FXCM Settles Another Regulatory Headache in US Ahead of Departure

2017 will be a year to forget for FXCM, and the troubled broker is not yet out of the woods. On Monday, the New York-based FX broker took a step towards resolving another legal headache in the US, which is scheduled to leave soon, by agreeing to pay a

[gptAdvertisement]$650,000 civil fine to the CFTC to settle charges that it was under-capitalized in January 2015, and failed to report its capital shortfall in a timely manner, the company said in a statement.

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On top of this, the settlement, filed with the US District Court for the Southern District of New York, also resolved charges that FXCM guaranteed against customer losses, by "zeroing out negative customer balances", which is a CFTC violation.

US laws explicitly prohibit retail brokers from saying that they can guarantee customers against loss, or limit these potential losses. However, the CFTC claimed that FXCM improperly guaranteed customers that they would not lose money while it should have warned them of the significant risks of trading FX and that they assume risk of loss in excess of their investment and margin deposit.

The CFTC complaint, filed on August 2016, alleged that FXCM was required to maintain adjusted net capital of $25 million on January 15, 2015. However, on that particular day FXCM admitted it had a shortfall of at least $200 million under its adjusted net capital requirement, meaning that FXCM had liabilities exceeding its assets by $175 million.

The case stemmed from the SNB Black Swan Black Swan A Black Swan event is most commonly associated with an unforeseen calamity or event. In its most basic form, this event results in disastrous consequences for multiple parties, markets, or individuals and are characterized as extraordinarily rare in frequency, yet are seemingly predictable in retrospect. In the foreign exchange space, the most noteworthy of these events in recent memory was the Swiss National Bank (SNB) crisis which roiled currency markets back on January 15, 2015.During this in A Black Swan event is most commonly associated with an unforeseen calamity or event. In its most basic form, this event results in disastrous consequences for multiple parties, markets, or individuals and are characterized as extraordinarily rare in frequency, yet are seemingly predictable in retrospect. In the foreign exchange space, the most noteworthy of these events in recent memory was the Swiss National Bank (SNB) crisis which roiled currency markets back on January 15, 2015.During this in Read this Term event which saw FXCM and other brokerages hit hard by the decision. The company announced on January 16 2015 that it lost more than $200 million as a result of the SNB's action.

The settlement was disclosed one week after the CFTC settled with FXCM and some of its executives on the charge of misleading its retail customers into believing that the firm used a ‘no dealing desk’ order Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term model, while in fact FXCM was routing orders through a market maker that was supported and controlled by FXCM.

There were several other charges against the company raised by the NFA. The company has settled the charges with both the CFTC and the NFA. The retail broker and its senior executives have been permanently barred from the industry and can no longer operate in the US. FXCM also agreed to pay a $7 million fine.