We suggested just after Christmas that FXCM were building an acquisitions war chest, and that's how things are now starting to pan out. At the beginning of this month the Wall Street Journal reported that:
FXCM had agreed to buy the retail trading business of GCI Capital of Japan, adding 20,000 active accounts to the online foreign exchange broker.
Now FXCM have announced in a press release that the deal has been finalized:
FXCM has acquired the retail FX business of GCI Capital Co. Ltd of Japan for $5 million net of cash received, subject to certain adjustments. GCI Capital's retail FX business, which has been operating under the FXCM Japan brand, will provide an excellent complement to FXCM's recent purchase of ODL Japan. The two entities will combine and operate as FXCM Japan, under the FXCM Inc umbrella.
We also suggested not long ago that more forex lawsuits were on the cards, and FXCM has been on the receiving end of another one this month. According to Michael Greenberg at Forex Magnates an analyst's downgrade after FXCM's recent IPO on top of that first lawsuit led to a fall in FXCM's share price, which in turn led to a securities class action lawsuit against FXCM.
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That prescient title is a quotation from a presentation given by Professor Dave Cliff of the University of Bristol at the Innovation and Algorithmic Trading conference hosted by LMAX at University College London at the end of February. I was sat at the front throughout Dave's talk, and I found myself laughing frequently. Perhaps for that very reason any shots of the back of my head have been left on the cutting room floor in the videos that have just been made available on the LMAX Trader community website. Here's Dave's extremely interesting and even more amusing presentation from that event on the subject of "Robot traders and evolving markets":
Here are Dave's take aways (at around 27:00) to try and tempt you to watch the whole thing from start to finish. You won't regret it, I promise!
- Algorithmic trading is here to stay
- Human traders are an endangered species
- Machine optimised algorithms are the future
- The global financial markets are a large scale complex IT system
- A wind tunnel is a useful thing… but it tells you nothing about whether Gower Street will be congested at 5 PM
- We need system level simulations too
Here's the UK Government project that Dave refers to at the end of his talk – Foresight Project on The Future of Computer Trading in Financial Markets and here's why he thinks it's important:
As far as I know no one has a tool for measuring tail risk at the systemic level (32:45)
That is no joke!
Filed under Trading Systems by
It didn't take long for the next forex lawsuit to arrive, and from the same source too! Following on from their action against FXCM, the Business Trial Group of Morgan & Morgan, P.A. has announced another class action lawsuit, this time against FXDirectDealer, LLC (more commonly known simply as FXDD). According to the announcement the plaintiff this time around is Hugo Cruz, and once more the suit accuses:
FXDD of fraud by misrepresenting its trading platform as one that is free from dealer intervention or manipulation. Instead, Cruz alleges, FXDD uses a number of devices and tricks, including software applications, designed specifically to manipulate and interfere with customers’ trades.
Like the FXCM case, the suit alleges that FXDD uses specially designed software to manipulate trading and “loot” its customer accounts, and also that FXDD lures its customers by promoting a “demo account,” which was touted as providing customers with a true market trading experience. Instead, the suit alleges, the demo account does not reflect what FXDD does when the customer begins “live” trading.
I can't help but wonder if these forex class action suits are like London buses? You wait ages for one, then three come along in quick succession.
In a press release issued earlier today The Business Trial Group of Morgan & Morgan, P.A. announced that it had filed a class action lawsuit today against Forex Capital Markets, LLC (FXCM) alleging fraud and racketeering. My thanks to Michael Greenberg over at ForexMagnates for bringing this interesting piece of news to my attention.
Morgan and Morgan say that FXCM are "the nation's largest Forex dealer", but they don't say how they came to that conclusion. There are lots of ways of doing that calculation, but personally I'd prefer to settle for "one of the largest US retail forex dealers" instead. Be that as it may, Morgan and Morgan are acting on behalf of:
William H. Sanders, of Muscogee, Oklahoma, and all other similarly situated FXCM customers
Accusing FXCM of fraud by misrepresenting itself as a trading platform that is free from dealer intervention or manipulation. Instead, Sanders alleges, FXCM uses a number of devices and tricks, including software applications, designed specifically to interfere with customers' trades.
Recently the NFA fined GAIN Capital and Ikon for their use (and alleged abuse) of the infamous MetaTrader 4 Virtual Dealer plugin, so quite possibly Morgan and Morgan are going to pursue a similar angle in this case? The press release certainly alleges :
That FXCM engaged in a pattern of racketeering activity by collaborating with its software developers and programmers to develop a "diabolical" software application that provides FXCM with a myriad of tools and system commands with which to interfere with customers' trades, including routing trades to "slow" servers and sending false "error" messages when customers attempt to close out profitable trades.
What with one thing and another I can't help thinking that this won't be the last lawsuit directed at US forex brokers both large and small during 2011.