FXCM
Encyclopedia
Forex Capital Markets, better known as FXCM, is a retail on-line foreign exchange broker based in New York
. It provides its services through its own on-line trading platforms
and through third party platforms such as MetaTrader 4
.
FXCM allows retail and institutional clients to speculate on global foreign exchange markets in what is known as ‘margin forex trading’. It is one of the largest of the on-line margin based foreign exchange brokers. Outside the US, in addition to forex, it also provides trading in Contract for difference
(CFDs) on major indices
and commodities such as Gold
and Crude Oil.
In Jan 2003 FXCM entered into a partnership with Refco
group, which at that time was one of the largest US futures brokers. Refco took a 35% stake in FXCM and licensed the FXCM software for its own clients to use. However, following the collapse of Refco
in Oct 2005, FXCM became entrenched in the bankruptcy proceedings which carried on for a number of years.
In 2003, FXCM opened an office in London
and became regulated by the UK Financial Services Authority
.
In 2008, the US futures industry self-regulatory organization, the National Futures Association
(NFA) obtained permission from the Commodity Futures Trading Commission
(CFTC) to increase the minimum capital requirements for ‘Forex Dealer Members’, of which FXCM was one, to $20M in staged increments in response to failures of a few forex brokers. This had the effect of driving out a number of FXCM smaller competitors and allowed FXCM to increase its client base by acquiring business from some of these companies, many of whom either ceased all operations or simply moved out of the US.
In 2008 FXCM continued its overseas expansion and opened offices in France
and Australia
.
In 2009 FXCM UK started offering a limited number of CFD
to its non-US based clients in addition to its currency products.
In May 2010 FXCM acquired the UK CFD and spreadbetting provider ODL. The deal gave them a much bigger presence in the UK and an existing CFD trading and financial spread betting client base concentrated in Europe.
On December 2010, FXCM went public and began trading on the NYSE. The initial public offering price was 14.00 per share.
In Feb and March of 2011 a number of different law firms filled class actions lawsuits against FXCM alleging fraud and racketeering because of deceptive and unfair trade practices and also misleading shareholders during the 2010 IPO
.
In August 2011, NFA fines FXCM $2 million for slippage malpractices.
On October 25, 2011, three debtors, Certified, Inc., Global Bullion Trading Group, Inc., and WJS Funding, Inc. filed an adversary complaint in the United States Bankruptcy Court for the Southern District of Florida against Forex Capital Markets LLC, ODL Securities, Inc., and ODL Securities, Ltd. (“Defendants”). The complaint asserts claims under the Federal Bankruptcy Code to recover allegedly preferential and fraudulent transfers to the Defendants, under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C §1961 et seq., as well as the common law. The complaint seeks an unspecified amount of compensatory and punitive damages, interests, and costs.
, London
, Tokyo
, Paris
, Berlin
, Sydney
, Dubai
, Milan
, Santiago de Chile and Athens
.
As well as the main FXCM brand, it also owns the FX news and research web site http://www.dailyfx.com.
. There is some criticism
of the industry saying that few retail traders have the experience to make money trading forex. Drew Niv, chief executive of FXCM, has been quoted as saying that "If 15% of day trader
s are profitable I'd be surprised."
FXCM promotes a 'no dealing desk' service for its currency products where it takes prices from a number of major banks and allows clients to trade the best price at any given time. This is also known as a Direct Market Access
(DMA) model which is in contrast to a market maker
model more commonly used by forex brokers.
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
. It provides its services through its own on-line trading platforms
Electronic trading platform
In finance, an Electronic trading platform is a computer system that can be used to place orders for financial products over a network with a financial intermediary. This includes products such as shares, bonds, currencies, commodities and derivatives with a financial intermediary, such as a...
and through third party platforms such as MetaTrader 4
MetaTrader 4
MetaTrader 4, better known as MT4, is an electronic trading platform widely used by online retail foreign exchange speculative traders. It was developed by MetaQuotes Software and released in 2005. The software is licensed to foreign exchange brokers who provide the software to their clients. ...
.
FXCM allows retail and institutional clients to speculate on global foreign exchange markets in what is known as ‘margin forex trading’. It is one of the largest of the on-line margin based foreign exchange brokers. Outside the US, in addition to forex, it also provides trading in Contract for difference
Contract for difference
In finance, a contract for difference is a contract between two parties, typically described as "buyer" and "seller", stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time...
(CFDs) on major indices
Index (economics)
In economics and finance, an index is a statistical measure of changes in a representative group of individual data points. These data may be derived from any number of sources, including company performance, prices, productivity, and employment. Economic indices track economic health from...
and commodities such as Gold
Gold as an investment
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises...
and Crude Oil.
History
Forex Capital Markets was founded in 1999 in New York, and was one of the early developers of on-line forex trading.In Jan 2003 FXCM entered into a partnership with Refco
Refco
Refco was a New York-based financial services company, primarily known as a broker of commodities and futures contracts. It was founded in 1969 as "Ray E. Friedman and Co." Prior to its collapse in October, 2005, the firm had over $4 billion in approximately 200,000 customer accounts, and it was...
group, which at that time was one of the largest US futures brokers. Refco took a 35% stake in FXCM and licensed the FXCM software for its own clients to use. However, following the collapse of Refco
Refco
Refco was a New York-based financial services company, primarily known as a broker of commodities and futures contracts. It was founded in 1969 as "Ray E. Friedman and Co." Prior to its collapse in October, 2005, the firm had over $4 billion in approximately 200,000 customer accounts, and it was...
in Oct 2005, FXCM became entrenched in the bankruptcy proceedings which carried on for a number of years.
