Proposed NFA Capital Requirement

forexsavior · Jan 8, 2009

Former Dead Pool Dealer Indicted

One of the very first forex dealers that the Savior shined his light on was One World Capital. Here is an excerpt from the summer of 2007:
http://www.fxstreet.com/forum/showpost.php?p=5102&postcount=6

As I continue to update the dead forex firms walking list I'm amazed how many people think fraud and undercapitalization are completely separate issues. Often times they are not. The reason is quite simple: firms that are committing fraud are not known for having legible books. And Vice versa. Firms that have a hard time maintaining their capital requirements will often cut corners and commit fraud to keep their firms from going under. Finally, smaller firms simply don't have the money to maintain the kind of large legal and compliance staffs necessary to keep up with the battery of regulations being issued by the NFA and CFTC. And of course some firms are just plain incompetent. All these factors have come to a head with Forex Dealer Dead Pool Member One World Capital, who is now in serious trouble with regulators.

To see the full report on One World's misdeeds you can click on the NFA's report yourself: http://www.nfa.futures.org/BasicNet/...px?seqnum=1190

In short, One World is a classic Dead Forex Firm walking. Firms like One World are the reason the NFA is going to raise capital requirements. And when they do, does anyone honestly believe the One World's of the world will survive?
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Over the next several months One World rapidly circled the Bowl:
http://www.fxstreet.com/forum/showpost.php?p=5976&postcount=39

The word on the street is that the situation at One World has become so dire that a large chunk of their sales force resigned because they hadnât been paid for two months. Other traders are reporting non-responsive customer service, emails that go unanswered and phones that keep on ringing. All the signs of a firm in its last death throesâ¦

The bottom line is when you canât return a customerâs money when they ask for it you are finished in this business. One World may be able to limp on indefinitely but it is hard to see this firm making a comeback to respectability. Barring a fat sugar daddy willing to pump in ten million dollars this firmâs days appear to be numbered.
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http://www.fxstreet.com/forum/showpost.php?p=7943&postcount=85

And the hits just keep on coming for One World Capital. The NFA just announced that One World has been fined $100,000 for the complaint brought against them last spring.
http://www.nfa.futures.org/basicnet/...17&contrib=NFA

In any case, I strongly recommend ANYONE who has an account with One World for the love of criminy get your money out of that firm once and for all- if you even still canâ¦
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Finally, like that fat man in the Monty Python sketch who exploded upon eating a mint One Worldâs bloated and rotting gut burst into a million pieces in December of 2007 when regulators shut the firm down for good:
http://www.fxstreet.com/forum/showpost.php?p=8337&postcount=92

Now the Feds have swooped in and arrested John Walsh and friends. Leading the charge is Patrick Fitzgerald. Fitz can mount Walshâs head above the fireplace, right next to former kills like Scooter Libby and Governor Blago. Welcome to the party pal: http://www.chicagotribune.com/business/chi-winnetka-forex-fraud-arrest-jan07,0,405109.story

Feds arrest 2 Winnetka futures dealers on fraud charges
By James P. Miller
Tribune reporter
4:27 PM CST, January 7, 2009
Federal agents arrested two top executives of a Winnetka foreign-exchange futures dealer that collapsed over a year ago on federal fraud charges, the Justice Department disclosed Wednesday.

Both men were principals with One World Capital Group, which was effectively shut down in December of 2007 when the Commodity Futures Trading Commission â responding to a growing chorus of complaints from customers who said they'd been unable to withdraw funds from their accounts -- obtained a court order that froze One World's assets and barred the troubled foreign-currency trader from further trading activity.

Wednesday's actions, including agents' execution of "search and seizure" warrants at both officials' homes, represent the first criminal charges to emerge from the company's failure.

FBI agents arrested One World founder John E. Walsh at his Lake Forest home this morning, U.S. Attorney Patrick Fitzgerald's office said in a Wednesday statement.

Another One World principal, 43-year-old Charles G. Martin, of Glencoe, was arrested last night in the Los Angeles area. The government calls Martin a "de facto" official of the currency-trading concern, although he was prohibited from holding a position with the company.

A criminal complaint unsealed this morning charges both men with one count of wire fraud each, for improperly diverting to their own use customer funds that were supposed to be invested in foreign-currency trades.

The two men used customer funds they had misappropriated "to finance a lavish and extravagant lifestyle," racking up huge sums on corporate credit cards largely paid for by the company, the government's criminal complaint says.

Martin charged over $1 million "at a strip club and restaurants" over the course of 20 months, the government says, spent $50,000 at toy stores, and used his company credit card to finance $280,000 in jewelry-store purchases.

In addition, the complaint says that Martin and Walsh used hundreds of thousands of dollars they had diverted from One World to finance a never-released movie entitled "Order of Redemption."

The company, founded in 2006, hit turbulence in the spring of 2007, the government notes, when the National Futures Association found improprieties in the course of an audit.

The fallout from that audit sparked a rise in the number of customers who sought the return of money they had invested, the complaint notes, but the firm couldn't honor those requests because the two men had allegedly been dipping into margin funds as part of their misappropriation scheme.

Based on the company's refusal to honor those customer redemption requests, the federal regulatory agency known as the Commodity Futures Trading Commission filed a civil complaint against One World and Walsh in Chicago federal court in mid-December, 2007. That litigation led to the asset freeze that has been in place for the past year.

