After just posting about Forex Scams, on the other side of the spectrum, FXCM continues its move to become the leader in broker transparency. FXCM just added a page to their website named FXCM Financials. While FXCM always made their financials open to the public, their new Financials page explains in-depth what all the terms mean and why this is important for traders.
The page includes all the basics like FXCM’s Balance Sheet, Income Statements, and 2011 Annual Reports. In addition, there is a list of questions traders should ask their brokers like how much debt they have, and who is the companies accounting firm. FXCM then lists their answers for these questions.
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The most interesting part of the page is a section called “The Problem with the US Commodity Futures Trading Commission’s (CFTC) Net Capital Requirements.” FXCM explains that the CFTC’s requirements of stating Net Capital is only in respect to its US entity and leaves clients exposed to financial risks of a brokers non CFTC jurisdiction subsidiaries. While FXCM didn’t outright state it, the obvious reference of this section is to Man Financial and PFG Best where the regulators failed to be fully aware of the broker’s risks.
Overall, FXCM is showing the need for additional transparency within the Forex industry and how this movement is coming from the brokers rather than the regulators. As a marketing concept the “play off consumer fears” strategy is time tested strategy, and especially makes sense in the Forex industry. It will be interesting to see which other names match FXCM in creating such pages and how far will brokers go to provide financial transparency.