NFA Forex Dealer Dead Pool

[WhipSawFX]

Thought I would bump this post, since forexsavior just did a bunch of post overs of it, without response... how about a response forexsavior ?

Originally Posted by EFX_justin

From Phil Davis at NonDealingDesk.com about Forexscholar and his possible motives.....

"It appears Chris's suspicion regarding Forexscholar's original posting declaring all but a small handfull of well capitalized market makers are destined to close their doors may be more than a suspicion. I spent a hour or so this morning doing a little research and discovered the Forexscholar lives just 5.4 miles from FXCM's downtown Manhattan offices.

Considering the distribution of the world's population, I'm hard pressed to think that this is just a mere coincidence. If, in fact, Forexscholar does work for FXCM it shows how low the company will stoop to exclude real competition in the marketplace. As Chris points out, the fact that Forexscholar put MBTrading/EFX name in the title of each of the forum postings only shows that ECN (non-dealing desk) trading is a real threat to the market maker business model.

Regarding capitalization requirements, anyone who knows anything about business knows that no properly managed company deposits phenomenally more than it has to deposit in an account that generates a nominal rate of return unless it has a good reason to do so. I would suggest that the well capitalized FCMs cited in Forexscholar's original post show those high balances for one reason and one reason only - it makes the look stronger than the little guy.

In FXCM's case, (IMHO) the only reason they show the biggest account is that they're using that to persuade traders that they're the best capitalized FCM in the business. Well, they ought to be. They've been screwing clients worldwide since 2001 and now want to change the rules of the game - not to protect the trader mind you but to insulate themselves from legitimate competition.

Any good financial planner will tell you that a balanced investment portfolio will include CDs and other time deposits but not to the exclusion of other asset classes. My guess is that the $50M they show is chump change considering the revenues they generate pulling off 2 pips per trade on the 90,000 traders they have in their camp. In 2005 they reported $154M. If that figure is accurate it's not a stretch to think that they currently have at least $200M in their political war chest considering the fact that they were willing to pay upwards of $110M to buy the now defunct Refco client list.

There's certainly no concern on my part that FXCM is going to go under unless, of course, the NFA decides to shut them down for some other reason. I'm not concerned about MBTrading/EFX either. They are but one of a small number of FCMs offering an alternative to the traditional bucket shop and push comes to shove, if they need to meet a higher cap requirement, I'm confident they'll find a way to make that happen. Their business model is not only an ethical one, it's a viable one that's obviously scaring the beJesus out of FXCM. Otherwise, FXCM wouldn't be encouraging its minions to create a fear campaign to drive MBTrading/EFX and others out of the business.

Again, it's hard for me to believe that Forexscholoar isn't in the employ of FXCM so members might want to take what he/she had to say with a big block of salt."

Phil Davis - The NDD Forum - Savvy Traders Want to Know - View Single Post - EFX/MB Trading Going Under?

[WhipSawFX]

Its interesting to note that the company which took over American National Trading Corporation, Peregrine was a few years ago, having exactly the same problem maintaining net capital as required by the CFTC, and this was at the time, when the requirements were a lot less stringent. And yet, the company is still trading years later, has now plenty of net capital to cover the current requirements, and is fact in a similar situation as FXCM as to its capabilities to cover any proposed net capital requirement changes.
As of 07/06/2007 http://www.cftc.gov/files/tm/fcm/tmfcmdata0706.pdf

Peregrines Net Capital : 13,758,638 
Requirement           :  5,000,000 
Excess                :  8,758,638
Requirement Cover     :  2.75x
American Trading      :  2,159,273 
Requirement           :  1,000,000 
Excess                :  1,159,273
Requirement Cover     :  2.16x

Here's how some other brokers compare normalised with their ability to meet the requirements.

