It's a good question ssblack. You are correct in saying that u.s. forex dealers are not allowed to segregate funds so it might not have made a difference. But had RefcoFX been a registered forex dealer member my guess is the NFA would not have allowed them to go into bankruptcy. They would have intervened and forced Refco to return customer funds just like they did in the Sentinel case because the NFA would have been hugely embarassed to see this happen to one of their own members. But since RefcoFX was not a member of the NFA the regulators just washed their hands and said "tough luck."
NFA Drops $20 Million Bombshell The President of the National Futures Association, Dan Roth, dropped a 50 megaton bomb on the forex industry yesterday. In testimony before the Congress the NFA CEO requested that the Government increase capital requirements to TWENTY MILLION DOLLARS. Here is what he is said in his testimony: http://www.nfa.futures.org/news/newsTestimony.asp?ArticleID=1968 Wow. If you thought it would be hard for poorly capitalized firms to raise a couple million dollars just wait until they have to raise $20 million. There is simply no way most of these little firms are going to be able to do that. In fact, medium sized firms are going to be hard pressed to do that. It is starting to become crystal clear that the only firms that are going to survive the coming NFA purge are the biggest, most well capitalized firms in the business. That is why Oanda went out and got $100 million in funding and Interbank got $30 million. The serious industry players know what's going on. So should the trading public. If ever there were a time to beware investing in poorly capitalized firms now is the time. After all, if the NFA has no confidence in the stability of "thinly capitalized" firms why should the trading public?
20 million would be great to see, but with the NFA going to 5 mil on January 1st, I doubt we will be seeing 20 million within the next year. Signs of good things to come tho.
It's Official: NFA Hikes Minimum Cap Requirement to $5 Million Only days after the President of the NFA told the Congress he wanted them to raise the minimum capital requirement to $20 million the CFTC signed off on the NFA's current minimum capital requirement request to $5 million. And they are not waiting around till 2008. Firms need to have the money in the bank by DECEMBER. That's right around the corner. With the forex industry rapidly changing before our very eyes I wanted to put together a much more comprehensive list of the industry's financial status. Therefore, I have included every single registered Forex Dealer member and listed their Adjusted Net Capital. Since I first started posting about the NFA proposal over a dozen firms have gone out of business. Two others have merged and several others are staring death in the face. It is astonishing that firms like Hamilton Williams (Velocity FX) can operate only $4,000 above the minimum needed to stay in business. How on earth can such a firm survive a few months from now when they're practically pushing up the daisies already? Here is the direct link for the CFTC capital reports: http://www.cftc.gov/marketreports/financialdataforfcms/ Firms Under $5 Million All these firms are reporting adjusted net capital below the $5 million mark as of the latest CFTC report. Some should be able to raise the necessary capital. Others clearly will not. Which ones can and can't will be anybody's guess. Already one of these firms, One World Capital, is not allowing customers to withdraw money. Hamilton Williams ($1,004,000) IG Financial Markets ($1,010,000) Advanced Markets ($1,042,000) One World Capital ($1,078,000) Direct Forex ($1,117,000) SNC Investments ($1,130,000) Wall Street Derivatives ($1,220,000) I Trade FX LLC ($1,801,000) Solid Gold Financial ($1,955,000) CMC Markets ($2,330,000) MB Trading ($2,393,000) GFS Futures & Forex ($3,259,000) E FX Options ($3,342,000) Forex Club ($3,715,000) Easy Forex ($4,731,000) Firms Under $20 Million These firms all meet the coming minimum adjusted net capital requirement. However, there are other capital requirements as well that as market makers these firms (HotSpot excepted in some cases) will need to meet in addition to the minimum $5 million. Clearly firms like Money Garden are not in the clear just yet. Money Garden ($5,162,000) HotSpot FX ($5,990,000) IKon ($7,130,000) ODL Securities ($10,822,000) CMS Forex ($11,849,000) IFX Markets ($12,293,000) PFG Forex ($12,781,000) FX Solutions ($15,077,000) Firms Over $20 Million These are the most well capitalized firms in the industry and two years from now may very well be the only firms left in the industry if Dan Roth and the NFA have their way and increase cap requirements to $20 million. Interbank FX ($25,178,000) Gain Capital (29,061,000) Forex Liquidity ($39,909,000) FXCM ($50,465,000) Oanda ($50,837,000) GFT Forex ($54,662,000) Firms No Longer in Business These are the firms that have gone out of business since I began posting on the forum. That's a quarter of the industry in just a few months. And one of those firms, Nations LLC has gone into bankruptcy and customers can't get their money back, and may never get their money back. Bacera Corporation Cal Financial Corporation FiniFX Forward Forex FX Option1 Inc. Nations Investments Performance Capital International Spencer Financial Tradex Swiss AG Trend Commodities United Global Markets Worldwide Clearing Firms that Merged These are the firms that could not make the new capital requirement on their own and decided to merge with larger players as a result. American National Trading Corp (Merged with PFG) Royal Forex Trading (Merging with IKON) Summary It is a very turbulenet time in the forex industry. My advice is what it has always been, do not trade with a poorly capitalized firm. And if you must, at least wait until after the December 17, 2007, deadline before putting any money on deposit with any firm that is not meeting the current minimum capital requirement.
with the exception of money garden, I think all of the firms over 5 million at this point should be good for a while and wouldn't have a problem raising money either through P.E, Venture Cap, etc. The industry is definately changing and hopefully those clients of the smaller firms can withdraw their funds without a hassle.
check out the NFA's webpage today, www.nfa.futures.org. A lot of fines and actions against some major Forex firms this week.
If IG are part of the IG group in the UK (and I am pretty sure they are) then they are pretty safe. They are fully listed on the London Stock Exchange and must be worth £100m+ I would have thought. And what a surprise to see fxcm fined $175k in a case where it was alleged to have cheated and defrauded customers. Who would have thought.......
IG Index is pretty safe, in the UK. But I think they'll probably close of up their U.S. office and pull out of the American market altogether.