Last week was a mixed bag of news. Forex Magnates reported that allegations of foul play were being levelled at Boston Prime, the latest company to buckle under last month’s CHF squall.
Meanwhile, KPMG crumbled none-too-substantial tidbits to Alpari UK customers waiting desperately for real updates about the company’s insolvency process. However, FXCM seemed to chart a new, safer course with the discontinuation of a volley of high-risk currency pairs; and FxPro CEO Charalambos Psimolophitis, shared with us how his company survived Black Thursday and why he thinks that leverage isn’t the problem.
Boston Prime Suspect
A recent court filing accompanied by a wealth of documentation revealed last week that a substantial amount of client funds were allegedly missing from Boston Prime and BT Prime. According to an affidavit from Forexware Head of Strategy and Director of Boston Prime and BT Prime George Popescu, FXDD, exclusive liquidity provider to the Prime entities, underhandedly compromised the companies and their customers.
Among the accusations trained at FXDD, Popescu claims that it: adjusted trade prices causing client losses to the tune of $15 million dollars after Black Thursday; artificially increased the liability of the Prime entities by making adjustments in the liquidity provider’s favour; funnelled money from Boston Prime (regulated) to BT Prime (unregulated) and to FXDD; and charged the Prime entities unjustified fees and unknown mark-ups.
This news, of course, after Forex Magnates reported at the start of February that many Boston Technologies employees had been laid off.
KPMG Remains Hush
KPMG, special administrator to Alpari UK, released an update to clients and creditors last Monday, but only confirmed what many readers already knew. Among the confirmed information, KPMG announced that Alpari UK’s intellectual property had indeed been acquired by Andrey Dashin; 114 employees had resigned or been made redundant; and that the pricing of trades is not expected to impact clients who only held cash balances in their accounts at 9:30 am GMT on January 15 (and who entered no subsequent trades).
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The special administrator also revealed that all of the institutions holding Alpari UK client money had been contacted and, as of the update last week, approximately £43.3 million (around 66% of the funds) was now under KPMG’s direct control.
The company announced that analysing of trades closed on and after Black Thursday continues and, until it’s completed, KPMG can’t confirm final client account balances. Given the complexity and regulation involved, it wasn’t ready to give a timeline for completion.
Finally KPMG updated Alpari UK clients on its controversial claims portal, saying that development is progressing well (much to the frustration of many of our readers).
FXCM: Road to Recovery
Last week, FXCM revealed a number of welcome changes in the works at the company. For starters, the company unveiled a new version of its platform, aimed at delivering a new set of data for traders to work with (including real-volume indicators). It also importantly decided to discontinue a total of thirteen exotic currency pairs as of February 20, ones more prone to rampant fluctuations of volatility given any currency floors, pegs or bands in place. For a list of the pairs, head here.
FxPro CEO: Leverage Not the Real Issue
FxPro CEO Charalambos Psimolophitis took some time last week to share with Forex Magnates how his company survived Black Thursday. He also shared why he thought the discussion about leverage in the wake of January’s tempest is misguided:
“One of the implications may be that regulators start placing an undue amount of attention on leverage…In my view this would be a mistake as it runs counter to the demands that traders themselves have made on the industry…I can’t stress enough that leverage was not the real issue here…”
Asked what he thinks would be a good direction going forward, Psimolophitis said that some sort of hybrid arrangement between agency execution and market making would be ideal, one where brokers can “continue to guarantee no conflicts of interest while also mitigating the impact of such outlier events.”