COMPANY     | Net capital |  Required  | Excess    | Multiple
FX Solutions| 17,295,130  |  2,064,386 | 15,230,744  | 8.38
GFT         | 49,664,118  | 6,904,864  | 42,759,254  | 7.19x
OANDA       | 49,222,317  |  9,172,410 | 40,049,907  | 5.37
Gain Capital| 18,930,914  | 4,341,150  | 14,589,764  | 4.36x
I-TRADE-FX  | 3,957,357   |  1,000,000 | 2,957,357   |>3.96x
FCM         | 44,626,492  | 12,977,713 | 31,648,779  | 3.44x
Peregrine   | 13,758,638  |  5,000,000 |  8,758,638   | 2.75x
InterbankFX | 8,584,434   |  3,719,721 | 4,864,713   | 2.31x
1-World     | 2,308,460   |  1,000,000 | 1,308,460   |>2.31x
AMTC        | 2,159,273   |  1,000,000 | 1,159,273   | 2.16x

The pretext of this thread is dead firms walking ... as I've posted before, if anything this is simply consolidation for those that can't meet the requirements, and adjusting the books for most so that more of the companies capital is available for 'net capital'.
Its also interesting to note Peregrines regulatory actions :
BASIC Details
BASIC Case Summary
BASIC Case Summary
BASIC Case Summary
(fined for not meeting net capital requirements in 2000)
--------------------------------------
from : OANDA FXMessage: NFA Forex Dealer Dead Pool

Originally posted by forexfigure:
[qb]

It is important information. For too long a lot of this has been swept under the rug in the retail forex industry. A lot of traders have been burned as a result. Whistle blowing is often greeted with harsh responses from those who want to keep all this information secret. But I feel the more places I can blow the whistle at the better it is for the industry. [/qb]

I've asked you a number of times, what you meant by this statement. Are you sweeping your ineptitude under the rug ? And what and who are you whistle blowing for ?
Whistleblower - Wikipedia, the free encyclopedia

A whistleblower is an employee, former employee, or member of an organization, especially a business or government agency, who reports misconduct to people or entities that have the power and presumed willingness to take corrective action. Generally the misconduct is a violation of law, rule, regulation and/or a direct threat to public interest — fraud, health, safety violations, and corruption are just a few examples. For instance, Jeffrey Wigand is well-known in the United States for exposing the Big Tobacco scandal, revealing that executives of the companies knew that cigarettes were addictive and that they added other carcinogenic ingredients to the cigarettes.

Which company do you work for ? and what are they doing wrong ?
from : EFX/MB Trading Going Under? - Page 3 - The NDD Forum - Savvy Traders Want to Know

Moderator: It's appropriate this thread be ended with "badass's" comment but it shouldn't dissuade members from reading the rest of the thread because I think it has been highly instructive. It's interesting that badass's IP address is only 12 miles West of Forexscholar's which is only 5.4 miles West of FXCM's Manhattan offices. Like badass, I'm sure the inner circle at FXCM wishes this fear campaign (whoever started it) hadn't gotten as much attention as it has.

Found the above graph interesting from FXCM's Alexia page.
Related Info for: fxcm.com/
I would encourage everyone to read the thread over at Forex No Dealing Desk Trading | Forex Trading Instruction
EFX/MB Trading Going Under? - The NDD Forum - Savvy Traders Want to Know
Here's the last post in it

I am closing additional posts to this thread because the ones that have been recently posted here distract from its central purpose. This thread is a must read for those who are visiting the forum for the first time. I suggest new visitors start reading it from the very beginning. It started almost immediately after I published a commentary on my blog related to FXCM's offer of no dealing desk trading.
It's interesting to note that neither Forexscholar and Basdass returned to the forum to refute their "outing" so there's little doubt in my mind that they are, in fact, shills for FXCM whether employed by FXCM or not. It's also been brought to my attention that identical posts suggesting that all FCMs with less than $5M in Adjusted Net Capital should be abandoned because the NFA is going to shut them done have been posted on a half dozen other forums. The poster, Forexsavior, obviously has little imagination otherwise he wouldn't have come up with a name with such a striking similarity to the one he used here.
From the very beginning of this forum, I have tried to get brokers to openly discuss the dealing vs non-dealing desk issue and [apart from Justin at EFX and Steve at MBtrading who obviously speak for non-dealing desk trading] no broker or broker representative has come forward to defend dealing desk brokerage. Had Forexscholar [and for that matter Badass] clearly identified themselves, stating the nature of their affiliation with FXCM, their comments would have been very instructive. Unfortunately, they chose to hide their real identities behind manufactured personas. I can only conclude that this is the case because there isn't a broker out there who can defend the indefensible. Members, of course, are intelligent enough to draw their own conclusions.

