Lowered Margins in the UK anyway to 100:1, dropping to 50:1 during high impact times, stopped or raised margin hugely on CHF and other pairs. Cost them 220Mil writing off all the Negative accounts, the rest of the brokers will scrabble around for years for 10% of there owings, atleast they just wrote it off. Odds on it happening again are very very low, remote even, but as with trading, business comes with risks. in both cases you have to accept and move on.
So maybe I'm missing something but FXCM certainly received a lifeline of $200mm (give or take) from Leucadia as they were in some kind of breach of their cap requirements. I feel like I'm causing the thread to go off the rails, so pardon me, back to tryin' to pick tops and bottoms..
300Mil wasn't it, which in nearly 2 years time, might seriously bite them on there asses, who knows. Bail out why not everyone else is getting them.
THIS IS QUOTED FROM FOREXMAGNATES. THE LINK IS AS FOLLOWS: http://forexmagnates.com/fxcm-february-volumes-dive-41-as-post-snb-clouds-persist/ FXCM has posted its trading metrics for February along with its Q4 and full year 2014 financial results (Financial Report article posted here). For the month, retail volumes were 41% lower to $267 billion, compared to $450 billion in January, calculating to $13.3 billion per day. The volume performance was well below the 20% drop experienced by GAIN Capital, but matched the 41% decline at Saxo Bank. So far in March, FXCM released that average daily volumes were 11% higher than February. Elsewhere, the broker’s institutional division didn’t fare much better with volume declines of 38% to $162 billion compared to $255 billion in January. Average daily volumes were 33% lower compared to January at $8.1 billion and also underperformed peer trading venues, such as the CME, EBS and Hotspot where average daily volumes fell 21%, 27% and 23% respectively. While the institutional unit fared slightly better than retail, it is worth noting that at $255 billion for January, institutional volumes had already dropped substantially from their 2014 high of $393 billion set in October. The decline in volumes appears to indicate that FXCM is experiencing difficulties in its retail division which suffered a reputational hit after the broker was forced to raise $300 million in emergency financing due to January’s Swiss franc flash crash. After initially reporting that volumes had remained strong in the days following the Swiss franc volatility, FXCM’s activity fell over 50% during the last few days of the month. February’s data reveals that despite assurances to clients of their financial strength, clients appear to be limiting their exposure to the broker and trading less. Surprisingly though, active accounts did show an increase to 194,517 from 193, 546 in January. Today’s report comes after FXCM released late Wednesday a minute by minute review of what transpired on the fateful January 15th day. The data showed that FXCM was able to fill 18% of its clients EUR/CHF orders at 1.1700 or above, with the remainder filled above parity when liquidity returned. According to the firm’s finding, the results showed that their circuit breakers prevented clients from losing greater amounts as other brokers and trading venues experienced fills well below the 1.00 parity level. February 2015 Operating Metrics Retail Trading Metrics Retail customer trading volume of $267 billion in February 2015, 41% lower than January 2015 and 12% lower than February 2014. Average retail customer trading volume per day of $13.3 billion in February 2015, 38% lower than January 2015 and 13% lower than February 2014. An average of 513,931 retail client trades per day in February 2015, 22% lower than January 2015 and 28% higher than February 2014. Tradeable accounts of 222,719 as of February 28, 2015, a decrease of 360, or 0.2%, from January 2015 and an increase of 31,997,or 17%, from February 2014. Institutional Trading Metrics Institutional customer trading volume of $162 billion in February 2015, 36% lower than January 2015 and unchanged from February 2014. Average institutional trading volume per day of $8.1 billion in February 2015, 33% lower than January 2015 and unchanged from February 2014. An average of 31,242 institutional client trades per day in February 2015, 13% lower than January 2015 and 11% lower than February 2014. - See more at: http://forexmagnates.com/fxcm-febru...post-snb-clouds-persist/#sthash.3baQJUXJ.dpuf
This was the largest move of a major currency since currencies started floating 1971. The EUR/CHF move was 44 standard deviation moves, while most risk management systems only contemplate 3-6 standard deviations. The fact that there was almost no available liquidity in CHF for approximately 40 minutes after the announcement shows that even the largest banks in the world did not expect the SNB, a major central bank, to be so reckless as to reverse a long-held policy without any forward guidance. Given what happened with EUR/CHF, the industry is now looking very hard at any potentially similar issues, especially given the increased geopolitical risks in Southern and Eastern Europe. The primary change FXCM has made is to remove currency pairs from our platform that carry significant risk due to over-active manipulation by their respective government either by a floor, ceiling, peg or band. We also raised margin requirements for other pairs as well. Some of these changes will be permanent while others may change as geopolitical risks change.
The caveat of our no dealing-desk execution system is that traders are offset one for one with a liquidity provider. When a client entered a EUR/CHF trade with FXCM, FXCM Inc. had an identical trade with our liquidity providers. During the historic move, liquidity became extremely scarce and shallow, which affected execution prices. This liquidity issue resulted in some clients having a negative balance. While clients could not cover their margin call with us we still had to cover the same margin call with our banks. When a client profits in the trade FXCM gives the profits to the customer, however, when the client is not profitable on that trade FXCM Inc. ends up having to pay the liquidity provider. FXCM ended with a regulatory capital shortfall. Accordingly, FXCM needed to get a loan to cover this balance, which it did. For anyone that still thinks FXCM is running an FX dealing desk, we have now demonstrated that such is not the case.
As a regulated broker we are required to notify our regulators in a timely manner when any event occurs that may be deemed sensitive to clients. When we notified the regulators, they required FXCM Inc.’s regulated entities to supplement their respective net capital on an expedited basis. We explored multiple debt and equity financing alternatives in an effort to meet the regulator’s deadline. The deal we ended up doing with Leucadia was the only deal that could and would happen in the very short timeframe we were given by the regulators. The CEO and the president of Leucadia were here in the office working on the deal. It was a tall order for someone outside of the FX industry to come in and write a $300 million dollar check. This was the type of thing only top management could do. But they see the sustainability of FXCM, and that was everyone’s end goal. We really are very thankful to Leucadia. The deal enables us to live and fight another day and gives us time to build shareholder value in the future. FXCM has spent over $250 million dollars in the past few years making strategic acquisitions building up our non-core businesses, mainly on the institutional side. Our goal is to repay the Leucadia loan by selling those non-core assets. Below is a slide from the March 13 public presentation for our Q4 2014 financials and February 2015 operating metrics.