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  • #6,101
  • Jan 17, 2015 7:21am Jan 17, 2015 7:21am
Quoting alayinizAMK
{quote} what is so funny?
Your chart is way behind reality. The chart only shows regular trading hours so since it never traded during regular trading hours on friday, it doesn't show what really happened.
The stock was trading @ 1.49 in the premarket when it was halted.
After the news of the Leucadia $300 million assistance the stock was trading around $4 in extended hours.
  • #6,102
  • Jan 17, 2015 8:34am Jan 17, 2015 8:34am
Im typing this from my phone so bear with me. I think a lot of the freak out with FXCM is really unwarranted. According to their financials, they have roughly $1.2 billion in "customer funds". At the same time, they held roughly $136 million in cash. When the crash in the EURCHF happened, roughly11% of their accounts were in EURCHF, 99% of which were long. Those accounts were all wiped out in the crash and couldn't be margin called because liquidity providers stopped making markets in CHF products - that's the speculation from Credit Suisse. I know I was worried about being able to withdraw or access my funds but, at the end of the day, we don't know what the initial values of those burned accounts were. We just know they went an aggregate $225 million in the red. Since they advertise that accounts will "never go below the initial deposit" FXCM is on the hook for that $225 million which they can't just take from existing customer funds, it has to come from their cash on hand. If they do that, they no longer meet regulatory requirements to act in a brokerage capacity so they needed the bailout to meet those requirements.

It's all to easy to call FXCM a "bucket shop" in an event like this. I'm no shill but I just don't think thats the case (despite marketing to the least sophisticated of investors on earth) - a lot of the so-called "reputable brokers" we're toasted. I think more blame lies with liquidity providers and, - at a distant second - the SNB.
  • #6,103
  • Jan 17, 2015 8:42am Jan 17, 2015 8:42am
Quoting Liviu
No Dealing Desk and traders owning money to FXCM: http://www.bloomberg.com/news/2015-0...iss-shock.html Can somebody explain this ? maybe is a silly question, but if FXCM uses the NDD system, how come that traders owe money to FXCM and not to other entities at the other side of the NDD ? FXCM states they don't trade against their clients and they make money only from commisions.
when the drop happened X number of accounts had long positions, Normally FXCM would have exit those positions on behalf of the accounts when they either hit stoploss level or got past margin call. In this case the prices dropped well below those levels before anyone could even think of exiting and of course liquidity providers were not quoting so the positions simply could not be exited. by the time they were exited the exit levels would have left the a lot of accounts with a negative balance....
  • #6,104
  • Edited 10:59am Jan 17, 2015 9:11am | Edited 10:59am
Quoting Bilstein
Im typing this from my phone so bear with me. I think a lot of the freak out with FXCM is really unwarranted. According to their financials, they have roughly $1.2 billion in "customer funds". At the same time, they held roughly $136 million in cash. When the crash in the EURCHF happened, roughly11% of their accounts were in EURCHF, 99% of which were long. Those accounts were all wiped out in the crash and couldn't be margin called because liquidity providers stopped making markets in CHF products - that's the speculation from Credit Suisse. I know...
so you're saying there's no reason to freak out.
i agree. business back to normal. if you wanna trade, you trade. if you wanna cash out, you cash out.

"they have roughly $1.2 billion in "customer funds"" - this number cannot be the same now (accounts defaulted + withdrawals)

so let's put it this way. yesterday, they had 225 mil in the red. then they got a secured loan of 300 mil to be able to operate under the required capitalization.

so today they are in the red the same amount of money as yesterday (+10% interest).
can they force their liable customers into collection? i don't think so.
they can operate tough and their business says that profits are made from commissions.
if you go to their net income, you'll be able to approximate the amount of time in which they'll get even (i don't wanna do the math, believe me).
i don't wanna go deep into the fundamentals. what i want to emphasize is that the trading environment with fxcm is going to change (for better or for worse). it's not the same broker you had last week.
  • #6,105
  • Jan 17, 2015 10:34am Jan 17, 2015 10:34am
Quoting Liviu
No Dealing Desk and traders owning money to FXCM: http://www.bloomberg.com/news/2015-0...iss-shock.html Can somebody explain this ? maybe is a silly question, but if FXCM uses the NDD system, how come that traders owe money to FXCM and not to other entities at the other side of the NDD ? FXCM states they don't trade against their clients and they make money only from commisions.

