The big news today in the world of Forex is that the broker FXCM – one of the largest brokers in the world – is withdrawing from servicing U.S. clients after reaching a settlement with regulators in the U.S. From the regulator’s website: “The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Forex Capital Markets, LLC (FXCM) , its parent company, FXCM Holdings, LLC (FXCM Holdings), and two founding partners, Dror (“Drew”) Niv, and William Ahdout…” FXCM has been permanently banned from operating in the U.S.A. and fined $7 million.
This position has been arrived at after the investigation of complaints against FXCM which has essentially determined that between 2008 and 2014, FXCM had control of a “fake” liquidity provider called Effex, and they sent between 50% and 80% of all their trades to Effex for “no dealing desk” processing. Effex sent profit back to FXCM, were operated by FXCM staff, and were even based in the same location as part of FXCM. What this all comes down to is that FXCM were a “fake ECN” – to coin a phrase!
This begs the question – there are a lot of brokers claiming to be ECN brokers these days. Where are they getting their liquidity from? Are they doing the same thing as FXCM were apparently doing? Is this going to shine a harsher spotlight on other brokers which claim to be ECN brokers?
On a personal note, I can share my experience as a VIP client of FXCM during 2015. I only closed my account because they wanted to move me out of the U.K. where my deposit was insured by the British government, and protected by strong regulation. Anyway, I can report that all my trades were executed quickly and professionally with reasonable spreads and commissions, and I even remember getting very good positive slippage on one trade. It is important to have a good broker, but it is not as important to have a perfect broker as many people think. Provided your funds are safe and trading conditions are mostly OK, if you use solid strategies and trade well, you can still make a nice profit. I see a lot of poor traders lashing out at their brokers in frustration.
