Well the folks over at IKon can't be too happy with the news that the NFA has filed suit against RFXT and accused them of fraud in a new complaint:
BASIC Case Summary
IKon recently merged with former Dead Pool Member Royal Forex Trading and on RFXT's website they are listed as being a "division of IKon Global Markets."
So how does IKon feel about a division of its company being charged with the following:
"CHEAT, DEFRAUD, DECEIVE FOREX CUSTOMERS"
The NFA summarizes their complaint as follows:
Quote:
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On September 14, 2007, NFA issued a Complaint charging Royal with using misleading and fraudulent promotional material; failing to uphold high standards of commercial honor and just and equitable principles of trade; and failure to collect and maintain the required security deposit. The Complaint also charged Royal and Marsch with failure to supervise.
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Perhaps the most illuminating aspect of the NFA Complaint against RFXT is this doozy about how Royal Forex clears its trades. NFA cites an IB that RFXT uses and in the process reveals how RFXT clears its trades:
Quote:
InterBank Group's website also contained statements that falsely implied that customers would be trading in the interbank market. For example, the website included such claims as, "InterBank Group clients routinely benefit from the size and strength of one of the world's largest online foreign exchange providers," and "with access to over $1 billion in liquidity from the world's top FX banks, InterBank Group is able to pass along bank level pricing to our clients through our clearing firms."
In reality, customers hardly enjoy "bank level pricing" as InterBank Group widens the spreads from the prices that it receives from Royal by as much as 39 pips. Further, Royal offsets its forex exposure with IFX Markets, Inc., an NFA Member FDM, which in turn offsets its exposure with IFX Markets, Ltd. Thus, it was misleading for InterBank Group to suggest that its customers receive the same prices that banks and other institutions do, as the spread InterBank Group charges its customers is widened from the spread on prices that IFX Ltd. receives from its counterparties.
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Lol! This is another downside of trading with poorly capitalized firms. Firms like RFXT do not have the kind of trade volume needed to get access to the best prices in the interbank market (although that doesn't stop these same firms from exagerrating their access to "interbank pricing.")
As it stands Royal Forex trading is clearing its trades through IFX? How on earth are you going to get good pricing trading with RFXT when they have to go cup in hand to one of their competitors to get their quotes? Why can't RFXT get a line of credit with a bank like the larger players get? The fact that they can't should send up red flags that these firms are far riskier to trade with than the more well established players.
The more you learn about how smaller forex firms operate (the fraud, the insolvency, the lousy pricing) the more traders should thank their lucky stars the NFA has raised capital requirements to $5 million because this industry is badly in need on an enema.