NFA Dead Forex Firms Walking

So... no matter what, in forex we're screwed.
But then, with let's say a futures' broker, we still have no guarantee of our money back in case they go bankrupt?


Thanks a lot.[/QUOTE]

No, your trading fund for futurs and all transaction must clear thought Central Counterparty Clearing House,not the broker. So in the US history, all futures clients of Rifco had no risk of the safety on their fund where there is a bankrupt, in the UK, when Leman Brother in default as a member of LIFFE and LME, as the Central Counterparty Clearing House position is LCH, its clients' fund is ok as well. The risk only for a time-consuming in swich legal and documentary issue to new member or broker and liquidity risk while you held open position.
 
No, your trading fund for futurs and all transaction must clear thought Central Counterparty Clearing House,not the broker. So in the US history, all futures clients of Rifco had no risk of the safety on their fund where there is a bankrupt, in the UK, when Leman Brother in default as a member of LIFFE and LME, as the Central Counterparty Clearing House position is LCH, its clients' fund is ok as well. The risk only for a time-consuming in swich legal and documentary issue to new member or broker and liquidity risk while you held open position.

Umm...that something I have to chew on. I'm not sure I'm following you.
Clients of Refco had no risk? How?

I guess it all leads to this:
What questions should one ask from a broker before trading, (making them simple, so that they know exactly what we're talking about and we get straight answers)?

Thanks a lot.
 
Umm...that something I have to chew on. I'm not sure I'm following you.
Clients of Refco had no risk? How?

I guess it all leads to this:
What questions should one ask from a broker before trading, (making them simple, so that they know exactly what we're talking about and we get straight answers)?

Thanks a lot.

:cool: In my dictionary,risk means uncertain. And from my past life I learned, only one thing is certain: There will be no certain things gonna happen in the future.

So, you cannot find something without risk.

What I said above, futures client of futures exchange member,Refco,hardly loss their efficient margin accounted as client's fund even the broker goes to bankrupt.

I was in a sales team of futures firm 14 yrs ago, to be honest with you, there is no so-called right question or right answer to make both sides satisfied all the time. Get some preparation by your own, not only rely on the message from 3rd so-called independent financial advisor.

Good luck.
 
GFS Forex Suspended in Dubai

Forex Dealer Dead Pool member GFS Forex has run into a bit of trouble in the Middle East. Their Dubai office was recently shut down by regulators and they were hit with $500,000 in fines and plaintiff compensation. It wasn’t always this way for GFS.

Back in 2007 this “leader in the online global foreign exchange and futures market” was trumpeting its new office with the usual public relations talking points as seen in this article (with accompanying photograph of glad handing executives):
GFS Investments opens office at DIFC | DIFC

From its offices in the DIFC, GFS will work to bring its expertise in the foreign exchange market to its customers throughout the region.

GFS has established a reputation as a global leader in commodities trading.

Mike Leung, Director, GFS Investments (Middle East) Ltd., said: 'We are extremely proud to join the DIFC, the leading international financial centre in the region. Working in the DIFC will allow us to provide our customers throughout the Middle East access to our foreign exchange and commodities market expertise from a platform that is internationally recognised for its integrity, transparency and efficiency.'

Integrity eh? Let’s see how accurate that claim turned out to be:
http://www.business24-7.ae/articles/2008/9/pages/09082008_fc2ef83f016143b1b76cf6dbc0a4fa3f.aspx

GFS broke the terms of its licence by placing foreign exchange trades on behalf of its clients when the company was allowed only to offer a platform for customers to place trades, according to the DFSA statement.

The trading on behalf of clients was often "unfair and unsuitable to the interests of the clients, motivated more by a desire to maximise commissions than to profit the clients," the DFSA said. "Most clients suffered financial losses as a result of this misconduct."

Well when you are $10,000,000 below the $20,000,000 capital requirement scheduled to kick in next spring you’d try to “maximise” your commissions too. GFS has a long, hard slog in front of it.

