Forex Capital Markets (FXCM)

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Forex Capital Markets (FXCM)
FXCM.jpg
Headquarters New York City
Key People Drew Niv, CEO; Brendan Callan, president, Europe
Products Foreign exchange trading

Forex Capital Markets, also known as FXCM, is the largest retail foreign exchange brokerage in the U.S. and Asia. It is based in New York City. It provides internet-based currency trading to retail investors through the operation of the DailyFX.com website. FXCM was founded in 1999, held an initial public offering in 2010, and trades on the NYSE under the ticker symbol FXCM. [1]

In February of 2017 the National Futures Association barred FXCM and its principals Dror ("Drew") Niv, William Ahdout and Ornit Niv from NFA membership and the Commodity Futures Trading Commission banned the firm from operating in the U.S. after finding that the broker had an undisclosed interest in the market maker that consistently "won" the largest share of FXCM's trading volume, and thus was taking positions opposite its retail customers. The NFA's complaint found that Niv and Ahdout had engaged in "deceptive and abusive execution activities" and had provided misleading information to the NFA.[2]

FXCM also agreed to pay a $7 million fine and it will begin offloading its US accounts to GAIN Capital Holdings Inc for an amount yet to be determined.[3] FXCM, Niv and Ahdout didn't admit or deny the findings.[4]

Later that month, FXCM Inc., the brokerage's parent company, said it would change its name to Global Brokerage, Inc, but keep FXCM as the name of the brokerage. Global Brokerage, Inc will also be listed under a new trading ticker symbol on NASDAQ, ‘GLBR’. The changes are slated to come into effect on February 27, 2017.[5]

The firm had been the subject of legal woes throughout its existence. The 2005 Refco bankruptcy took years to sort out. In the years following, 2006-2010, the firm failed to pass on profits generated from price movements between the time orders were placed and executed, while any losses were passed on to clients in full.[6] This practice, known as "asymmetric price slippage" led to a series of fines, including a $14.2 million fine by the CFTC in 2011 and a £4 million fine assessed by the U.K. Financial Conduct Authority in February 2014. The FCA also forced FXCM to compensate its UK retail customers with £6m for profits that have been withheld.[7]


History

FXCM was founded in 1999, and was privately held. An early source of outside capital was former futures commission merchant Refco, which took a 35 percent stake in FXCM two years before Refco went bankrupt. In May 2010, FXCM acquired ODL, a British forex broker that was also a platform for contracts-for-differences and spread betting. These products now trade on the firm's U.K. subsidiary, FXCM, Ltd. FXCM went public in December 2010, raising $211 Million in its IPO.[8] In June 2012 FXCM bought a controlling stake in Lucid Markets LLP, a London-based automated trading group focused on currency trading.[9]

In 2014 FXCM acquired certain assets from Infinium Capital Management, a high-frequency trading firm based in Chicago. The trading desks it bought became part of V3 Markets LLC.[10]

On January 16, 2015, wild swings in the Swiss franc that took place after the Swiss National Bank suddenly removed the cap on the currency's value resulted in losses that left FXCM with a negative equity balance of about $225 million. Trading in FXCM’s shares on the New York Stock Exchange was shut down, but the stock price dropped more than 80% in the premarket. [11] [12] Three days later, FXCM received a $300 million rescue package from Leucadia National, the parent company of the investment bank Jefferies, that allowed it to continue operating.[13] [14]

Later in January 2015 FXCM filed a stockholder-rights plan making it harder for anyone to take control of the company. The plan gave each shareholder the right to buy a new class of stock if someone else accumulates more than 10 percent of the firm. Holders of the new shares are entitled to 1,000 times the dividend on common stock, according to the filing. If a merger takes place, they could receive 1,000 times the purchase price. This would discourage someone from trying to buy the company on the open market.[15]

On March 25, 2015 FXCM said it had agreed to sell its Japan business to a brokerage unit of e-commerce giant Rakuten Inc. for $62 million, as part of its effort to sell noncore assets to repay its debt. The deal is expected to close April 1. Rakuten Securities will continue to use the FXCM trading system for legacy FXCM Japan clients.[16]

Key People

  • Dror ("Drew") Niv, Chief Executive Officer and Founding Partner
  • David Sakhai, Chief Operating Officer
  • William Ahdout, Founding Partner
  • Robert Lande, Chief Financial Officer
  • Andreas Putz, Managing Director and Global Head of FXCM Pro
  • David Sassoon, General Counsel and Secretary
  • Brendan Callan, President - Europe

References

  1. FAQ. FXCM.
  2. NFA bars New York retail foreign exchange dealer Forex Capital Markets, LLC and its principals Dror Niv, William Ahdout and Ornit Niv from membership. National Futures Association.
  3. Breaking: FXCM to Sell US Accounts to GAIN Capital. Finance Magnates.
  4. FXCM banned by CFTC after taking positions against clients. MarketWatch.
  5. FXCM Inc to Be Renamed ‘Global Brokerage Inc’ Following US Upheaval. Finance Magnates.
  6. Why would anyone trade forex?. FT.com.
  7. Regulator penalises US forex trading group FXCM twice. FT.com.
  8. FXCM's IPO Raises $211 Million at Midpoint of Range. Bloomberg.
  9. FXCM Eyes Stake in Infinium. The Wall Street Journal.
  10. FXCM Said in Talks With Jefferies for $200 Million Rescue. Bloomberg.
  11. Fallout From Swiss Move Hits Banks, Brokers. The Wall Street Journal.
  12. FXCM Has Tripled in December, Still Down Nearly 90% This Year. The Wall Street Journal.
  13. FXCM to Get $300 Million Rescue Package From Jefferies. The Wall Street Journal.
  14. FXCM rescue package includes rising interest rates. The Wall Street Journal via MarketWatch.
  15. FXCM Adopts Shareholder Plan to Block Unwanted Takeovers. Bloomberg.
  16. FXCM to Sell Japanese Business for $62 Million. The Wall Street Journal.