Did Brokers Prepare For NFA Requirement Changes?
I guess we'll find out sooner or later but Forexds has an interesting comment regarding the whole thing:
"I know that many of the small FCM fishes have become IB's to established FCM's in December or sold their books to the likes of FXCM. But ALL of the names you mention in your note have posted the higher capital (I know for a fact that MB Trading and FX Club have). Alpari is a new comer to the US, but very well established in Eastern Europe. The higher net cap requirement of $10m is no surprise to FCM and they've had months to prepare and get the capital in order. You wont get the DEC data from the CFTC site until 6 weeks from now, though."
For those of you that aren't versed in the common acronyms you see in forex, FCMs are Futures Commission Merchants. IB's are introducing brokers (defined as a futures broker who has a direct relationship with a client, but delegates the work of
the floor operation and trade execution to another futures merchant.) Some IB's may be fund managers and some could just be considered salespeople, "introducing" traders to a larger broker and taking a commission and a cut of the spread.
Forex Brokers In Serious Trouble
I mentioned back in November that the NFA had implemented new net capital requirements for Forex brokers that went in effect on December 21st, 2007. In a nutshell, brokers that offer 100:1 leverage needed 10 million in net capital and brokers offering 50:1 leverage needed 5 million in net capital.
If you missed that post, you can find it at http://www.forexproject.com/Blog/Investing_and_Trading/Forex_Brokers_Will_Be_Affected/
The CFTC has only released net capital reports up to October (November should be out any day now) but there are several brokers that could be in serious trouble. If you go over to http://www.brokerontop.com/small_futures_commission_merchant.htm, any of these small-cap firms (< 10 million in excess net capital) could soon have a problem if the NFA start enforcement of the new requirements. I'd be seriously hesitant depositing any money or having any money at these firms. Do your own research but based on my understanding, the recognizable firms in trouble could be:
- CMS Forex (need 10 million, barely compliant based on October report)
- Hotspot FX (need 5 million, barely compliant based on October report)
- Forex Club (need 10 million, seriously undercapitalized based on October report)
- MB Trading (need 10 million, seriously undercapitalized based on October report)
- Easy Forex (don't know their leverage but still seriously undercapitalized based on October report)
- Alpari (need 10 million, seriously undercapitalized based on October report)
Lots of Changes
Forex on Top was updated last night with a lot of ranking changes across the board. Forex broker positions changed substantially. According to traffic reports, the top 10 Forex brokers are:
- Oanda
- EasyForex
- Forex.com
- FX Solutions
- FXCM
- ACM
- Saxo Bank
- GFT Forex
- iForex
- CMSFx
Other notables, of course I have to mention, Forex Project up 6 spots to #35 and Forex on Top up 19 spots to #63.
Peter Bain’s Forex Mentor dropped 14 spots to #42. It can only be a good thing that FXPowercourse dropped 21 spots.
New Research Your Broker Site
I spent my remaining vacation days of 2007 designing a new site that ranks FCMs (Futures Commission Merchants). This has been a site that I’ve been wanting to develop for over a year but just never got around to it mostly because I knew it would take a lot of data parsing and compilation. I’m launching it today fully functionaly but with more features in the works. In a nutshell, you can search for your broker, view the financial data they’re required to report, view their ranking trends over 60 months, view any regulatory actions against this broker, and more. These reports are the best thing we have as traders in identifying a broker that may be financially troubled or fit. Seeing trend data may also assist in viewing how this particular broker is financially progressing.
Click the thumbnail picture on the right to see an example of Oanda who is ranked 31st overall and 6th in the mid-cap broker category.
You can check out the site at http://www.brokerontop.com
I had this evil grin on my face one day
Globes Online is reporting that Easy Forex is being sued by one of its' customers alleging that the company paid brokers incentives when clients lost money.
The claim followed a report on Channel 10 in which an Easy Forex broker
was heard saying, "I had this evil grin on my face one day, when a
client lost $35,000 in a quarter of an hour. A guy gets wiped out – I
get my commission. A guy comes up a winner and turns a profit – I pay."
I haven't heard about this in other news outlets, but here's the link: http://www.globes.co.il/serveen/globes/DocView.asp?did=1000276313&fid=1725
Strange thing is that Easy Forex has an advertisement right about this article.
MB Trading
MB Trading: Narrow pip spread. Fast Executions. Professional order types capable of preventing slippage. Service Staff eager to help. Downside – No Charts.
[Read more]
FXCM Transitions to No Dealing Desk Business Model
I haven't heard much from traders regarding FXCM's no dealing desk but an email I received from them today surprised me. FXCM states that they've already transitioned 95% of their clients to no dealing desk execution. Here are additional highlights:
- Over 95% of FXCM direct clients now trade with No Dealing Desk (NDD) Execution.
- Clients trading with NDD have seen spreads significantly reduced in 13 currency pairs.
- NDD eliminates the potential conflict of interest between trader and broker; all trading orders are passed through FXCM to global banks and financial institutions competing to offer the best price.
From what I've been reading on the forums, no one is very impressed with the no dealing desk option. I'd like to hear from others experiences.
ForexYard
Currency Trading with FOREXYARD, the leader in online currency trading, provides real-time execution, free forex charts and quotes, and 24 hour commission-free forex trading.
[Read more]
Help! Need New Broker
I'm posting this for a loyal visitor who is tired of Oanda's spread hikes. I too have had issues with their spread hikes mostly during economic releases out of England. Anyway, he's looking for feedback on any Metatrader brokers that others are using for live trading. I personally have no experience with any Metatrader brokers. If you do, please post a comment on your experiences.
FXCM Apologizes
Yesterday and part of today, FXCM had technical difficulties and their trading platform was unavailable. Anyone who had open positions from last week couldn't manage their trades. They sent out an apology today and offered to reimburse those clients who suffered a loss on open positions during the outage. They pretty much stated that they haven't done enough to address reliability issues and wanted to ensure everyone that the technical issues were not indicative of FXCM's financial stability or health. Do you believe them? Click [Read More] to view the entire email that I received because I have monies deposited with FXCM. They are my backup broker.