Authority suspends GFS Investments
By Babu Das Augustine, Banking Editor
Published: September 08, 2008, 00:03

Dubai: The Dubai Financial Services Authority (DFSA) on Sunday slapped hefty fines and sanctions on GFS Investments (Middle East) Limited, a company that offered online trading facilities in foreign exchange and commodities.

The DFSA's action follows a detailed investigation into the business operations of GFS Investments.

GFS Investments is licensed to provide an online foreign exchange and commodities trading facility to clients who meet DFSA's required eligibility standards. Eligible investors gain direct access to that platform via unique login and password.

Under its licence, GFS Investments was not permitted to conduct the trades, but received commissions for each trade carried out by its customers. The business is therefore suitable for professional investors who have relevant market experience, but unsuitable for retail investors.

An affected customer told Gulf News yesterday that the company used different customer accounts to carry out trades for customers who were not eligible under DFSA regulations.

"The investigations determined that GFS Investments had operated outside its authorisation by conducting business with non-eligible retail clients and by itself carrying out trading in the names of clients. The DFSA took immediate steps to ensure that no further unlawful trading took place," DFSA said in a statement.

Investigation revealed that some employees of GFS Investments engaged in conduct designed to misrepresent the eligibility of clients, including the falsification of client particulars.

Following investigations, the DFSA has imposed a range of sanctions including the banning of relevant individuals for five years from the Dubai International Financial Centre (DIFC); the imposition of fines; and the compensation of relevant clients for financial losses suffered as a result of the misconduct.

"The DFSA has an important role to maintain business standards within the DIFC. The vast majority of our licensed firms take their governance and compliance responsibilities very seriously and this has helped the DIFC to quickly establish a reputation for excellence.

"We are, therefore, disappointed by the unacceptable conduct of GFS Investments," said the DFSA's Chief Executive, David Knott.

"The DFSA's intervention will also ensure that all investors who suffered financial loss as a result of the misconduct will be fully compensated," he said.

The bans imposed by DFSA prevent the individuals from performing any function in or in connection with the provision of financial services or ancillary services in or from the Dubai International Financial Centre during the designated period.

All sanctions have been recorded in enforceable undertakings made with the DFSA by GFS Investments and its relevant officers and employees.
 
I was in a sales team of futures firm 14 yrs ago, to be honest with you, there is no so-called right question or right answer to make both sides satisfied all the time. Get some preparation by your own, not only rely on the message from 3rd so-called independent financial advisor.

Good luck.

What I meant:
Assuming I want a broker which has a segregated accounts and I want to find out what that "segregation" gives me. OK, let's say I ask straight-out: "in case you guys go out of business, is my money protected anyhow?".
Now, I would probably get some slippery answers.
What to expect and what to watch-out for when talking with sales/reps?

Thanks a lot.
 
CMC in Crisis

So say news reports coming out of Australia. A few weeks ago, at the height of the financial panic, leading CFD provider Saxo Bank took a meat cleaver to their work force in a frenzied effort to slash costs. CMC now appears to be following suit. They had already laid off staff and closed their U.S. office and another office in Perth, Australia. But now more redundancies lie over the horizon and the company just held an emergency meeting for all their staff at a hotel in Sydney. Details below:
CompareShares.com.au - company news

Crisis meetings at CMC Markets
Toni Case - November 6, 2008

CFD specialist CMC Markets held an all-staff meeting at the Intercontinental Hotel in Sydney today at 2.30pm to put the rumours to rest once and for all. What is happening to CMC Markets?

CMC Markets' normally thundering public relations machine has suddenly gone quiet, and in its place is FD Third Person, a media agency "specialising in financial transaction support and issues and crisis management”, according to their website.

CompareShares did its best to get clarification for traders with existing accounts with CMC Markets. We put in numerous calls to internal public relations, Sydney reception, the New Zealand office and even the 1300 303 888 number and couldn't get anyone to comment. Phone calls rang out. According to FD Third Person, key staff were in meetings until late last night and again early this morning.

CMC Markets did not want to make an official announcement to the market until staff had been notified of the changes at 2.30pm today, was the official response.