I'm pretty sure FXCM advertised that clients cannot lose more than they deopost (+realized profits) and that negative balances will be zeroed out. So clients dont owe them anything.

http://www.fxcm.com/uk/advantages/safety-of-funds/
  • #6,106
  • Jan 17, 2015 11:01am Jan 17, 2015 11:01am
i am US based, so rules may apply differently - i guess in UK you don't have to deal with the FIFO "blessing". it is just too confusing. also, 1:50 leverage days appear numbered

http://www.forexfactory.com/news.php?do=news&id=522160
Once A Trader Always A Trader.
  • #6,107
  • Jan 17, 2015 11:16am Jan 17, 2015 11:16am
Quoting Liviu
i am US based, so rules may apply differently - i guess in UK you don't have to deal with the FIFO "blessing". it is just too confusing. also, 1:50 leverage days appear numbered http://www.forexfactory.com/news.php?do=news&id=522160
I could tell you outright if there is a negative balance protection for US clients - but that would have no educational value. Homework: locate and read the FXCM full risk warning and report back your findings.
  • #6,108
  • Jan 17, 2015 11:33am Jan 17, 2015 11:33am
Support Your USA Forex Broker!

To Retail Traders, FXCM and all Other USA Brokers,

Well, if FXCM had a Dealing Desk operation taking the counter-party side of all the retail trades, they would have ended up making a small fortune! Retail traders should not be concerned who is the counter-party to their trades. There always has to be one, no matter who it is. In the case of FXCM, apparently the counter-party was the market makers themselves. And so once again these bastard Robber Bank MMs ripped off a bunch of people, including the "no dealing desk" brokers!

We should not be hard against FXCM - dealing desk or no dealing desk - because there always has to be counter-parities. And maybe it is worse if the counter-parities are the banks rather than the brokers, because the banks have unlimited credit with which to manipulate prices once they see from the price queue which way and how far their price manipulations will allow them to steal the most money.

The real issue is leverage. And now we are seeing - and will see more - articles biased against leverage for retail traders. These articles serve the move by "Regulators" to crush leverage for retail traders. These "Regulators" do not server the interests of the retail traders, but serve the interests of the super-rich behind the Robber Bank MMs, to whom all the stolen money ultimately goes. These people have things set up to facilitate their thieving and they continually push for more changes that will make it even easier to put other peoples money into their own pockets.

FXCM is to be praised for standing up for leverage for retail traders back when the NFA and CFTC (minions of the Robber Bank MMs) wanted to crush that leverage down from typically 1:200 to 1:10! Due to the efforst of FXCM the leverage was only crushed to 1:50, for which we owe a debt of gratitude to FXCM and other brokers siding with FXCM at that time. If these false "Regulators" ever get their way and crush leverage for retailers, it will be a sorry end to the currency market in the USA for retail brokers. Retail traders will flock to overseas brokers, more and more of whom are now accepting USA clients. The push to crush leverage for retail traders by the false "Regulators" on behalf of the Robber Bank MMs is to make it so retail traders make less money when their trades win, and to make it so retail traders pay up completely and immediately all the loss when their trades lose!

FXCM is not a perfect broker. And they cannot become one due to the NFA and CTFC. These false "Regulators" need to be crushed themselves into total unimportance. And maybe this can be done by the USA brokers forming their own client protection agency with its own rules and punishments - forming an agency more honest and protective than the SEC, NFA or the CTFC ever intend to be. And then these brokers should just go thumb their noses at these other agencies, and let them die of "unimportance".

This is a path we retail traders should pray the USA brokers will take. And they will need the support of retail traders, not our condemnation. If we are to condemn anyone or anything, let it be the agencies such as the SEC for the stock market, and the NFA and CFTC for the currency market. These agencies do not look out for the interests of shareholders in the stock market, nor the interests of retail currency traders in the spot forex market. They serve the interests of the Robber Banks in these markets. They always have and they always will. Condemn them and support your USA forex broker. Now, more than ever - at a critical point in time when the false "Regulators" will attempt to gain more power for the Robber Banks and less leverage for traders - our USA brokers need the support of retail traders, and our recommendations.

Condemn the SEC, NFA and CFTC that serve the interests of the Robber Bank MMs. Retail traders, FXCM, all other USA brokers,.......unite!

-tah
  • #6,109
  • Jan 17, 2015 11:57am Jan 17, 2015 11:57am
imho the main culprit is SNB -the way CHF was deleveraged from EUR. They dropped their "utmost determination " very quickly. They could have change their tone and pursue unpegging in small steps over several months period - not sure at what cost -but avoid this kind of shock. it is not my intention to paint FXCM in negative light, but i am curious how things work and they landed so badly.

http://www.snb.ch/en/ifor/media/id/media_speeches

anyway, to answer shrike's request for homework, the uk fxcm website is slightly different from us one.
Attached File(s)
File Type: pdf uk.pdf   376 KB | 470 downloads
File Type: pdf us.pdf   509 KB | 479 downloads
File Type: pdf us2.pdf   334 KB | 625 downloads
File Type: pdf snb 15.01.15.pdf   52 KB | 655 downloads
File Type: pdf 14.12.18 snb.pdf   58 KB | 510 downloads
Once A Trader Always A Trader.
  • #6,110
  • Jan 17, 2015 12:00pm Jan 17, 2015 12:00pm
Quoting traderathome
Support Your USA Forex Broker! To Retail Traders, FXCM and all Other USA Brokers, Well, if FXCM had a Dealing Desk operation taking the counter-party side of all the retail trades, they would have ended up making a small fortune! Retail traders should not be concerned who is the counter-party to their trades. There always has to be one, no matter who it is. In the case of FXCM, apparently the counter-party was the market makers themselves. And so once again these bastard Robber Bank MMs ripped off a bunch of people, including the "no dealing desk"...
My opinion....