Personally, I dont think he's a shill for FXCM, or anyone else. But its funny as hell, and some coincidence. If FXCM or another company were doing anything like this, they would have employed someone way smarter than this cutnpaster. But why would anyone post the exact same thread on every forum he can find :
Proposed NFA Capital Requirement - Forex Trading
Forexnews.com
Proposed NFA Capital Requirement - Page 17
http://www.talkgold.com//forum/showthread.php?t=177822
NFA Forex Dealer Dead Pool - The NDD Forum - Savvy Traders Want to Know
http://www.fxfisherman.com/forums/fo...dead-pool.html
Forums - Proposed NFA Capital Requirement
PiP Trader Forum: NFA Forex Dealer Dead Pool
Are Your Funds Safe? NFA to Shut down small forex fcms - Forex Forum
Proposed NFA Capital Requirement - Forex Trading
MoneyTec Traders Community Forum

[akforex]

Dear Trader:
The Forex industry could be in for a major structural change — soon.
This change has the potential to benefit Forex Capital Markets, LLC (“FXCM”); however, we believe many forex brokers may not survive.
Our industry’s regulating agency, the National Futures Association (“NFA”), has proposed new financial requirements for every Forex Dealer Member (“FDM”). Spelled out in their “Request for Comments on Forex Proposals,” dated June 19, 2007, the NFA’s proposed requirements call for the following:

• All FDMs must maintain at all times a net worth of $5 million;
• Larger FDMs, particularly those that have a dealing desk, could potentially face net excess capital requirements significantly higher than the minimum under the proposed new rules;
• Where appropriate, the NFA may require an FDM’s annual financial statement to be certified by an independent public accountant.

FXCM’s current financial situation well exceeds NFA’s proposed requirements.
As of June 30, 2007, FXCM has over $44 million in adjusted net capital, and for the last six years we have had our financial statements audited by an independent, certified public accounting firm.
We believe the NFA is proposing these requirements because of the troubling number of insolvencies and near-insolvencies that have recently plagued the forex industry. According to the NFA:

• In 2003, a Forex Dealer Member misappropriated almost $2 million in customer funds, driving the company into bankruptcy. (The CFTC is currently attempting to salvage some of the customers' funds.)
• Since March of this year, eight different FDMs have fallen under the “early warning” requirement of $1.5 million.
• More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million.

Industry-wide, there is now concern that some Forex Dealer Members may be unable to meet their financial obligations to customers in the event the increased capital requirements take effect. A review of the current net capital positions of the 43 Forex Dealer Members available on the following CFTC web page clearly demonstrates that this concern is justified. View CFTC Web Page
As you can see from the financial data compiled by the CFTC, FXCM reports an adjusted net capital of over $44 million—far greater than the proposed financial requirement. Based on the most current available CFTC financial data, at least 22 FDMs would not be able to meet the new $5 million minimum net capital requirement. These firms are currently reporting net capital levels below $5 million. If the new capital level is imposed, these firms will either have to obtain more capital or close down. Because larger brokers may also face higher capital requirements, FXCM believes that several of these larger firms may also be unable to meet the new requirements, even though they presently have in excess of $5 million in adjusted net capital.
In the event that some of these firms close down—or worse, are shut down by the NFA—we are concerned that customer funds, or at least their timely and orderly repayment, could be jeopardized.
We realize that many forex traders have accounts with multiple forex brokers. That is why we advise you to make sure all your trading accounts are held at firms that are adequately capitalized.
If you have an account with a possibly endangered firm, we believe, depending on when the NFA proposal takes effect, that the time may be fast approaching to consider moving those funds while the opportunity still exists.
Our industry is changing, and the new proposed regulations are intended to put every FDM, and the industry itself, on a more secure financial footing. We welcome the NFA’s proposed changes because the effect will ultimately lead to clients trading through regulated brokers that are better capitalized or have access to greater financial resources.
Please contact us if you have any questions regarding these changes.
We look forward to serving you.
Best regards,

[forex scholar]

The great consolidation has begun. A few days ago PFG purchased Dead Pool Member American National Trading Corporation. Expect more of these types of purchases in the months ahead as the FX world contintues to evolve in light of the proposed capital requirement increase:

August 23, 2007
Peregrine Financial Group, Inc. (PFG) today announced it is purchasing the assets of American National Trading Corporation (ANTC), which is headquartered in Los Angeles, CA. ANTC is a successful FCM which conducts business in futures, foreign exchange, and managed accounts.