It’s now official that managing director David Trew has been axed from the Group. Trew, who made headlines earlier this year when splurging on a $25 million trophy mansion in Point Piper (as reported in The Australian newspaper) is leaving the group, according to FD Third Person. And more staff cuts – “in non-client facing functions” – are scheduled for the Sydney office. CMC Markets shut its Perth office in August this year, and recently slashed Sydney staff by around 8 per cent.

Furthermore, the London head office will be taking the reins over its Antipodean businesses. CMC Markets’ business units, Sydney, New Zealand and Asia (Singapore, Hong Kong and Japan) will now report directly to London, states FD Third Person. To date, the Australian and New Zealand businesses came under the wing of former managing director Trew.

Two months ago, CompareShares reported on a series of events that had unfolded at CMC Markets, “An AVO, staff cuts and a trophy mansion – it’s all happening at CMC Markets.”

Back then, managing director David Trew denied the suggestion that staff cuts were a result of problems at CMC Markets. He insisted that further staff cuts were not anticipated.

Stay tuned - we'll keep you updated with any developments in this story.

So will the Scholar…
 
An old story,at least they were regulated and accepted the watchdog's decision. Anyway, Dubai financial market is not worth to comment.

In history, CITY INDEX was fined by FSA for its misconduct in the UK in 2003.
 
September Net Capital Report

The CFTC has just released their latest net capital figures. The big news is that everyone is doing well. Firms are seeing big jumps in net capital as forex brokers appear to be raking in the cash in this volatile market. It doesn’t appear that anyone has had difficulty clearing the $10 million hurdle judging by the fact the NFA has not closed down anyone since Halloween (although AMIFX continues to report way below the $10 million requirement although keep in mind CFTC reports lag a full month behind the current date.) The only other change appears to be that IFX and FX Solutions have formally merged as IFX is no longer listed on the CFTC Report.

Financial Data for FCMs

The following firms have net capital below $10 million

Advanced Markets $6,743,000
Friedberg Mercantile $8,164,000
ACM $8,891,000
Forex Club $9,615,000
Easy Forex $9,943,000

The following firms have net capital below $20 million

Hotspot $10,021,000
Ikon $10,424,000
GFS Forex $11,908,000
MB Trading $14,245,000
ODL $15,180,000
I Trade FX $17,258,000
Alpari $17,437,000

The following firms have net capital above $20 million

FX Solutions $21,197,000
CMS Forex $22,018,000
PFG $22,038,000
Interbank FX $37,596,000
GFT Forex $67,073,000
Gain Capital $77,580,000
FXCM $114,299,000
Oanda $168,344,000

As always conduct your due diligence and make sure the firm you are trading with will be able to comply with the new $20 million capital requirement going into effect in the months ahead.
 
The CFTC has just released their latest net capital figures. The big news is that everyone is doing well. Firms are seeing big jumps in net capital as forex brokers appear to be raking in the cash in this volatile market. It doesn’t appear that anyone has had difficulty clearing the $10 million hurdle judging by the fact the NFA has not closed down anyone since Halloween (although AMIFX continues to report way below the $10 million requirement although keep in mind CFTC reports lag a full month behind the current date.) The only other change appears to be that IFX and FX Solutions have formally merged as IFX is no longer listed on the CFTC Report.

Financial Data for FCMs

The following firms have net capital below $10 million

Advanced Markets $6,743,000
Friedberg Mercantile $8,164,000
ACM $8,891,000
Forex Club $9,615,000
Easy Forex $9,943,000

The following firms have net capital below $20 million

Hotspot $10,021,000
Ikon $10,424,000
GFS Forex $11,908,000
MB Trading $14,245,000
ODL $15,180,000
I Trade FX $17,258,000
Alpari $17,437,000

The following firms have net capital above $20 million

FX Solutions $21,197,000
CMS Forex $22,018,000
PFG $22,038,000
Interbank FX $37,596,000
GFT Forex $67,073,000
Gain Capital $77,580,000
FXCM $114,299,000
Oanda $168,344,000

As always conduct your due diligence and make sure the firm you are trading with will be able to comply with the new $20 million capital requirement going into effect in the months ahead.

anyone know how CFTC deal with the case if the firm net capital fall into less 10m in the future?
say, Hotspot net capital reduced a further 22000 USD next month.
 
anyone know how CFTC deal with the case if the firm net capital fall into less 10m in the future?
say, Hotspot net capital reduced a further 22000 USD next month.

