Breaking: FXCM Inc to Forgive 90% of Negative Client Balances
FXCM has waived the negative balances of 90% of its clients, but its going after 10% of them, representing "institutional,
According to a company announcement made by FXCM Inc. (NYSE:FXCM), the company has decided to forgive the majority of negative client balances in the aftermath of the Swiss franc debacle which unfolded after the Swiss National Bank’s unexpected retreat from the 1.20 EURCHF exchange rate floor.
The announcement states that 90% of clients’ negative balances at FXCM will be waived. The company will be sending out notifications to all applicable clients in certain jurisdictions and will adjust the account balances in the next 24-48 hours.
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“FXCM worked diligently to reach this decision and we are extremely appreciative of our clients for their patience and loyalty as we worked through this,” said Drew Niv, CEO of FXCM Inc (NYSE:FXCM).
Speculation about the move has been growing in recent days as some European customers have been receiving notifications that their balances will be reset to zero.
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The company has stated that, “The SNB announcement, extreme price movements and the resulting lack of liquidity were exceptional and unprecedented events causing many market participants to incur trading losses. These events were unforeseen and beyond the control of FXCM.”
The firm will be notifying “institutional, high net worth, and experienced traders who generally maintain higher account balances,” requesting them to cover their negative balances, pointing to the force majeure clause in the terms and conditions which a client signs with FXCM.
According to the announcement, the latter group of clients of FXCM Inc (NYSE:FXCM) represents about 10% of all customers who ended up in negative territory, yet in terms of volumes, it represent about 60% of the total debit balances owed.
Forex Magnates reached out to FXCM, who declined any additional comments at this time.
Oh .. This is so nice of you FXCM.
Too bad for them to be public company otherwise, They would made all their clients carry their losses!
I would imagine what this actually means is that they are going after the institutions who have white labels, rather than those white label’s individual customers. Those customers will then no doubt be chased by the the institution holding the white label, so FXCM don’t look the bad guys…..
yes. could be the case which is same as what Saxo did
I wonder when will Drew get sacked? After all, risk management under his supervision was just perfect.
@Doug, the $300MM loan from Leucadia has a clause that it would charge a fine or something like that if there is a change in staff at FXCM as part of the terms of the loan. They want to make sure no panic HR decisions are made that could cause them to lose revenues on the loan (pretty smart actually)
@FM,could you break the losses down in actual $$ amounts please?
So the small guys who are undercapitalized are going to lose because they are traded against – but they will get money back.
And the big guys with well capitalized accounts will have to pay. I’m sure they’ll love staying with FXCM after this………
Terrible.
Clearly their offering is much scarcer than their US operations, however I would give them more time before even comparing their European business to the US one. They are in for the long haul, so I agree with you Jon – let’s cut them some slack and see how things go forward for at least half a year.
Clearly their offering is much scarcer than their US operations, however I would give them more time before even comparing their European business to the US one. They are in for the long haul, so I agree with you Jon – let’s cut them some slack and see how things go forward for at least half a year.
Should FXCM not forgive the negative balance of the individual clients, the clients would not pay them back ANYWAY.
A guy in Taiwan whose account is now -2000 USD is never gonna deposit again if the account is not zeroed out.
either way, FXCM is not gonna get that money back, so might as well just forgive, or should I say, forget it.