PFG will transfer ANTC customer accounts as quickly as possible.

"PFG and ANTC are joining forces to better serve ANTC’s customers," said PFG Chairman and Chief Executive Officer Russell R. Wasendorf, Sr. "There are so many synergies, and we believe there will be significant benefits to ANTC customers including:

• Ability to utilize PFG’s proprietary online trading system, BEST Direct™
• The opportunity to use multiple electronic trading platforms
• Unique and additional suite of managed futures and forex product offerings
• Auto trading systems and other exclusive electronic capabilities for clients."

PFG, one of the largest non-clearing U.S. FCMs, was registered in 1990 and has headquarters in Chicago, IL with customers, affiliates and brokerage offices in more than 80 countries. It has experienced rapid expansion in the past several years through organic growth as well as through strategic acquisitions.

ANTC was founded in 1988. It is led by Chairman Don Varden and President Guy Zummo in Los Angeles, CA.

[forex scholar]

Update on Swiss Regulation

It appears that the winds of change are blowing in Switzerland according to FX Street:
Forex Street Weblog: Wind of important changes in Switzerland

Hi Everybody
As you may probably already know, SFBC (Swiss Federal Banking Commission) is decided to regulate the Foreign Exchange business in Switzerland . This process already started a couple of months ago and some important brokerages are already going through the process of getting SFBC’s approval.
One of my sources in Switzerland told me this morning that SFBC is implementing big changes in the way Swiss brokers use to work...
The restrictions that SFBC will require to brokers to implement to get their approval will probably force those not strong enough to disappear and this process could be faster than we think and could take place before the end of the year.

I’ll keep you posted about all this very interesting process.
Under my point of view, the fact that SFBC puts order in the Swiss Foreign Exchange business should be considered as a very good news for all the community, but we must remain alert over the whole process.
Francesc

So it could be that by the end of the year Switzerland will have instituted forex regulation at the retail level and the industry will not have to suffer any more Tradex Swiss AG style shenanigans.

[forex scholar]

Well it's clear that the NFA proposal is having an impact in the industry already. For the second time in a week a smaller firm in the Dead Pool has announced merger plans. They wouldn't be doing this if they had the capital to stay in business on their own. This shows you how serious an issue this is. The pressure is being wratched up and the time is fast approaching when those firms below $5 million will have to either join the borg, or die.

Royal Forex Trading LLC. Future Plans

Dear Valued Client,
I am pleased to announce that there has been a very big development for Royal Forex Trading. Before that, I wish to bring to your attention the minimum adjusted net capital requirement proposed by the National Futures Association (NFA). The NFA recently circulated a proposal calling all the FCM's to adjust their minimum net capital requirement from $1 million to $5 million to avoid risks to the customers.
Royal Forex Trading fielded many inquiries for several days and we addressed the issue in our last corporate newsletter. We believe the NFA is taking appropriate measures if they decide to increase the net capital limit for FCMs. Bottom line; this eliminates many inexperienced brokers.
RFXT’s management has been in the industry for many years and we believe we have adequate resources as well as a full fledged backup plan.
In the midst of all this, we have been approached by several companies inviting us to form a partnership. After further due diligence, we are very close to striking a deal with a company whose name cannot be mentioned at this juncture. This entity has an 8 year track record and does not hold a single complaint with the NFA. Their net capital is well over $5 million and they are licensed to do business in many continents.
In the past few weeks, we have been holding several conferences and meetings to finalize the deal. Upon completion of the deal, the following will occur:
Ø Royal Forex Trading will join as a division of a much larger entity.
Ø Royal Forex Trading will officially re-locate to Wall Street, the Hub of major financial institutions.
Ø Royal Forex Trading will retain its Service Desk.
Ø Royal Forex Trading will in the very near future be providing various other products like including Crude, Gold and Silver CFD’s, Currency Options as well as many other new and exciting products.
Ø Royal Forex Trading will be opening branches around the world.
Ø Royal Forex Trading will continue to provide superior execution and excellent customer support.
Ø Royal Forex Trading will be developing an Institutional Desk.
In the end, you as a client will benefit immensely from this merger and that is what we have always wanted; world class service for our clients.
I thank you from the bottom of my heart for all the trust you have put in us and I appreciate the excellent feedbacks we received during this "critical" phase. As we promised, our main goal and mission is and will always be to satisfy our clients beyond expectation.
Thank you
--
Rayan Elannan
President & Co-founder
Royal Forex Trading LLC

