FIFO Fiasco Status Report – Who Said What When?
At long last August 2nd has been and gone, and the dust has settled slightly. We'll cover what still works and what doesn't in a forthcoming post, but for today we're going to concentrate on who said what, and when. We'll do that by working our way down the list of retail forex brokers included in the CFTC report on the financial strength of Futures Commission Merchants. For some reason it seems the better capitalised a broker is the less it has to say about the FIFO fiasco!
We've mentioned before that most futures traders find it a bit difficult to comprehend the furore that the new NFA FIFO regulations have caused in the forex industry. They and their brokers have always done it that way! There are a variety of ways of entering a futures position, but at the end of the day there is only one way of exiting. Open an equal and opposite position and all of a sudden you're flat. Either that or you can look forward to receiving delivery of a truck load or two of soybeans and pork bellies! The best capitalised businesses on the CFTC list deal in futures, including currency futures, as well as spot forex. They seem to have had no need to frantically reprogram their trading platforms, or to spend large chunks of their big piles of cash on marketing.
The Interactive Brokers ($691,880,346) website only talks about FIFO in its accounting context.
Oanda's ($159,062,073) only comment was "no comment".
GFT ($79,368,858) were slightly more expansive, explaining in a document called "Get the Facts" that their proprietary DealBook platform didn't need changing to comply with the new rules.
Moving on to the MetaTrader brokers, Gain Capital Group ($98,125,651), better known in the US as Forex.com, reassured their customers that their proprietary FOREXTrader platform "has always used the FIFO method". However they were quick to suggest that MetaTraders who liked to use "hedging" might want to move their money offshore to the UK.
FXCM ($63,999,806) appeared to have rather more work to do to get their Trading Station platform FIFO compliant, but they too implied that MetaTrader should return across the Atlantic from whence it came, leaving the US far behind. They kept on repeating the message that the UK rather than Russia was the best destination.
FX Solutions ($48,262,204) took a slightly different approach, suggesting that users of MetaTrader and their GTS platform should all consider going offshore to Australia rather than the UK. I suppose the surf is better there?
Now we're getting down to the small fry that only just scraped in with less than twice the new adjusted net capital requirement of $20,000,000. It seems like only yesterday that a mere $1,000,000 was sufficient.
Interbank FX ($35,611,164) say they have implemented a "proprietary back office system", and they reassure US MetaTraders that "all of your Expert Advisors will continue to work with all of your pre-programmed stops, limits and trailing stops." Makes you wonder what all the fuss was about, doesn't it. Why didn't everyone else just do that?
Last, but not necessarily least, comes Alpari US ($22,312,195). They claim to "have been working diligently on an upgrade to MT4 which is fully compliant with new FIFO/offsetting rule", and they make no mention of any new back office system. Their cousins from the UK say they won't take money from US residents. Alpari have even gone to the trouble of producing a video showing their US customers how they can keep on using MetaTrader 4, and still keep their cash in the US too. Here it is::
If you've read this far you may be wondering by now where one of the favourites of the Forex MegaDroid team comes on this list. The answer is they don't. ForexMeta don't seem to be a Futures Commission Merchant. They're not a member of the NFA either. If you examine their website very closely you might discover that "our clearing firm, FXDD, will email you a Live account login and password" if you open an account with them. Maybe FXDD are on the list somewhere then? Alas no. Their NFA membership is still pending. That means that apparently they don't see the need to abide by the new rules.