on a monthly basis positively and negatively slipped:

Limit and limit entry orders are the most likely to experience positive slippage which is why we highlight using limit and limit entry orders in the execution center on our website. You can find even more data on slippage broken down per order type in the complete report here: Slippage Statistics

Please let me know if you have any additional questions. I will do my best to answer them as thoroughly as possible.

Jason
FXCM

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Whenever I see these sorts of fines I always like to go to the company's website and see how many 'awards' they've got because there often seems to be a high correlation between the number of awards and the level of service, or to put it another way, watch out for companies that have loads of 'awards' and do their best to make sure you know about them.

So low and behold I go to the website and it's choking with 'awards'. Proof if there ever was needed that now days 'awards' are nothing more than marketing gimmicks.

I didn't check what they were all for for though. So if anyone looks more closely is there an award for -

"Best FX Broker for making a big song and dance about how they treat their customers fairly but then take every opportunity to rip them off behind their backs."

I know competition for that award is extremely fierce in the online FX bucket shop world but a $2million fine and compensation to the clients might just be enough to pip all the other FX bucket shops out there.