FXCM Settles CFTC Charges For More Than $14.2 Million

At last we know the answer to the questions posed by FXCM themselves back in August following settlement of charges brought by the NFA, when they revealed that:

FXCM has set aside a $16 million reserve for the…. anticipated CFTC settlement.

Yet again the CFTC have simultaneously:

Issued an order filing and simultaneously settling charges

against FXCM, and they have just issued a press release which states that:

According to the CFTC order, from at least June 18, 2008 until December 17, 2010, FXCM failed to supervise diligently the handling of more than 57,000 customer accounts traded on the FXCM platforms by its officers, employees, and agents with respect to changes in price between order placement and execution on both market orders and margin liquidation orders. The order finds that FXCM’s failure prevented its customers from receiving the benefit of price movements in customers’ favor, but allowed its customers to suffer detrimental price movements. The CFTC order finds that had FXCM diligently supervised its personnel, FXCM would have discovered these problems with its trade integrity and would have had the opportunity to correct them before its customers were deprived of, and FXCM benefitted by, approximately $8,261,937.

Further, the CFTC order finds that FXCM failed to produce certain records promptly in its capacity as a CFTC registrant and thereby required the CFTC to issue a subpoena to attempt to obtain required records from FXCM.

That covers the alleged offences, but what about the headline figure of a fine of over $14.2 million. On that side of the equation the CFTC has this to say:

The CFTC order requires FXCM to pay a $6 million civil monetary penalty and restitution of $8,261,937 to its customers and former customers. In addition, the CFTC order requires FXCM to retain, at its own expense, a monitor to review for three years:

1. Its trade execution practices and policies as they relate to the change in price between the time the customer places the order and the time the order is executed by FXCM
2. Its compliance with its restitution obligation.

The "monitor at its own expense" clause explains the "more than" in the title, and apart from tying that number down more tightly that is quite possibly the last such news we will hear for a while regarding sanctions against U.S. public FX brokerages. However there is still much more news to come regarding the settlement of CFTC actions brought in the U.S. courts against a long list of overseas brokerages.