Before the Bust FXCM lobbied for HIGHER Leverage

spinola

Established member
614 138
Fraud Act 2006

If there is any suspicion that fxcm have been advertising one thing, but doing another as normal practice , then, clients could counter claim if they are pursued using the Fraud act 2006.http://www.legislation.gov.uk/ukpga/2006/35/contents

several handy , concise sections to protect people from Criminal Fraud.

2 Fraud by false representation

(1)A person is in breach of this section if he—
(a)dishonestly makes a false representation, and
(b)intends, by making the representation—
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.
(2)A representation is false if—
(a)it is untrue or misleading, and
(b)the person making it knows that it is, or might be, untrue or misleading.
(3)“Representation” means any representation as to fact or law, including a representation as to the state of mind of—
(a)the person making the representation, or
(b)any other person.
(4)A representation may be express or implied.
(5)For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).

http://www.legislation.gov.uk/ukpga/2006/35/section/2

Section 3.

Fraud by failing to disclose information

A person is in breach of this section if he—

(a)dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and

(b)intends, by failing to disclose the information—
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.

http://www.legislation.gov.uk/ukpga/2006/35/section/3


So, the legal technique, (as far as I understand) would be to ' counter claim ' against and if they arise a claim etc. Obviously you'd need to prove your case, or use it to see if the other party backs down etc.

But these legal games, are all adversarial , a bit like trading.

It's a nice simple statute, for a change.


Just sharing awareness of this statute .which helps deal with fraud.
 

BSD

Veteren member
3,819 985
There were certainly a lot of marketing claims made that didn't hold up.

"Disaster Warning

The 157-page prospectus for FXCM’s 2010 initial public offering warns of the disaster that could follow extreme market volatility, as happened last week.

“We may be unable to close out customer positions at a level where margin posted by the customer is sufficient to cover the customer’s losses,” the prospectus says.

Many businesses might sue customers who refuse to pay up. Not FXCM.

The prospectus goes on to describe what, in hindsight, might seem like a weakness in FXCM’s business plans: “Our policy is generally not to seek to pursue claims for negative equity against our customers.”

In other words, if customers run up big losses, FXCM will be on the hook."



And the CFTC warning is also in stark contrast to FXCM claiming that they offset client positions:


"Higher Leverage

Still, until now, FXCM tended to win even when its customers lost. In disclosure statements mandated by the U.S. Commodity Futures Trading Commission, customers are told upfront that such currency trading isn’t carried out on regulated exchanges.

“WHEN YOU SELL, THE DEALER IS THE BUYER. WHEN YOU BUY, THE DEALER IS THE SELLER,” the CFTC warning reads in capital letters. “As a result, when you lose money trading, your dealer is making money on such trades.”

http://www.bloomberg.com/news/2015-...d-the-king-of-leveraged-currency-trading.html

That's not some conspiracy loonie stating that, that's the CFTC.
 

BSD

Veteren member
3,819 985
Fast forward to 1.30 where FXCM guarantee that their clients risk is limited to the equity in their account, that clients of theirs can never lose more than their deposit, that clients will never owe a deficit as a result of trading even with higher leverage, and, as a sales tactic / jab against the competition, that their account guarantee offers "an important safeguard most forex brokers don't provide":

Indeed.

Another forex broker to whom that applies springs to mind under the harsh scrutiny of daylight.

:LOL::LOL::LOL:

https://www.youtube.com/watch?v=Vr2vnM9O0oA&feature=youtu.be
 

BSD

Veteren member
3,819 985
On the one hand I kinda feel sorry for the guys working there and unsure about what their future brings.

That said, on the other hand they musta known that they worked for what at the end of the day is a bucket shop.

Some interesting tidbits here:

http://www.trade2win.com/boards/forex-brokers/88834-fxcm-discussion.html#post1072126

FXCM manipulating it's core price, and guess to
whose detriment these things tend to pan out:

http://www.trade2win.com/boards/for...anipulating-its-core-pricing.html#post1929366

There was a thread on here about all the software brokers have to manipulate price, slippage, execution speed, etc.

Bucket Shops were banned in Livermores day, and they need to be banned again.
 

BSD

Veteren member
3,819 985
Here ya go:

Virtual dealer pt1 - a demonstration of Virtual Dealers "Delay" setting, shows how to automatically create slippage with every market order.

This video shows how a broker can easily inject prices into the market to create spikes of various sizes and if needed hunt your stops. This feature is rarely used in the industry at this time. There are much more advanced plugins and tools offered by a number of software companies, whos main purpose is to make a Brokers life easier.

This video demonstrates how a brokers Dealing Desk operates. It can accept/reject/hold your orders or create some slippage for you.


Etc:

http://www.trade2win.com/boards/for...tor-virtual-dealer-other-plugins-setting.html

Chaaaaaarming industry.

:LOL::LOL::LOL:
 
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spinola

Established member
614 138
Fast forward to 1.30 where FXCM guarantee that their clients risk is limited to the equity in their account, that clients of theirs can never lose more than their deposit, that clients will never owe a deficit as a result of trading even with higher leverage, and, as a sales tactic / jab against the competition, that their account guarantee offers "an important safeguard most forex brokers don't provide":

Indeed.

Another forex broker to whom that applies springs to mind under the harsh scrutiny of daylight.