In 2003, FXCM opened an office in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
and became regulated by the UK Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
.
In 2008, the US futures industry self-regulatory organization, the National Futures Association
National Futures Association
The National Futures Association is an independent self-regulatory organization and watchdog of the commodities and futures industry in the United States. The NFA oversees and protects investors from fraudulent commodities and futures activities. The NFA also provides mediation and arbitration...
(NFA) obtained permission from the Commodity Futures Trading Commission
Commodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
(CFTC) to increase the minimum capital requirements for ‘Forex Dealer Members’, of which FXCM was one, to $20M in staged increments in response to failures of a few forex brokers. This had the effect of driving out a number of FXCM smaller competitors and allowed FXCM to increase its client base by acquiring business from some of these companies, many of whom either ceased all operations or simply moved out of the US.
In 2008 FXCM continued its overseas expansion and opened offices in France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
and Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
.
In 2009 FXCM UK started offering a limited number of CFD
Contract for difference
In finance, a contract for difference is a contract between two parties, typically described as "buyer" and "seller", stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time...
to its non-US based clients in addition to its currency products.
In May 2010 FXCM acquired the UK CFD and spreadbetting provider ODL. The deal gave them a much bigger presence in the UK and an existing CFD trading and financial spread betting client base concentrated in Europe.
On December 2010, FXCM went public and began trading on the NYSE. The initial public offering price was 14.00 per share.
In Feb and March of 2011 a number of different law firms filled class actions lawsuits against FXCM alleging fraud and racketeering because of deceptive and unfair trade practices and also misleading shareholders during the 2010 IPO
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
.
In August 2011, NFA fines FXCM $2 million for slippage malpractices.
On October 25, 2011, three debtors, Certified, Inc., Global Bullion Trading Group, Inc., and WJS Funding, Inc. filed an adversary complaint in the United States Bankruptcy Court for the Southern District of Florida against Forex Capital Markets LLC, ODL Securities, Inc., and ODL Securities, Ltd. (“Defendants”). The complaint asserts claims under the Federal Bankruptcy Code to recover allegedly preferential and fraudulent transfers to the Defendants, under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C §1961 et seq., as well as the common law. The complaint seeks an unspecified amount of compensatory and punitive damages, interests, and costs.
Operations
FXCM has its headquarters in New York and offices in Dallas, San Francisco, Hong KongHong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
, London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, Tokyo
Tokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
, Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
, Berlin
Berlin
Berlin is the capital city of Germany and is one of the 16 states of Germany. With a population of 3.45 million people, Berlin is Germany's largest city. It is the second most populous city proper and the seventh most populous urban area in the European Union...
, Sydney
Sydney
Sydney is the most populous city in Australia and the state capital of New South Wales. Sydney is located on Australia's south-east coast of the Tasman Sea. As of June 2010, the greater metropolitan area had an approximate population of 4.6 million people...
, Dubai
Dubai
Dubai is a city and emirate in the United Arab Emirates . The emirate is located south of the Persian Gulf on the Arabian Peninsula and has the largest population with the second-largest land territory by area of all the emirates, after Abu Dhabi...
, Milan
Milan
Milan is the second-largest city in Italy and the capital city of the region of Lombardy and of the province of Milan. The city proper has a population of about 1.3 million, while its urban area, roughly coinciding with its administrative province and the bordering Province of Monza and Brianza ,...
, Santiago de Chile and Athens
Athens
Athens , is the capital and largest city of Greece. Athens dominates the Attica region and is one of the world's oldest cities, as its recorded history spans around 3,400 years. Classical Athens was a powerful city-state...
.
As well as the main FXCM brand, it also owns the FX news and research web site http://www.dailyfx.com.
Industry
FXCM's main business is allowing retail clients to speculate on forex markets with leverageLeverage (finance)
In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...
. There is some criticism
Forex scam
Foreign exchange fraud is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour" as of early 2008, according to Michael Dunn of the U.S...
of the industry saying that few retail traders have the experience to make money trading forex. Drew Niv, chief executive of FXCM, has been quoted as saying that "If 15% of day trader
Day trader
A day trader is a trader who buys and sells financial instruments within the same trading day such that all positions will usually be closed before the market close of the trading day. This trading style is called day trading...
s are profitable I'd be surprised."
FXCM promotes a 'no dealing desk' service for its currency products where it takes prices from a number of major banks and allows clients to trade the best price at any given time. This is also known as a Direct Market Access
Direct Market Access
Direct market access ' is a term used in financial markets to describe electronic trading facilities that give investors wishing to trade in financial instruments a way to interact with the order book of an exchange. Normally, trading on the order book is restricted to broker-dealers and market...
(DMA) model which is in contrast to a market maker
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
model more commonly used by forex brokers.