Currently the last post.
http://www.forexfactory.com/showthre...=522046&page=6
So, you think you have rights? LOL
  • #6,111
  • Jan 17, 2015 12:12pm Jan 17, 2015 12:12pm
Quoting MaxDoom
{quote} when the drop happened X number of accounts had long positions, Normally FXCM would have exit those positions on behalf of the accounts when they either hit stoploss level or got past margin call. In this case the prices dropped well below those levels before anyone could even think of exiting and of course liquidity providers were not quoting so the positions simply could not be exited. by the time they were exited the exit levels would have left the a lot of accounts with a negative balance....
Maybe there should be a pre-margin call that looks ahead of the stop and closes out the trade if there is no more liquidity at that time. This case would be executed in cases of catastrophy. However, its possible that the next minute or two liquidity returns and the pre-call would be rendered early. Just overthinking perhaps on my part ...
  • #6,112
  • Edited 12:45pm Jan 17, 2015 12:31pm | Edited 12:45pm
It Takes Money to Make Money

Not a single outfit on Wall Street trades either the stock market or the currency market without doing so using margin, and as much of it as it can get! This is the secret to making money,.....use other people's money! This is the #1 FACT OF LIFE for the "Thieves of Wall Street". Any person espousing the evils of doing this just does not know what he is talking about. Unfortunately, the internet lets everyone talk. And many fool others in the process.

The currency market moves are not really all that good on the average. Without good leverage it hardly makes sense to trade the spot forex market unless you have gobs of money. But in that case, one would still be better off with good leverage. Leverage (margin) is not an evil thing. It is a tool used by those that are wise in the ways of making money with money.

Sure, like any tool, in the wrong hands it can be disastrous. Put a chain saw in the hands of an small youngster and watch what happens. Yes, it is a nasty image, but let it serve the point that the tool is not the problem. The maturity, intelligence, training, discipline and preparedness of the user is the issue.

It is a disservice to retail traders to espouse the non-existent evils of leverage by citing the bad experiences of fools and idiots! Leverage is the tool for the job at hand, when in the right hands. Nobody can protect fools and idiots from themselves. And the rest of us should not be robbed by the NFA and CFTC of the same opportunity to make money in the way of the wise just because fools and idiots exist. If you want to make that argument, then every gun should be taken away from every normal citizen who is trained in its use and has it for protection, because one might fall into the hands of a fool or idiot!

-tah
  • #6,113
  • Jan 17, 2015 2:45pm Jan 17, 2015 2:45pm
Quoting Datu
{quote} Maybe there should be a pre-margin call that looks ahead of the stop and closes out the trade if there is no more liquidity at that time. This case would be executed in cases of catastrophy. However, its possible that the next minute or two liquidity returns and the pre-call would be rendered early. Just overthinking perhaps on my part ...
Seriously? A "pre-margin call that looks ahead of the stop...." WTF?

If you could do this, why wouldn't you just make it a "pre-take profit call" that looks ahead into the future to see if you're going to hit your take profit level. If you do, it takes the trade, if not it doesn't.
  • #6,114
  • Jan 17, 2015 4:23pm Jan 17, 2015 4:23pm
Quoting TheGrind
{quote} Seriously? A "pre-margin call that looks ahead of the stop...." WTF? If you could do this, why wouldn't you just make it a "pre-take profit call" that looks ahead into the future to see if you're going to hit your take profit level. If you do, it takes the trade, if not it doesn't.
I didn't say take profit. I said margin call in a catastrophic case of looking ahead if there is enough liquidity to protect the broker and trader.
  • #6,115
  • Jan 17, 2015 4:59pm Jan 17, 2015 4:59pm
fxcm isnt ready for this kind of event at this huge magnitude. CHF bank is having fun. Wondering if anyone within that circle make big money.
  • #6,116
  • Jan 17, 2015 5:06pm Jan 17, 2015 5:06pm
Quoting Datu
{quote} I didn't say take profit. I said margin call in a catastrophic case of looking ahead if there is enough liquidity to protect the broker and trader.
What's the difference between a stop loss and a take profit?
  • #6,117
  • Jan 17, 2015 7:33pm Jan 17, 2015 7:33pm
Quoting OMGtrader
{quote} his hands were tied. Remember FXCM is an Public company, compared to many other private companies. Any information he shares will be considered insider trading if it is not known to the public already. It is more an legal issue than anything else.
I kind of agree with that ... . When these sort of things occur, the Legal Department generally takes over and tells everyone to shut up and let the Public Relations Department do the talking (after, of course, running any statement through Legal) ... .