[forex scholar]

Meanwhile...

The rest of the industry is moving on to address the capital requirement issue. It's been commented on in the media, it's been commented on by numerous firms, it has spurred two mergers already. This issue is not going away and I'm glad to see a lot of the major FX firms going on the record as supporting this proposal. And this statement by FXCM is the strongest of any firm to date: NFA Proposal - FXCM Comment

Dear Client,
The Forex industry could be in for a major structural change — soon.
This change has the potential to benefit Forex Capital Markets, LLC (“FXCM”); however, we believe many forex brokers may not survive.
Our industry’s regulating agency, the National Futures Association (“NFA”), has proposed new financial requirements for every Forex Dealer Member (“FDM”). Spelled out in their “Request for Comments on Forex Proposals,” dated June 19, 2007, the NFA’s proposed requirements call for the following:
• All FDMs must maintain at all times a net worth of $5 million;
• Larger FDMs, particularly those that have a dealing desk, could potentially face net excess capital requirements significantly higher than the minimum under the proposed new rules;
• Where appropriate, the NFA may require an FDM’s annual financial statement to be certified by an independent public accountant.
FXCM’s current financial situation well exceeds NFA’s proposed requirements.
As of June 30, 2007, FXCM has over $44 million in adjusted net capital, and for the last six years we have had our financial statements audited by an independent, certified public accounting firm.
We believe the NFA is proposing these requirements because of the troubling number of insolvencies and near-insolvencies that have recently plagued the forex industry. According to the NFA:
• In 2003, a Forex Dealer Member misappropriated almost $2 million in customer funds, driving the company into bankruptcy. (The CFTC is currently attempting to salvage some of the customers' funds.)
• Since March of this year, eight different FDMs have fallen under the “early warning” requirement of $1.5 million.
• More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million.
Industry-wide, there is now concern that some Forex Dealer Members may be unable to meet their financial obligations to customers in the event the increased capital requirements take effect. A review of the current net capital positions of the 43 Forex Dealer Members available on the following CFTC web page clearly demonstrates that this concern is justified. View CFTC Web Page
As you can see from the financial data compiled by the CFTC, FXCM reports an adjusted net capital of over $44 million—far greater than the proposed financial requirement. Based on the most current available CFTC financial data, at least 22 FDMs would not be able to meet the new $5 million minimum net capital requirement. These firms are currently reporting net capital levels below $5 million. If the new capital level is imposed, these firms will either have to obtain more capital or close down. Because larger brokers may also face higher capital requirements, FXCM believes that several of these larger firms may also be unable to meet the new requirements, even though they presently have in excess of $5 million in adjusted net capital.
In the event that some of these firms close down—or worse, are shut down by the NFA—we are concerned that customer funds, or at least their timely and orderly repayment, could be jeopardized.
We realize that many forex traders have accounts with multiple forex brokers. That is why we advise you to make sure all your trading accounts are held at firms that are adequately capitalized.
If you have an account with a possibly endangered firm, we believe, depending on when the NFA proposal takes effect, that the time may be fast approaching to consider moving those funds while the opportunity still exists.
Our industry is changing, and the new proposed regulations are intended to put every FDM, and the industry itself, on a more secure financial footing. We welcome the NFA’s proposed changes because the effect will ultimately lead to clients trading through regulated brokers that are better capitalized or have access to greater financial resources.
Please contact us if you have any questions regarding these changes.
We look forward to serving you.
Best regards,
Sales & Client Services
Forex Capital Markets, LLC
Financial Square
32 Old Slip, 10th Floor
New York , NY 10005
1-888-50-FOREX (36739)
info@fxcm.com/
Forex | currency trading | forex trading | forex broker