:LOL::LOL::LOL:

https://www.youtube.com/watch?v=Vr2vnM9O0oA&feature=youtu.be

For those who are being pursued by fxcm, and their ' farce majeure ' shenanigans , you might want to download this evidence to support a case of them failing to ADEQUATELY highlight, the part of them, guarenteeing a no negative , and the reality of them now actually coming after you for a HUGE negative balance outside of their publicised promo video , above.

Naughty naughty FXCM .
 

BSD

Veteren member
3,819 985
Yah never gonna hold up in court in view of such unequivocally and strongly uttered sales promises of clear cut account guarantees where they "guarantee clients will not lose more then their deposit" slogans, that directly opens up the path to account holders counter-suing for false and misleading advertising claims.

Complete and utter PR disaster they let themselves in for.

That said, going thru some of the links highlighting a couple of unsavoury aspects of this industry it's really no wonder that over the last 20 odd years everyone and their uncle and his poodle opened up an OTC, non-exchange based brokerage.
 
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BSD

Veteren member
3,819 985
Doesn't get clearer than that.

No amount of small print legalese hidden away somewhere is gonna out-compensate this clear cut statement straight from the source:

"Is there a debit balance risk? Can I lose more money than I deposit?
Not with FXCM. It is FXCM™s policy to credit accounts to a zero balance when debit balances occur as a result of trading. One of the greatest concerns traders have about leverage is that a sizable loss could result in owing money to their broker. At FXCM, your maximum risk of loss is limited by the amount in your account.".

http://support.fxcm.com/fxts/user-guide/margin/
 

bredin

Member
80 20
When a position is opened for (say) one lot, a 100,000 currency position is opened. The trader has (say) 100:1 leverage meaning that 1,000 currency comes from the trader, the other 99,000 currency is borrowed by the broker (secured by their operating capital) and lent to the trader.

Nothing ive read in this thread leads me to believe that this is not the process in operation at FXCM.

A 100:1 leverage means that 1% of the margin is used per pip of loss. A 100 pip move completely destroys the traders margin. in the case of 1 lot 10 currency is lost per pip negative; 1000 currency will be lost in a 100 pip move (10 * 100 = 1000, the amount of margin).

Under 'normal' operation a broker can be reasonably certain that Mr. Margin Call will save their bacon by using the traders account to protect them (the broker) in a large move where there is no liquidity to take the traders order off the table as the brokers demand.

in the case of the SNB announcement, a traders (eg) 10,000 currency account can be killed, even if they are "sensible" and only use a 1 lot position, by a 1000 pip adverse move (1000 * 10 = 10,000 = total loss of account: equivalent of using 10:1 leverage from the traders perspective).

My broker reports a 7000ish pip move on the USDCHF. It is possible that there was not enough liquidity to get such a traders position off the table in the first 1/7th of the move. Meaning that the account closes negative.
The broker borrowed to allow the trader to open the position in the first place; the agreement is between the bank and the broker, not between the bank and the trader. Thus the broker is on the hook for the lossy position. These are typically call loans which are due as soon as the position is closed (remember 1929).

FXCM could have gotten spanked just because a significant portion of their client base was dumb enough to touch the swissy after it got pegged to the euro, and/or (the traders) never understood the reasons for that peg.

B.

(edit: an account could get killed in a 7000 pip move with just 1.42:1 leverage)
 
Last edited:

alexaherself

Established member
560 149
Great FXCM is back to 400:1 lol

LOL, they certainly "know their customer" (to coin a phrase): he's someone eager to trade with an outfit previously fined millions by regulators over the way they've treated their previous customers. :rolleyes:
 

Jason Rogers

Senior member
2,772 93

Hi Tar,

Our new Mini account type with DD execution is a solution for our clients who demand higher leverage (up to 400:1) than we offer on Standard accounts with No Dealing Desk (NDD) forex execution. Given what happened with EUR/CHF, the industry is now looking very hard at any potentially similar issues, especially with the increased geopolitical risks in Europe and economic risks in China.

The primary change FXCM made was to remove some currency pairs from our platform that carried significant risk due to over-active manipulation by their respective government either by a floor, ceiling, peg or band. We also raised the margin requirements for other currency pairs which reduced the maximum leverage available on our Standard NDD accounts to 100:1.

However, we continue to receive requests for higher leverage (lower margin requirements) particularly from traders in emerging markets where the average account balance is smaller. Offering these traders a DD option through our new Mini account type in addition to our existing Standard NDD model allows us to cater to their demand for higher leverage from a risk management perspective.
 

tar

Legendary member
10,443 1,313
Hi Tar,

Our new Mini account type with DD execution is a solution for our clients who demand higher leverage (up to 400:1) than we offer on Standard accounts with No Dealing Desk (NDD) forex execution. Given what happened with EUR/CHF, the industry is now looking very hard at any potentially similar issues, especially with the increased geopolitical risks in Europe and economic risks in China.

The primary change FXCM made was to remove some currency pairs from our platform that carried significant risk due to over-active manipulation by their respective government either by a floor, ceiling, peg or band. We also raised the margin requirements for other currency pairs which reduced the maximum leverage available on our Standard NDD accounts to 100:1.

However, we continue to receive requests for higher leverage (lower margin requirements) particularly from traders in emerging markets where the average account balance is smaller. Offering these traders a DD option through our new Mini account type in addition to our existing Standard NDD model allows us to cater to their demand for higher leverage from a risk management perspective.

I dont mind it bring it on great , on the bright side it means i need to keep less money with you :cheesy:
 
 
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