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FXCM fined for for failing to treat its customers fairly

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New York
Trading Experience: Intermediate
Platform: Strategy Trader
Jason Rogers's Avatar
Posts: 166 since Aug 2010
Thanks: 122 given, 153 received

sands View Post

The settlement, is certainly a step towards addressing the problems here. In my opinion however is not a 'significant step' as Brian Callan (FXCM UK CE) is quoted as saying. The significant step in my view is providing restitution to your clients (which is a step you are noted as having started) and secondly to ensure practical internal steps to ensure higher standards are maintained in future for your clients.

As a potential customer I'm quite alarmed at reading this FCA statement, and it has damaged FXCM's reputation in my view. In my position as a commentator, potential client and as an investor, I would like to pose the following questions that I hope you can answer for me:

Hi Sands,

Thank you for your questions. As you mentioned, under the terms of our settlement with the FCA, FXCM has agreed to pay fines totaling 4 million to the FCA and to provide approximately $10 million in restitution to the affected clients. All clients receiving restitution will be notified within 60 days.

sands View Post
How have FXCM addressed the issue of transparency to the regulators since these issues were raised?

In compliance with NFA rules regarding Price Slippage and Price Re-quoting that were finalized in 2012, FXCM LLC provides daily trade reports to the NFA which monitors and supervises FXCM LLC's activity including information on the price where all client orders are filled and the corresponding price where those orders are offset with our liquidity providers. All of FXCM's global trading entities including FXCM UK execute client rolling spot forex transactions as a riskless principal with FXCM LLC, so the same execution standards are applied for all of our clients worldwide.

sands View Post
What steps have FXCM taken to improve handling of future conflicts of interest in line with their policy to treating customers fairly?

FXCM took major steps to address potential conflicts of when we first introduced the No Dealing Desk (NDD) forex execution model in 2006/7, back when the vast majority of brokers in the industry were still using a dealing desk model. We made this change because we believed then and we still believe now that the NDD model is more fair and transparent in that it offers competitive, market driven prices that are sourced from multiple liquidity providers.

In switching to the NDD model, we left behind the fixed-spread dealing desk model which was the norm at the time. This meant that our clients enjoyed benefits that weren't traditionally available to retail forex traders in the past such as the ability to set stops and limits as close as 1 pip from the market price, with no restrictions on setting orders during news events, and no re-quotes. This eliminated a lot of the conflicts of interest that are built into dealing desk model, and helped FXCM grow into an industry leader with over $1 billion in customer funds.

Our 2010 updates to pass on all positive slippage to our clients have served to enhance our trade execution model. As a result, FXCM is currently one of the only firms in the industry to give price improvements on both limit orders AND market orders. Often when a dealing desk broker re-quotes traders, they receive a re-quote when the market moves in their favor, but don't receive a re-quote when the market moves against them. It's possible that this asymmetrical application of re-quotes could cause traders to miss out on potential positive slippage.

At FXCM, there are no re-quotes and traders benefit from the positive slippage in full whenever it's available. In the last six months alone, FXCM clients have received price improvements totaling over $15 million. Last month, the FCA announced that they are conducting a thematic review of best execution, which we welcome to introduce best execution standards across the industry that benefit traders in the same way our traders have benefited for years.

sands View Post
And finally, this issue has been quoted as occurring between 2006 and 2010 and normal conduct has been presented by your statement as occurring in 2013. In my opinion that shows signs of improvement without necessarily defining what has been changed/improved internally. I'm sure your clients would appreciate a statement of plain and simple apology given the moral failing to your customers during the 2006-2010 period (as has been quoted in this thread). Is that something that FXCM will extend?

On behalf of everyone at FXCM, I would like to apologize for us not passing on positive slippage in full to our clients prior to 2010. I also echo the sentiments of our FXCM UK CEO Brendan Callan in saying that we hope this FCA settlement is a significant step in our efforts to put this legacy trade execution issue behind us. I appreciate your post and will also relay your feedback to our top management.

Jason Rogers
FXCM Ambassador to Online Communities

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