[WhipSawFX]

Here's a couple of snipets I stumbled upon whilst looking up the regulatory history of the best capitalised forex firms.

In November 2005, FXCM was fined $110,000 to settle a complaint brought against them by the NFA claiming violation of Rule C.R.2-36(b)(1) which is defined as "Cheat, defraud, deceive forex customers" . FCM in no way admitted or denied the charge, and made the settlement with the NFA. You can find the details here :
BASIC Case Summary

In January 2006, the NFA did a follow up audit. The follow on audit revealled that FXCM had not abided by the agreement which had the resolved the previous regulatory action. Thus the NFA initiated another complaint against FXCM, which is as yet unresolved (I believe) for violation of Rule C.R.2-36(b)(1) which is defined as "Cheat, defraud, deceive forex customers"
The audit also identified potential failings of "FXCM's anti-money laundering program (AML) "as evidenced by the high number of accounts FXCM opened for Nigerian nationals, without identifying those accounts as high risk for potential money laundering." [quote from http://www.nfa.futures.org/basicnet/...px?seqnum=1023 ]
You can find the details here :
BASIC Case Summary
The particular concern about Forex companies opening accounts for Nigerian nationals is that Nigeria is the origin of a number of internet scams commonly called the "Nigerian 419 Scam" If you dont know what the Nigerian 419 scam check out the the following very entertainment link :
Ebola Monkey Man: Nigerian 419 Scam

I personally wouldnt go near any Forex Dealer Merchant that had been subject to regulatory action, let alone bought to book for violation of Rule C.R.2-36(b)(1). I've done a check and found the following 3 firms have not been subject of any regulatory action, and are the best capitalised.

GLOBAL FUTURES & FOREX LTD (Forex Trading: Online Currency Trading from Global Forex Trading)
BASIC Details

OANDA ( http://fxtrade.oanda.com/ )
BASIC Details

FX SOLUTIONS LLC (FX Solutions - Simplified Forex Trading with Premier Forex Trading System)
BASIC Details

COMPANY      | Net capital| Required  | Excess     | Multiple
GFT          | 49,664,118 | 6,904,864 | 42,759,254 | 7.19x
OANDA        | 49,222,317 | 9,172,410 | 40,049,907 | 5.37
FX Solutions | 17,295,130 | 2,064,386 | 15,230,744 | 8.38

Does anyone else knows of any FDM's with no regulatory problems and are well capitalised ?


disclaimer : I in no way qualified to say that fxcm is Cheating, defrauding, or deceiving forex customers, or that they ever have. However, our regulatory body the NFA have made complaints that they have.

[forex scholar]

That is the title of an article by John Jagerson over at PFXglobal:
http://www.pfxglobal.com/index.php?o...9&Item id=116

The retail forex business is young and relatively unregulated but that won't last. I was surprised that the regulators have not moved faster in the U.S. when the Refco disaster occurred a few years ago but we are starting to see some action. What's coming down the pipeline might affect your dealer so do your homework and check them out.

Because many forex dealers are headquartered in the U.S. they are subject to the NFA and the CFTC. Although registration requirements for FCMs (Futures Commission Merchants) have been loose in the past, they are tightening fast. There are two big changes coming down the pipe. The one I think retail traders should be aware of is the change to the net capitalization requirement. There is a minimum amount of cash (outside of customer accounts) that an FCM has to have to stay in business. That minimum used to be $250,000 then was recently raised to $1,000,000 and it is now going to be raised to $5,000,000 in the very near term. Did you know that if you are working with a dealer in the U.S. you can find out how much net capital they have? Just go the the CFTC's website and look up their financial data for FCMs. In fact, if you google "CFTC" it will give you a link right to the spreadsheet you want to look at. There is a bunch of other interesting goodies in that spreadsheet as well.