Firms below $10 million would be sanctioned because they are violating federal law. Depending on how severe the violation would determine how severe the penalty.
 
The news about the NFA shaking up the forex industry by dramatically raising capital requirements has kicked off a lot of speculation. So I gathered everything I have learned about this new NFA proposal and am posting here for your review. As someone who has been burned by a bankrupted forex broker I can tell you it is not a pleasant feeling to watch your funds get sucked into some black hole. So my advice is to stay away from any firm that is not currently meeting the coming $5 million capital requirement. And if you already have money at such a firm, get it out, now. If you don't, you could end up like the poor souls at United Global Markets (UGMFX) who can't get their money out due to an NFA account freeze.

Who has the Money & Who Doesn't
To find out how much money your broker has goto this link:
http://www.cftc.gov/files/tm/fcm/tmfcmdata0704.pdf

Healthy Forex Firms
FXLQ ($36,000,000)
Interbank ($7,000,000)
FXCM ($51,000,000)
GFT ($48,000,000)
Oanda ($44,000,000)
FX Solutions ($20,000,000)
Gain Capital ($20,000,000)
CMS ($10,000,000)

Dead Firms Walking
One World Capital ($1,105,000)
Velocity4X ($1,587,000)
Direct Forex LLC ($1,523,000)
FiniFX ($1,464,000)
Forex Club ($3,304,000)
GFS Futures & Forex ($3,074,000)
Nations Investments ($1,699,000)
Royal Forex Trading ($1,102,000)
SNC Investments ($1,565,000)
FXDD ($781,000)
I Trade FX (-$3,039,000!!!!! Close to Bankruptcy!!!!)
MB Futures ($3,080,000)
Money Garden ($3,399,844)
United Global Markets (Bankrupt)

Here is the actual NFA proposal to raise capital requirements (below that is the sad email from the CEO of UGMFX stating the firm is going under.) The CFTC is expected to sign off on it this summer. I'll comment further on the proposal in a future posting as it will actually require most firms to have upwards of $10 million in capital when you take into consideration such things as open customer positions and margin levels. In any case, this should be sober reading to anyone who is currently trading at one of the "Dead Firms Walking."

NFA Proposal
The proposals pertain to the minimum adjusted net capital requirement and the concentration charge and set certain requirements for FDMs' internal financial controls.

Minimum Adjusted Net Capital and Concentration Charges

In the past twenty years, there have been nine FCM insolvencies. Since 1990, there have been only two insolvencies by traditional FCMs trading on U.S. exchanges, and no funds in segregated customer accounts were lost in either of those two instances. This is from a population that averages around 250 (over the last 20 years). Even in the Refco matter, the FCM filed for bankruptcy not because customer funds were at risk but, rather, to facilitate the sale of its assets and the transfer of its accounts in connection with the parent company’s insolvency.

The FCM insolvency rate becomes more troubling when FDMs are added to the mix. Of the three bankruptcy or receivership proceedings for insolvency occurring in the last four years, two have involved FDMs (Refco was the third), and they are drawn from the smaller FDM population (averaging around 40). Specifically, in late 2003, an FDM misappropriated almost $2 million of customer funds, which depleted the amount of assets necessary to meet the amounts owed to customers. The Commodity Futures Trading Commission ("CFTC") is still working to try to get back some of the customers’ funds. More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million. The CFTC also brought an emergency action in U.S. District Court, and the Court immediately appointed a receiver who was subsequently able to sell the FDM’s customer accounts. Due to this sale, it appears that the customers were made whole.

This discrepancy between FDMs and FCMs involved in on-exchange transactions is even greater when looking at the number of financial MRAs NFA has issued in the last ten years. During that period, NFA issued twelve MRAs to FCMs for failing to demonstrate compliance with NFA’s financial requirements. Three of these firms were traditional FCMs with an on-exchange business, one was a forex dealer registered as an FCM prior to the advent of the FDM category, and the remaining eight were FDMs.

