In an aggressive statement against FXCM, Darwinex, a UK-based social trading broker and asset manager, said that it has terminated all business partnerships with the FX broker after the US regulators found that it was taking positions opposite its retail customers.
Darwinex, which offers a hybrid of social related copy trading solutions, said that it would stop serving its US clients through operating as an IB for FXCM. However, the company added that it will do its very best to find alternative arrangements going forward, and even told its traders to recommend their preferred execution venue.
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The company said in a statement: “Unfortunately, one of our partners whom we negotiated to serve as Introducing Broker to (for US Traders Only who could list DARWINS on the Darwin Exchange in return), was (keyword “was”) FXCM – regarded as an established, credible broker in the USA up until February 06, 2017 when they were banned by the CFTC for taking positions against their clients.”
It’s worth mentioning that Darwinex in essence offers a similar concept with its trade copying and social trading networks, but this is through its unique approach. Instead of the trades being copied, the company allows traders to use their trading strategy as well as profit from it by attracting investors to invest in their DARWINs (a standardized risk version of their trading strategy). The value of the DARWINs goes up or down and the trader can sell them at any stage to stop following or investing in the trader.
The CFTC today issued an order settling charges against FXCM and its founding managers for engaging in fraudulent activities with respect to telling its retail customers they used a ‘No Dealing Desk’ order execution model, while in fact FXCM was routing orders through a market maker that was actually supported and controlled by FXCM.
There were several other charges against the forex giant, but the gist was that the retail broker and its officers would be permanently barred from the industry and could no longer operate in the US. FXCM also agreed to pay a $7 million fine.