That being said, I think what we got beyond the $225 million short fall press release was virtual silence until the press release about their being in talks to obtain funding through Leucadia; that was an awfully long and uncomfortable time for concerned clients who were thinking in the back of their minds that they might not be able to get their money out, especially against the backdrop of news of other failed forex brokerage houses.

Although Leucadia is not a shareholder, they do hold a secured interest in FXCM, and my reading of FXCM's SEC filings is that this debt will not be easily be repaid within the time period specified (two years) and for the interest rate indicated (10%) in light of what their reported net revenues are. In fact, I think that it is a virtual impossibility unless FXCM is able to recover the vast majority of negative equity balances from clients; given the legal process involved in doing that and the fact that clients who experienced these losses are likely scattered across numerous legal jurisdictions, that is also unlikely.

Making the payback of the loan even less likely within the two-year time frame is the fact that it is improbable that FXCM will continue to earn what was specified in the last reported quarter's SEC reports, as there is likely to be client flight out of concerns over whether and how long FXCM will be able to remain operational even in spite of the loan, which is not intended for operational costs, but rather to replenish negative equity balances and to restore it to SEC regulatory compliance.

Moreover, there is likely to be additional flight from FXCM to brokers who appear to be taking marketing advantage of the client negative equity balance issue, such as Oanda, which is currently claiming to have forgiven negative equity balances where regulations permit as part of its "client first" philosophy, as well as to more diversified brokers such as CitiFx and E*Trade, whose enterprises encompass a wide variety of asset classes beyond forex, whose market capitalization makes FXCM's look like peanuts (CitiGroup, 144.23B; E*Trade, 6.41B; FXCM, 595.64M), and who were therefore able to easily withstand the hits dealt them by the SNB's decision.

And naturally there is the little problem of the fact that the clients who experienced a negative equity balance are unlikely to return; their accounts were wiped out ... .

Additionally, CNBC has reported that the deal has a clause which entitles Leucadia to 75% of the proceeds in the event of an FXCM sale, so it is a win for Leucadia if FXCM pays back the loan and it is a win if FXCM is sold, since it is imaginably Leucadia's calculation that their entitlement to 75% of the sale proceeds will result in profit on the $300 million loan.

From my perspective, this is an extremely short-term fix; now that FXCM has bought some time, they can naturally seek other, longer-term solutions, but if the Leucadia financing is their end-game, it will be their end-game in the literal sense.
Fireworks are fun ... as long as you don't blow your fingers off.
  • #6,118
  • Jan 17, 2015 7:51pm Jan 17, 2015 7:51pm
Quoting ZebraSquirl
{quote} I kind of agree with that ... . When these sort of things occur, the Legal Department generally takes over and tells everyone to shut up and let the Public Relations Department do the talking (after, of course, running any statement through Legal) ... . That being said, I think what we got beyond the $225 million short fall press release was virtual silence until the press release about their being in talks to obtain funding through Leucadia; that was an awfully long and uncomfortable time for concerned clients who were thinking in the back...
The loan at least get FXCM back to business, and could resume their stock trading. Indeed they bought some time to get the problem fixed, but it won't be easy. I just wonder if they would make any change towards policies/ terms and condition to customers after this incident.
  • #6,119
  • Jan 17, 2015 8:10pm Jan 17, 2015 8:10pm

  1. I trade with 500:1 leverage broker. People who do not know how to use leverage simply shouldn't trade. For those that do, the leverage restriction impeeds our ability to make money. I have a $10,000 forex account of which $9,000 is kept in my FDIC insured bank account. I open positions with about 7:1 and as trade goes in my favor, I scale in to the point where sometimes I am at 200:1 with stops at break even. This week I risked $20 on a euraud short and my profit on the trade was $844. Explain to me how I could do this with these regulations that are protecting us. First of all, I would have to put up 10 times the margin to execute the same size trade and I have to put that amount up with a broker who does absolutely nothing to protect my funds. Nobody stops anyone from walking into a casino and betting any amount they want, why are they so worried about what we risk on forex. Go police the casinos! If you want to help, make segregated accounts mandatory.

  • #6,120
  • Jan 17, 2015 8:22pm Jan 17, 2015 8:22pm
Quoting damson122
{quote} The loan at least get FXCM back to business, and could resume their stock trading. Indeed they bought some time to get the problem fixed, but it won't be easy. I just wonder if they would make any change towards policies/ terms and condition to customers after this incident.
Do you think they honor their policy about zero balance this time?
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