FXCM in trouble with CFTC

[Fasdraw]

I was just getting ready to open my account with FXCM when someone pointed this out to me:

http://www.forex-markets.com/NewswireFXCM.htm

From reading many posts on this forum concerning other brokers FXCM seemed like the one fewest people had any problems with and I loved the ease and simplicity of their trading platform software. Now I feel I have to pause and rethink this.

[4xis2ez]

Here is a quote from another thread by FXCM rep concerning the action by the CFTC.

Quote:
FXCM Rep.
stranger


Registered: Sep 2003
Location:
Posts: 8


On February 10, 2004, the Commodity Futures Trading Commission (CFTC) filed suit against Florida based Gibraltar Monetary Corporation, a former introducer of Forex Capital Markets LLC (FXCM). Gibraltar is being sued for numerous alleged violations regarding their dealings with customers in 2002, including approximately $900,000 in commissions they earned during their time in operation. Given that Gibraltar is already out of business, the CFTC has included FXCM as a defendant in the suit in an attempt hold FXCM responsible for Gibraltar’s actions.

The CFTC is also claiming that FXCM charged approximately $200,000 in commissions, when, in fact, FXCM does not charge commissions. All customer funds are 100% safe. FXCM and its overseas offices have over $30 Million in net capital (our own money). The CFTC is suing us for $200,000 and that would be the fine that we would face if they ever win, and this would not put a dent in our finances.

Although the CFTC is not accusing FXCM of fraud or other wrongdoing, they are attempting to hold FXCM responsible for the actions of Gibraltar. In fact, Futures Commission Merchants, such as FXCM were only provided with industry guidelines for supervising their unregulated affiliates during December 2003, over one and a half years after this incident occurred.

Additionally, the CFTC is alleging that FXCM’s website was not functional for the entire period that Gibraltar was operating (approximately 16 months), so that customers were unable to access their account information and generate statements. These ridiculous and baseless accusations not only have no basis in fact, but demonstrates how little the CFTC actually knows about the matter and how little they care for the true facts, all while trying to make a public statement.

Finally, it should be noted that the legal basis being used for this lawsuit is unprecedented (and is unlikely that it will hold up in court) and although the CFTC has acknowledged this, they insist on sending a message to the Futures Commission Merchant community and is using FXCM, as the highest profile Forex dealer with 40% market share in North America to do it.

FXCM fervently expects to win this lawsuit in short order and to be vindicated of these baseless charges.

Notwithstanding the above, please be advised that FXCM will continue to operate using the highest standards and in the same professional manner you have come to expect and deserve. FXCM is committed to offering clients excellent execution, easy accessibility, safety of funds, and the most exceptional customer service in the foreign exchange industry.
Unquote:

[4xis2ez]

Here is a link to the thread FXCM rep posted these comments.http://www.moneytec.com/forums/showt...&threadid=7006

[Fasdraw]

Thank you,

This certainly puts my mind as ease.

[autofx]

Folks, I have put on many trades every week with FXCM for the last couple of years, and I can tell you that trading with them
is a pleasure.

There software works great, their servers only rarely go down, and then for very brief periods, and they WILL refund you
some money if you can show their trading desk did a predatory takeout of a stop of yours (this happened to me once), but my money was instantly refunded.

Don't use your paranoia as an excuse to not trade!

Sincerely,
Bob Cochran

[DB]

I've been musing about the cftc's involvement in regulating the forex industry. I've noticed their ridiculous requirements for margin increases and then seen them back off from it once they actually faced the reality of forex liquidity and the true nature of the purpose of margin.

I've wondered if the cftc is threatened by the forex retail trade because so much trading activity migrating over to forex trading threatens the retail aspect of liquidity in the futures markets and also threatens a portion of the liquidity from fund managers as they include more and more cash market trading in their portfolios both for hedging and speculation.

It appears to me that cftc being the regulatory authority for both presents a conflict of interest. It appears to me at least in a general sense that they are currently much more dependent on the futures markets for their existance and financial stability as a regulatory body. It is currently much harder for them to extract money from forex trading activity to support their own existance so when I look at their activities in this light it is difficult not to look for a certain bias in their decisions and an attempt to regulate things that don't necessarily make sense except from the point of view of their own interests while trying to make it appear they are working for public interest.

For now my comments are general because I've yet to explore much in the way of specifics other than the issues of margin and this unprecedented and seeminlgy frivilous liability suit for third party actions... but I'm interested in knowing if anyone else has more concrete evidence to support or deny my theory?

I've also been told by a banker who offers retail forex that they are pressuring market makers not to guarantee limits, stops, and no slippage. This, while couched in "public interest" vernacular seems to me to be more of an attempt to prevent these advantages from luring more money from the futures and equities markets. Again this is where the current bulk of revenue for the cftc comes from. Also who is the watchdog over the cftc other than the judicial system itself?

DB