Proceedings are fast underway for a chapter 11 bankruptcy filing for the US OTC forex and on-exchange futures introducing brokerage (IB) known as Avail Trading Corp, according to recent court filings..
Chapter 11 proceedings have been filed by Avail Trading Corp in the California Central Bankruptcy Court, case 2:16-bk-11648-DS, dated February 9th, with nearly 20 subsequent updates as motions are set to prepare the administrators. The next court date is marked for April 6th at the Los Angeles court house, with case judge Deborah J. Saltzman (and Elaine L. Garcia) presiding.
Avail Trading Corp is planning to release a statement to address the development later today. It will include information regarding its UK clients, who trade under a separate entity and are not affected despite the common ownership.
From IB to bankruptcy
The firm’s two sole principals, brothers David and Jack Manoukian, are well-known industry veterans, who (in my opinion) appeared to run their IB more like a brokerage than an introducer. I remember first seeing their website and speaking with them nearly a decade ago.
They offered their own platforms, or white-labeled solutions, in addition to MT4, and offered both OTC forex and on-exchange futures. This separated them from the average IB shop, which helped them to survive – almost every other forex IB failed long ago in the US.
I am not sure of the main drivers causing Avail Trading Corp to file for a chapter 11, but the challenging environment for FX in the US was likely one of the underlying contributors.
NFA license up for sale?
The firm’s status with the NFA is still listed as active and approved in the midst of the chapter 11 filings, as IBs aren’t permitted to hold customer funds (although they do need to maintain net capital). If they were regulated as an FCM or FDM, a freeze or injunction by the CFTC may have been necessary to protect client funds.
KVB PRIME Strikes UK with Influential Finance Summit SponsorshipGo to article >>
After the bankruptcy, the NFA license could be acquired by another business along with other assets. On the other hand, those options might not be on the table – it depends on how the arrangement is structured, and on the creditor’s rights.
According to people familiar with the developments, the company hopes to emerge reorganized for its US operation, which is still running business as usual despite the on-going proceedings.
David Manoukian filed an official form 106Sum with the court dated February 23rd, listing nearly $1.75 million of assets, and just over $1.5 million of claims from creditors for both secured and unsecured assets – one example of the many filings related to this case since the initial filing date.
An excerpt of the form can be seen below listing the following three entities:
United States and United Kingdom
The regulatory landscape in the US had made it increasingly difficult not only for small brokerages and IBs but even for medium to large size firms to compete, as subsequent consolidations left only a few large players in the FX space. The futures side was also affected to a lesser degree.
Finance Magnates reached out to a support representative who said that the company’s UK business was not affected. The FCA confirmed this status.
An FCA spokesperson explained that due to transparency and supervisory regulations Avail Trading Corp would need to make the FCA aware of any difficulty it was facing.
Shortly after publication, an Avail Trading Corp spokesperson confirmed to Finance Magnates that the firm’s UK entity is a separate business and unaffected. The company expects to issue a press release on the developments.