NFA's concern that one day an FDM might be unable to meet its financial obligations to its customers has heightened as the amount of retail customer funds held by FDMs has increased to over $1 billion. The above described FDM insolvencies have done nothing to abate this concern, particularly with the most recent occurring just months after the $1 million capital requirement became effective. If the receiver had not sold the FDM's accounts, then twice within less than four years customers of FDMs would have lost funds due to an FCM insolvency. Additionally, since March, eight different FDMs have fallen under the early warning requirement of $1.5 million.

One of the reasons for the 2006 increase to the FDM capital requirements was that an FDM’s dealer activities create greater financial risks than the agency transactions involved in traditional exchange-traded futures and options. A second reason is that the need for adequate capital is particularly acute for FDMs since customers trading off-exchange forex have not received a priority under the Bankruptcy Code in the event of a firm’s insolvency. Both of these reasons still exist.

NFA is not alone in recognizing the increased financial risk of acting as a dealer. Congress recognized that acting as a dealer increases financial risk and requires substantially higher capital on the part of the dealer. Pursuant to Section 4c(d)(2)(A) of the Commodity Exchange Act (the "Act") the grantor of a dealer option must maintain at all times a net worth of $5 million. The Commission has likewise recognized the increased financial risk resulting from being a dealer, imposing an adjusted net capital requirement of $2.5 million on leverage transaction merchants ("LTMs").[1]

When the Commission adopted the financial requirements for LTMs in 1984, it noted that the leverage market is "essentially a principals' market" and that the "purchaser of a leverage contract is solely dependent on the LTM for performance on the contract."[2] This is the exact same situation that customers are in when they purchase or sell currencies with an FDM. Further, as with an LTM, an FDM "takes the other side of every [contract] entered into by a [customer]" and the FDM "is the sole guarantor of performance on the [contract]." When trading with an FDM "there is no clearing organization to take the other side of every trade, no FCM guaranty of variation margin to the clearing organization and no clearing organization guaranty fund and assessment power."[3] Due to these factors, the financial requirements for FDMs, like LTMs, must be substantially higher than those for FCMs engaging in agency transactions.

As noted above, the Commission imposed the $2.5 million capital requirement for LTMs in 1984. Based upon the Consumer Price Index, $2.5 million in 1984 dollars would be worth approximately $5 million today. Accordingly, NFA is proposing to raise the minimum adjusted net capital for FDMs to $5 million. An increased capital requirement would result in an FDM having a larger buffer to meet its obligations to its customers. Additionally, an increase in capital requirements for FDMs would ensure that FDMs have a larger financial stake in their forex business.


Mr. Stephen Leahy
Chief Financial Officer
United Global Markets, LLC
20 Park Plaza, Suite 1000Boston, MA 02116
Tel # (617) [email protected]


Dear Valued Client:

United Global Markets (UGMFX) has been notified that we are in violation of CFTC Regulation 1.17(a)(4) by our regulatory body, the National Futures Association. We have been notified that we fall below the minimum Adjusted Net Capital requirements of $1,000,000 and therefore may not allow clients to open new positions until we increase our own capital.

To be clear, United Global Markets has more than enough cash assets as compared to our liabilities to our clients. But we do not have $1,000,000 of our own liquid assets which is the NFA’s required minimum.

We are speaking to an institutional partner that has both more than the capital requirements AND shares our philosophy of treating clients fairly. However as with most large financial institutions, they have not been able to due their due diligence on United Global Markets in the short time period since the NFA’s proposed changes to Financial Requirements.

Therefore, in compliance with the NFA-issued notice of violation of CFTC Regulation 1-17(a)(4), our clients may only close open positions and not initiate new positions until further notice. Additionally we may not accept new client accounts or further funds from existing clients.

For those who wish to withdraw funds, please fax or e-mail a Withdrawal Request Form and we will process quickly.

http://www.ugmfx.com/downloads/Withdrawal_funds.pdf

Thanks for this crucial information.
 
