FXCM
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| Forex Capital Markets | |
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| Type | Private |
|---|---|
| Founded | 1999 |
| Headquarters | New York, New York |
| Key people | Drew Niv, CEO |
| Industry | Finance |
| Products | Foreign Exchange |
| Website | www.fxcm.com |
FXCM supplies online trading services for retail speculators in the foreign exchange market and is one of the largest non-bank foreign currency markets that specializes solely in spot FX. The company has 78,000 clients and over 400 institutional customers from more than 80 countries. Approximately 500 employees, based in offices in New York, London, Dallas, San Francisco, Hong Kong, Tokyo provide 24-hour, multi-lingual sales, dealing, administrative, and technical support 7 days a week.
The retail foreign exchange market is controversial because few retail traders make money, and because of the existence of many forex scams. According to the Wall Street Journal (Currency Markets Draw Speculation, Fraud July 26, 2005) "Even people running the trading shops warn clients against trying to time the market. 'If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised.' " [1]
Forex Capital Markets (FXCM) is entrenched in the bankruptcy proceedings of Refco, Inc (OTC:RFXCQ). Refco, a commodities brokerage that collapsed amid an accounting scandal last year currently owns a 35% share of FXCM, which is now in receivership. FXCM is currently backing a client led lawsuit against REFCO.
FXCM is a registered Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and is a member of the National Futures Association (NFA). Ownership and regulatory information on FXCM are available at its National Futures Association (NFA) listing [2].
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[edit] Services
The company supplies most of its services through three primary websites: FXCM, the company's flagship site; FXCM Trading Room, which offers numerous resources for trading the market; and Daily FX, which is a leading source for foreign exchange and economic news, as well as information, advice, and resources pertaining to the global currency market. For new traders, FXCM also provides a variety of learning resources, through such products as the FX Powercourse and free live webinars. The firm's Chief Strategists, Kathy Lien and Boris Schlossberg are well known and frequently quoted by major business news outlets.
Like most market makers, FXCM's revenues come from five main sources:
1) The Internal matching of client trades - If the spread is 3 pips, and FXCM is able to match a buyer and a seller internally, they collect 6 pips.
2) The Spread - The difference between the spread FXCM quotes to clients and the spread FXCM receives from the banks they offset from. If FXCM is unable to match a buyer and seller internally, FXCM will, after the positions become sufficiently large, offset with larger banks that quote them cheaper spreads.
3) Interest on client deposits (like most online brokers, such as E*TRADE, these are a dependable and large source of income)
4) The firm's own speculative positions in the market.
5) Losses on clients' trades that were never offset.
Not all of the above apply to FXCM's "no dealing desk" trading option. In this setup, trades are routed straight through to banks and therefore offset immediately. This allows clients direct access to bank liquidity. However, all trades are still cleared through a dealing desk of some type as all banks have dealing desks.
[edit] Awards
FXCM has been awarded Best Retail Platform by FX Week in 2004, and has been recognized as Best Currency Broker by both Shares and T2W Member Choice Awards in 2004, as well as Best FX Specialist by Stocks & Commodities in 2002, 2003, and 2004.
[edit] Fines/Administrative Actions
NFA
On November 28, 2005, NFA issued a Complaint charging FXCM with using deficient promotional material that was misleading and fraudulent. FXCM was fined $110,000, and was forced to make changes to its website. To view the complaint and decision, please refer to the following link: http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0308179&case=05BCC00025&contrib=NFA
CFTC
Gibraltar Monetary Corporation, an IB of FXCM, was charged with defrauding customers. However, FXCM was found not liable as principal for the misrepresentations made by Gibraltar Monetary Corporation. Full details of the Commodity Futures Trading Commission injunction against FXCM can be viewed here: http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0308179&case=04-80132&contrib=CFTC
