FXCM fined and ordered to pay restitution of $14.2 million to settle charges

pboyles · Oct 5, 2011

This has been expected for a while, though I'm not sure anyone thought it would be this much. It relates to the same matters that they were fined by the NFA for a few weeks ago. The actual fine is $6 million and the remainder is restitution.

2nd UPDATE: CFTC: FXCM To Pay Over $14.2 Million To Settle Charges - WSJ.com

pboyles · Oct 5, 2011

Press release from CFTC

Forex Capital Markets LLC Ordered to Pay More Than $14.2 Million to Settle CFTC Charges Relating to Its Failure to Supervise Customer Accounts

wackypete2 · Oct 5, 2011

CFTC Press Release said:
In addition, the CFTC order requires FXCM to retain, at its own expense, a monitor to review for three years: (1) its trade execution practices and policies as they relate to the change in price between the time the customer places the order and the time the order is executed by FXCM; and (2) its compliance with its restitution obligation

Haha, that just means higher spreads and more slippage to cover costs

CFTC Press Release said:
Further, the CFTC order finds that FXCM failed to produce certain records promptly in its capacity as a CFTC registrant and thereby required the CFTC to issue a subpoena to attempt to obtain required records from FXCM.

Implies the fine could have been much lower if only FXCM complied with a simple request. You do dumb things and eventually you get bit.

Peter

pboyles · Oct 5, 2011

Actually to be clear the fine and restitution total $14.2 million, not just the restitution as the title may imply.

Jason Rogers · Oct 5, 2011

pboyles said:
This has been expected for a while, though I'm not sure anyone thought it would be this much. It relates to the same matters that they were fined by the NFA for a few weeks ago. The actual fine is $6 million and the remainder is restitution.

2nd UPDATE: CFTC: FXCM To Pay Over $14.2 Million To Settle Charges - WSJ.com

The settlement between FXCM and the CFTC was anticipated and previously disclosed on August 11, 2011, during FXCM’s Second Quarter Earnings Conference Call. At that time, the company established a reserve of $16 million in anticipation of the fines associated with the CFTC ($6 million) and the NFA ($2 million) settlements as well as restitution ($8,261,937) credited to affected clients. To date, the NFA fine has been paid and restitution to affected clients has been credited. The NFA and CFTC fines as well as restitution are all covered under that reserve, resulting in no negative impact to the net income of FXCM Inc.

Our full statement can be found here FXCM US Reaches Settlement with the CFTC for $6 Million

-Jason

pboyles · Oct 5, 2011

Jason Rogers said:
. The NFA and CFTC fines as well as restitution are all covered under that reserve, resulting in no negative impact to the net income of FXCM Inc.

-Jason

I'm not sure its your net income that we're worried about.

Albert Carey · Oct 5, 2011

Will the victims get anything?

pboyles · Oct 5, 2011

Albert Carey said:
Will the victims get anything?

Yes there is an order for restitution, however whats not clear is whether that applies to victims outside the US. When the NFA fined them they only ordered restitution to US clients. I suspect its something to do with jurisdiction.

alan5616 · Oct 6, 2011

How many of us would love to see a "NFA like" investigation, carried out by the FSA, here in the UK. There are too many private traders being defrauded, on a daily basis, by unscrupulous Market Makers and Spread Betting Companies.

pboyles · Oct 6, 2011

alan5616 said:
How many of us would love to see a "NFA like" investigation, carried out by the FSA, here in the UK. There are too many private traders being defrauded, on a daily basis, by unscrupulous Market Makers and Spread Betting Companies.

That day will come, the public mood has changed and sooner or later the industry will pull one scam too many, they'll get too greedy and it will come back to bite them, just like FXCM, Gain Capital and all the others. It's already happened in the US so it's only a matter of time.

bha1 · Oct 7, 2011

pboyles said:
That day will come, the public mood has changed and sooner or later the industry will pull one scam too many, they'll get too greedy and it will come back to bite them, just like FXCM, Gain Capital and all the others. It's already happened in the US so it's only a matter of time.

mmmm my experiences were very strange the market moves to your SL then almost like magic returns in the desired direction.

tar · Oct 7, 2011

that's nothing look at this 2 Billion $ suit against BNY Mellon , it seems not only retail forex that stinks !

http://www.trade2win.com/boards/for...illion-suit-over-forex-rates.html#post1695402

alan5616 · Oct 7, 2011

bha1 said:
mmmm my experiences were very strange the market moves to your SL then almost like magic returns in the desired direction.

It's called stop hunting. This is a favourite amongst the forex broking criminals. Your stop may not have been individually targeted but, if there were a bunch of other trades with SLs close to yours, then it will happen.

I do wish people would stop listening to the old SB fairy tale that "we add a small spread to each trade, which is how we make our profit". This is absolute b ollocks. They trade against their clients and when you lose, they win. They are, after all, bookmakers. Unfortunately, they get away with scams that a high st bookie, taking racing & football bets, would lose his licence for.

tar · Oct 7, 2011

alan5616 said:
It's called stop hunting. This is a favourite amongst the forex broking criminals. Your stop may not have been individually targeted but, if there were a bunch of other trades with SLs close to yours, then it will happen.
.

@ stop hunting : is that the reason why futures traders at the exchanges faces the same problem ( stops triggered then the market moves in their favor ) ?

pboyles · Oct 7, 2011

tar said:
@ stop hunting : is that the reason why futures traders at the exchanges faces the same problem ( stops triggered then the market moves in their favor ) ?

The same argument was made about slippage, 'dont blame the broker'. Except of course we learnt otherwise after the Gain Capital investigation.

alan5616 · Oct 7, 2011

tar said:
@ stop hunting : is that the reason why futures traders at the exchanges faces the same problem ( stops triggered then the market moves in their favor ) ?

Stops get triggered as part of the normal trading movement of the futures market. That is very different from the deliberate stop hunting carried out by unscrupulous fx brokers, operating in a spot market that has no centralised exchange.

The conversation goes something like this:-

Customer: "Why did I get stopped out on this EUR/CAD trade?"
Broker: "We use several banks that provide us with data. Your stop loss got triggered by a quote from the Mugabe Investment Bank"
Customer: "Of course; how silly of me not to realise that"

RIGHT

tar · Oct 7, 2011

@ forex : it is stop hunting .

@ futures : it is normal trading movement of the market .

Silly me :whistling

Albert Carey · Oct 7, 2011

pboyles said:
Yes there is an order for restitution, however whats not clear is whether that applies to victims outside the US. When the NFA fined them they only ordered restitution to US clients. I suspect its something to do with jurisdiction.

Thanks.

pboyles · Oct 7, 2011

tar said:
@ forex : it is stop hunting .

@ futures : it is normal trading movement of the market .

Silly me :whistling

I think you'll find futures are traded through exchanges where price movements can be verified. In forex you just take their word for it as there is no exchange and different providers offer different prices.

Of course forex companies would never dream of taking advantage of this, just like they'd never rip you off on slippage.

tar · Oct 7, 2011

pboyles said:
I think you'll find futures are traded through exchanges where price movements can be verified. In forex you just take their word for it as there is no exchange and different providers offer different prices.

Of course forex companies would never dream of taking advantage of this, just like they'd never rip you off on slippage.

I agree exchange trading is better than forex and some dodgy brokers could hunt your stop , but that doesn't change the fact that in exchange trading your stop would be slipped and the market could move in your favor after hitting your stop , afterall this how the market operates ( price discovery ) ....

FXCM fined and ordered to pay restitution of $14.2 million to settle charges

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