The bottom line is that you should know whether your dealer can meet those requirements because if they can't your account could be tied up while they shut down their operations or raise capital. I realize most of us are working with large dealers but smaller boutique firms have a certain appeal and service levels that attracts a lot of traders. Just make sure you are not working with someone that is too small.

Couldn't have said it better myself...

[FXCMDavid]

Originally Posted by WhipSawFX

Here's a couple of snipets I stumbled upon whilst looking up the regulatory history of the best capitalised forex firms.

In November 2005, FXCM was fined $110,000 to settle a complaint brought against them by the NFA claiming violation of Rule C.R.2-36(b)(1) which is defined as "Cheat, defraud, deceive forex customers" . FCM in no way admitted or denied the charge, and made the settlement with the NFA. You can find the details here :
BASIC Case Summary

In January 2006, the NFA did a follow up audit. The follow on audit revealled that FXCM had not abided by the agreement which had the resolved the previous regulatory action. Thus the NFA initiated another complaint against FXCM, which is as yet unresolved (I believe) for violation of Rule C.R.2-36(b)(1) which is defined as "Cheat, defraud, deceive forex customers"
The audit also identified potential failings of "FXCM's anti-money laundering program (AML) "as evidenced by the high number of accounts FXCM opened for Nigerian nationals, without identifying those accounts as high risk for potential money laundering." [quote from http://www.nfa.futures.org/basicnet/...px?seqnum=1023 ]
You can find the details here :
BASIC Case Summary
The particular concern about Forex companies opening accounts for Nigerian nationals is that Nigeria is the origin of a number of internet scams commonly called the "Nigerian 419 Scam" If you dont know what the Nigerian 419 scam check out the the following very entertainment link :
Ebola Monkey Man: Nigerian 419 Scam

I personally wouldnt go near any Forex Dealer Merchant that had been subject to regulatory action, let alone bought to book for violation of Rule C.R.2-36(b)(1). I've done a check and found the following 3 firms have not been subject of any regulatory action, and are the best capitalised.

GLOBAL FUTURES & FOREX LTD (Forex Trading: Online Currency Trading from Global Forex Trading)
BASIC Details

OANDA ( http://fxtrade.oanda.com/ )
BASIC Details

FX SOLUTIONS LLC (FX Solutions - Simplified Forex Trading with Premier Forex Trading System)
BASIC Details

COMPANY      | Net capital| Required  | Excess     | Multiple
GFT          | 49,664,118 | 6,904,864 | 42,759,254 | 7.19x
OANDA        | 49,222,317 | 9,172,410 | 40,049,907 | 5.37
FX Solutions | 17,295,130 | 2,064,386 | 15,230,744 | 8.38

Does anyone else knows of any FDM's with no regulatory problems and are well capitalised ?


disclaimer : I in no way qualified to say that fxcm is Cheating, defrauding, or deceiving forex customers, or that they ever have. However, our regulatory body the NFA have made complaints that they have.

My name is David Waring and I am the Managing Director in charge of Business Development here at FXCM. I came across this post and would like to address the community with a response to make sure that both sides of the story are properly represented.

On December 8th, the National Futures Association ("NFA") filed a complaint against FXCM. The NFA complaint alleges that certain promotional material used by FXCM and some of its Introducing Brokers was deficient. The NFA also cited FXCM for a single alleged deficiency in its anti-money laundering ("AML") compliance program.

FXCM maintains comprehensive compliance and AML programs and has long since addressed all of the issues identified by the NFA in the complaint. We believe our firm has more staff and resources dedicated to compliance than all other Forex Dealer Members and most other Futures Commission Merchants. We have terminated hundreds of Introducing Brokers and turned away millions of dollars of potential business due to compliance related concerns. In light of our significant investment in compliance infrastructure and training, FXCM is troubled by the NFA's decision to bring this current complaint. Accordingly, FXCM will be exploring all options presently available to it, including litigation, to bring this matter to conclusion in a manner that gives proper acknowledgment to FXCM's integrity and the strength of our compliance program.

