FXCM Joins the Australian CFD Forum Call to Require Mandatory Segregation of Client Funds
IG Markets, GFT Global Markets and CMC Markets created the Australian CFD Forum to petition the regulator to apply harsher

FXCM has joined other CFD brokers in the country to require segregation of company and client funds by law, the Australian Sydney Morning Herald reports.
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Last month the Australian Competition and Consumer Commission (ACCC) approved self-governing standards for the industry that say that client money should be segregated and protected. These standards were proposed by the Australian CFD Forum, an industry body that was created by CMC Markets Asia Pacific, GFT Global Markets UK and IG Markets. It is believed that IG Markets is still unsatisfied with the law, holding that it should provide more consumer protection.
Jaclyn Klein, FXCM’s Vice President for Corporate Communications, has stressed the company support of the move. “If there were any regulatory moves in Australia to prevent pooling of client funds we would be fully supportive of this direction,” she said. FXCM client funds in the UK are segregated by law, so the broker is familiar with the possible effects of such a requirement elsewhere in the world.
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Jaclyn Klein, FXCM’s Vice President for Corporate Communications, has stressed the company support of the move. “If there were any regulatory moves in Australia to prevent pooling of client funds we would be fully supportive of this direction,” she said. FXCM client funds in the UK are segregated by law, so the broker is familiar with the possible effects of such a requirement elsewhere in the world.
Local brokers voiced their objection to the Australian CFD Forum course of action, claiming that this is a move spearheaded by non-Australian firms who will gain from a new law at the expense of smaller, local companies.”We are opposed to foreign firms operating under the guise of the ‘Australian CFD Forum’ trying to lobby for a change in Australian law,” Owen Kerr, Director of the local Pepperstone, told Forex Magnates. “We see this type of anti-competitive industry lobby power exerted in US politics and it is not something we should accept in Australia.”
As for the debate in question, however, Kerr’s firm is rather agnostic. “Given we have significant balance sheet strength any changes to the law would not affect our operations,” he said. But other Australian brokers such as AxiTrader, oppose the move itself, saying the ACCC standard contained “exclusionary and cartel provisions.” “They are anti-competitive and constitute a barrier to entry to the CFD industry by Australian companies,” he added.
Tamas Szabo, Chief Executive of the Australian operations of IG Markets, explained that about 40% of Australia’s CFD and FX brokers use client money to hedge trades. He is quoted as saying: ”It is a $200 million hazard. There’s an example of a firm with roughly $70 million of client money, with about $3 million of their own cash in the business. If the markets don’t move it’s pretty sustainable but as soon as you see significant market moves then it is a problem. Sometimes clients can’t pay that quickly and that could be a hole in the firm’s balance sheet. Alternatively if there is a large bad debt from a client or a group of clients, again that puts a hole in the firm’s balance sheet and if that hole is greater than the cash they have on reserve, it potentially means the firm will go under.”
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So if it is not segregated, what does ASIC ensure for client’s fund’s safety at the moment?
This is not about client money protection but its about market meker protection. A brokers balance sheet is irrelevant if they are hedging all of their flow, its only impotant when they are gambling against their clients like IG and CMC do. This should be called market maker protection not client money protection. What a joke I wish these people knew what they were talking about. Smart traders can see through the garbage that the likes of IG markets spu out to the uneducated media. For me I would go with a DMA or ECN broker anyday, at least we… Read more »
I thought the ASIC already required client segregated funds. Can someone please clarify the CURRENT ASIC requirement towards client segregated funds?
im guessing but think when not trading it is client segregated. When you trade – your exposure is in a pooled fund. So in the UK – it remains still segregated.
That CFD’s and FX CFD’s (which may or may not be all Forex instruments but assuming it is) have had Broker requirements bumped up some 3 (?) years ago …..
Anyway – yes i too would like to know.
I mean – perhaps a firm in Australia has to meet the $10 mn requirement , and on top of that add $3mn to be in the trading pool. There was an example recently in a middle eastern company where they published on a website a spreadsheet. So as your clients trade more your requirements go up – say fixed at 10% of exposure for certain leverage. etc etc. Maybe if 1/2 is on A book and 1/2 on B book and requirements is 5% for 100:1 leverage – then $3mn will be enough to cover open trades. It sounds… Read more »
Bruce has a valid point. More brokers are moving towards b book and risk taking as spreads narrow. This increases risk, something the regulators may think they have the right policy on but clearly needs further work. The way forwaed is not the US model as that has led to a monopoly. Greater transparency should be provided by brokers as to their market making practices and risk a trader takes in placing monies with them. There is nothing wrong with a broker b booking (banks have been doing this forever of course) if the bwnefit both in spread and cost… Read more »
please read
https://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg212-9July2010.pdf/$file/rg212-9July2010.pdf
I found this bit to be relevant: Counterparty risks RG 212.14 Even though the client money account is a separate account subject to a statutory trust, clients are exposed to counterparty risk with respect to client money. That is, the risk that in the event of the failure of another client or the licensee, a client will not receive all of their client money back. This arises because: (a) the licensee is permitted to use client money to meet obligations incurred by the licensee in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives by the licensee,… Read more »
Give the trader more legal standing. If the firm goes bust, allow the trader to be ranked higher in the list of priority creditors. A wait but not a fruitless wait.
Call it “3/4 way to full account segregation”.
I don’t think any firm is going to want central monitoring and reporting on their day to day % flucuations. But if they did there may be more insurance or guarantees from Prime.
Engineers have insurance, and premiums go up the more you use it.
there is more to it.
I see from this link that the “new” requirements were / did / might have end up – affecting the different business models.
http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/Consultations/2011/Handling%20of%20client%20money%20in%20OTC%20derivatives/Submissions/PDF/Marketech.ashx
NB) listed on ASX Nov 2006 , Resigned from ASX Apr 2010, Document is 2011 ‘ish.
Perhaps FX did not come within these changes…..
Still is easier to make decisions about a new direction in hindsight.
Full list here
There is one from MFGlobal too
Brooks Philip
http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2011/Handling-of-client-money-in-OTC-derivatives/Submissions