FXCM Fined $2 million by the NFA

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Fresh from having their UK subsidiary fined by the CFTC earlier this month, FXCM have now been fined $2 million by the National Futures Association. Once again the complaint against FXCM and their CEO Drew Niv and details of the agreed settlement have been published simultaneously. Once again FXCM neither admit nor deny the allegations in the complaint, which concern FXCM's failure to pass on positive slippage from their liquidity providers to their customers, and lapses in their anti money laundering procedures. However this time around FXCM's customers do stand to benefit financially since one of the agreed sanctions states that:

Within 30 days of the effective date of this decision, FXCM shall make a good faith effort to credit the accounts of its customers the amount of positive slippage which its customers experienced on their trades from and after June 18, 2008

According to the allegations in the complaint this could amount to a sizeable sum, since:

From January to September 2010, FXCM derived approximately $520,000 from positive slippage, none of which it passed on to its customers.

and:

During January to September 2010, there were over 40,000 margin liquidation orders that experienced positive slippage, resulting in a gain of approximately $130,000 to FXCM.

In addition the complaint alleges that:

FXCM failed to adopt or carry out adequate procedures to ensure the timely and efficient execution of customer orders, regular evaluations of the capacity of its electronic trading platforms to efficiently execute customer orders, and the implementation of appropriate modifications to its trading platforms to increase capacity when necessary.

If you're a long standing active FXCM customer from the US it seems highly likely that you're entitled to expect an unanticipated bonus in your trading account at some point within the next 30 days. If on the other hand you're a long standing FXCM customer from the UK like me, you might be wondering why you're apparently not entitled to receive such a bonus. Last, and by no means least, if you're an active customer of any other forex broker in any jurisdiction you might instead be wondering whether your own "no dealing desk" broker has been pocketing positive slippage whilst running their business on a trading platform that isn't up to the job of efficiently executing customer orders, and whether the NFA, the CFTC, or indeed any other regulator  intends to do anything about that situation.

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August 21, 2011

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