The NFA complaint comes more than six months after the conclusion of a routine NFA on-site examination of FXCM, which itself lasted almost six months. During this examination, FXCM provided NFA with unrestricted access to thousands of documents, including complete records of all promotional material used by FXCM. These records of promotional material included access to websites and copies of all forms of advertising used by the firm such as web banner ads, web click ads, e-mails and print media.

The NFA complaint identifies five instances where it alleges FXCM used deficient and misleading promotional material. Two of the examples cited by NFA are as follows:

1. "Whichever web site you use - FXCM or FXCM TR - you will be able to experience the same excellent order execution, price certainty and 24-hour support."

2. "Benefits of Forex Trading . . . Leverage up to 200 to 1" and "Benefits of Foreign Exchange Trading . . . Leverage up to 100 to 1."

FXCM believes the statement in Example 1 above is true and not misleading. The statement suggests that regardless of which website a client chooses to use, FXCM's award winning trading platform will be the principal client interface providing pricing. FXCM also believes that the statements contained in Example 2 above are not deficient or misleading. The statements in Example 2 with respect to leverage appeared in an FXCM Trading Seminar PowerPoint presentation which contained a full page risk disclosure slide at the outset dedicated to the issue of leverage risk. The risk disclosure stated in part: "Leveraged foreign exchange and options trading carries a significant level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you." FXCM believes that the NFA's published interpretive guidance on leverage risk disclosure does not require repeated risk disclosures each and every time the availability of leverage as an account feature is mentioned in a single piece of promotional material.

The NFA complaint also alleges marketing deficiencies on the websites of a small number of Introducing Brokers. As part of its compliance program, FXCM regularly monitors the websites and promotional material used by FXCM's hundreds of Introducing Brokers. Each week FXCM's compliance staff reviews hundreds of webpages and, while the process is not infallible, various types of deficiencies are routinely identified and then communicated to the Introducing Broker so that they can be corrected promptly. Several of the examples of alleged promotional material deficiencies identified by the NFA in its complaint had already been identified by FXCM's compliance staff through routine surveillance and were either in the process of being remedied or had been remedied prior to the conclusion of NFA's on-site examination.

The NFA complaint also alleges that FXCM failed to establish and implement an adequate AML program. This allegation is especially unfortunate as the fact is that FXCM maintains a vigorous and comprehensive AML program. Under a provision of the USA Patriot Act and applicable federal regulations, FXCM submits its AML program to an independent, outside audit each year and has never been cited for any deficiencies in its AML program.

The allegation contained in the NFA complaint with respect to the FXCM's AML program centers on the NFA's claim that FXCM failed to identify a small number of accounts from Nigeria as "high risk accounts." During the NFA's on-site examination of FXCM, we explained to the NFA managers that because FXCM already had in place a comprehensive, individual account review program, FXCM did not believe that its Nigerian accounts needed to be subject to additional due diligence as discussed in the Interpretive Notice to NFA Compliance Rule 2-9. We explained further that the Interpretive Notice to NFA Compliance Rule 2-9 clearly states that with respect to "high-risk" accounts the decision as to what "if any, additional monitoring of account activity is appropriate" is left up to the discretion of the individual firm. At no time has the NFA suggested or alleged that any money laundering took place at FXCM. The NFA has also not suggested or alleged that FXCM was required to perform any additional due diligence with respect to activity in these accounts. Rather, the NFA's sole allegation with respect to AML appears to be with respect to the how these accounts were designated or "coded" internally. We do not believe that a dispute over this single issue amounts to a failure by FXCM to "establish and implement" an adequate AML program.

FXCM is committed to being the forex industry leader in compliance and adheres to the highest standards in carrying out all of its regulatory obligations. Please do not hesitate to contact us at compliance@fxcm.com if you have any further questions or concerns about this matter.


Sincerely,

David Waring
Managing Director
FX Business Development
Forex Capital Markets LLC
32 Old Slip, 10th Floor
New York, NY 10005
Tel (212) 897-7660
Fax (212) 897-7669
Email: dwaring@fxcm.com