Few FX brokers have had a more tumultuous ride over the past twenty-four hours than FXCM (NASDAQ:FXCM), which blindsided the industry yesterday with a surprise regulatory clampdown from the US National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC).
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The news has not been a welcome revelation for FXCM’s shareholders, which plunged at the Tuesday opening ofUS trading. Having already been flirting with a 52-week low of $6.65, the company’s share prices collapsed to $3.52 at the time of writing, down -49.64 percent. Conversely, GAIN Capital (NYSE:GCAP), which bought FXCM’s client list, saw its share prices spiking 8.5 percent to $8.30.
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Yesterday, FXCM’s prospects of maintaining its stance as the biggest Retail Foreign Exchange Dealer (RFED) in the US were dealt a fatal blow, after the broker and its top brass were forced to withdraw from NFA and CFTC registration permanently.
Both regulators issued an order against FXCM, levying a $7.0 million civil monetary penalty for engaging in false and misleading solicitations. The group and its CEO Drew Niv settled the charges with US regulators, though FXCM’s business in the US is effectively over.
Consequently, FXCM intends to implement a restructuring plan that includes the termination of approximately 150 employees, or about 18% of its global workforce. FXCM’s US business had unaudited 2016 net revenues of approximately $48 million and generated an EBITDA loss, but the costs associated with the business will not be transferred to GAIN. Withdrawing from this business will free up approximately $52 million in capital.