The Pirates of Scandinavia

Last month the S.S. Saxo Bank forced hundreds of employees to walk the plank in a furious effort to keep their Danish Longship from taking on any more water amidst the financial tsunami that has engulfed CFD brokers around the world. But it is another former shipmate of Saxo that has now taken to his Somalia-like pirate ship to fire pot shots at this listing to port Viking Broker. Ahoy it’s Charles-Henri Sabet! With parrot perched on shoulder and a black eye patch in place Sabet has Saxo in his sights…

According to Euromoney Magazine in an article titled “Charles Henri Sabet Bites Back in Saxo Saga” Sabet says that he was exiled to Davey Jones locker because of a shareholder dispute, not because of an SFBC investigation of alleged insider trading.

Charles-Henri Sabet bites back in Saxo saga /Euromoney magazine

“This is really about an argument between shareholders,” says Sabet. “I still own around 5% of Saxo and I was not happy with what I saw as the bank’s domestic focus. I offered to leave, but I wanted Saxo to buy my shares as was agreed when it took over Synthesis,” he adds. Sabet says that Saxo is now focused on becoming a well-known name in Denmark, including giving backing to the small, centrist Liberal Alliance political party.

So how did this investigation come about? Euromoney states:

Saxo has declined to comment on whether or not the investigation came about because it informed the regulator of an irregularity, rather than the SFBC acting because it suspected suspicious activity. But a letter from the commission makes it clear it was informed by Saxo of the issue.

So instead of paying Sabet his share of Saxo’s booty the scallywags in Denmark simply ratted him out to regulators? Shiver me timbers that’s a low thing to do to a mate. But Sabet wasn’t the only one sent to the brig.

Sabet says he is also particularly upset that his dismissal was followed by a purge of his former employees, including his chauffeur. He believes that he will be fully exonerated when the SFBC reports its findings. In the meantime he is preparing to take legal action to clear his name and to complete the deal that was agreed when he sold Synthesis Bank to Saxo in September 2007; this included the verbal agreement to purchase his remaining shares in the bank.

Yarrrgh matey, Saxo ain’t likely to depart from its treasure anytime soon. This Sabet fellow could be waiting a long time before he sees one gold doubloon from the cash strapped folks in Denmark. I reckon Sabet would have a better chance demanding ransoms from oil tanker owning Saudi princes than from a forex and cfd broker that had been spending money like a drunken sailor on shore leave prior to the financial panic.

Arrgh, Sabet best crack open a bottle of Rum and batten down the hatches cause Saxo will fight him to the last cannon ball over that 5% share. To be continued I’m sure.
 
Bacera??....are they still about..

I noticed on the CFTC monthly list that they made the 5 mill mark (just), but earlier on this thread I noted they were closed down........the mind boggles.

Any light on this rather shady induvidual.

Cheers
 
What's this with Alpari Uk?
Will there be anny sanctions if they don't reach the 20,000,000?
 
Bacera??....are they still about..

I noticed on the CFTC monthly list that they made the 5 mill mark (just), but earlier on this thread I noted they were closed down........the mind boggles.

Any light on this rather shady induvidual.

Cheers

Bacera is soliciting foreign customers not u.s. customers. They are the turd that will not be flushed...
 
The Taming of the Wild West

The forex market has long been known as the Wild West of Finance due to its unregulated nature. But the frontier is being tamed and it now appears the day of the unregulated Introducing Broker is drawing to a close. While the CFTC has not yet released its new Forex Dealer rules to the public the NFA just issued a preliminary set of guidelines for all introducing brokers who are now required by law to be licensed: National Futures Association | Compliance

Among the rules, IBs must maintain net capital of $45,000. Aside from other requirements like proficiency exams and disclosure documents the NFA is doing background checks which require finger printing:

NFA requires all individual applicants to submit fingerprint cards, which are sent to the Federal Bureau of Investigation (FBI) to determine if the applicant has a criminal record.

This should help drive some of the industry’s worst cattle rustlers out of the market and into a new line of work, like holding up banks instead...

It remains to be seen just how onerous the new rules from the CFTC will be but with the NFA releasing this guide now the CFTC shouldn’t be too far behind.
 
If the brokers are closed, what will happen to the customers?
















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