Chicago attorney Kevin Flynn, who is representing Walsh in the One World matter, said he hasn't had a chance to review the government's criminal complaint, but said "I don't believe that Mr. Walsh will admit guilt of any criminal conduct."

Indeed, said Flynn, Walsh has been cooperating with the CFTC's One World probe, and had this week reached an agreement in principle, in the courtroom of the judge hearing the civil case, on a possible resolution of the CFTC's complaint.

"We were shocked and surprised at the timing" of the government's decision to bring criminal charges, said Flynn, "coming as it does on the heels" of the tentative resolution of the civil complaint.

Martin, who was to appear Wednesday in Los Angeles federal court, couldn't immediately be reached for comment.
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forexsavior · Jan 13, 2009

Alpari Struggling to Meet Cap Requirement?

The NFAâs next scheduled capital requirement is set to kick in on January 17th at $15 million. Firms offering leverage of over 100 to 1 therefore must have over $20 million set aside. Alpari was showing $18 million in their last net capital filing but still appear to be about $5 million short of the amount required to offer leverage greater than 100 to 1. Therefore, Alpari has just announced they are raising their margin requirement:
http://www.alpari-us.com/en/company-news/234.html

Company News â January 8, 2009: Change to Customer Agreement and Terms of Business

Effective January 18, 2009, Section 2 of the Customer Agreement and Section 6 of the Terms of Business are being amended as follows:

CUSTOMER AGREEMENT â SECTION 2. SECONDARY RISK DISCLOSURE: HIGH RISK INVESTMENT

In accordance with these changes, effective January 18, 2009, Alpari (US) will increase its stop out level to 100% of the required margin.

Please refer to the following example for an explanation on how this will affect your trading:

Assume that the quote for the EUR/USD is 1.2600, and you have $5,000.00 in your account.

Assume that, today, you open a position of 1 standard lot of EUR/USD. If the price moves against you after you open your position, MetaTrader 4 will automatically close your position around $252.00 (20% of the required margin), with a loss of around $4,748.00.

As of January 18, 2009, you open a position of 1 standard lot of EUR/USD in your account. If the price moves against you after opening your position, MetaTrader 4 will automatically close your position at $1,260.00 (100% of the required margin), with a loss of $3,740.00.

Please note the following: all positions that are left open with insufficient margin after the market closes on January 16, 2009 will be automatically closed upon the marketâs re-opening on January 18, 2009, without further notice.

Team of Alpari (US)
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With the new cap requirement scheduled to kick in shortly expect more such announcements. Traders who employ high leverage may want to consider winding down their positions if they are trading with smaller brokers to avoid any nasty margin calls.

forexsavior · Jan 14, 2009

November Net Capital

The CFTC has just released their latest net capital figures. With the $15 million dollar deadline just days away who will make the cut and who will not?
http://www.cftc.gov/marketreports/financialdataforfcms/index.htm

The following firms have net capital below $15 million

Advanced Markets $10,195,000
Hotspot $10,527,000
Easy Forex $10,606,000
GFS Forex $12,861,000
MB Trading $14,664,000

AMIFX, HotSpot and Easy Forex are really behind the 8 ball. They are not even close to the $15 million mark. Sure the CFTC cap report lags about six weeks behind but time is running out and these firms have not shown any kind of gradual increase in their cap numbers unlike their other competitors.

The following firms have net capital below $20 million

**** Royal $15,013,000
Forex Club $15,823,000
I Trade FX $17,098,000
Alpari $18,158,000
ODL $18,982,000

The following firms have net capital above $20 million

CMS Forex $26,540,000
PFG $27,704,000
Interbank FX $42,954,000
FX Solutions $45,125,000
GFT Forex $73,808,000
Gain Capital $102,959,000
FXCM $131,416,000
Oanda $170,799,000

As always conduct your due diligence and make sure the firm you are trading with will be able to comply with the new $20 million capital requirement going into effect in the months ahead.

forexsavior · Jan 15, 2009

ODL says âNO MAS!â

ODL Securities has developed a nervous reaction to the battery of new regulations in the United States and has officially thrown in the towel. They are closing their U.S. office and shipping all their customers to FXCM. ODL released a fascinating press release making the announcement: http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=10f6f438-1c7a-4584-b8ec-cb706e07fb77

ODL Securities Sells US Business

ODL Securities, the leading independent FOREX, derivatives, equity, spread betting and commodity trading house has sold the US division of its profit making US Forex business to Forex Capital Markets LLC (FXCM).

The move follows the current and planned implementation of new and more complex regulatory rules that have made it increasingly burdensome for all Forex Dealer Members to operate in the United States. These include increases in the minimum amount of regulatory capital that a Forex Dealer Member must maintain - up by three times over the past year and due to increase further in May to $30mn.

A strategic decision was therefore taken by ODL to use its financial capital more efficiently to fuel its growth in other parts of the world.

As part of its expansion strategy ODL Securities will open new JV offices in Turkey and Australia in the very near future, and expand its operations in Japan and Canada. In the UK head office, the business has been restructured to improve its offering with a focus on multi-lingual customer service and support (ODL now has clients from over 100 countries).

Announcing the sale, Graham Wellesley, Chief Executive of ODL Securities, said: âThis has been a hard decision for us to make, ODL Securities Inc. is a very successful and profitable operation, but we could not justify disproportionately supporting one of our smaller subsidiaries.

âWe remain firmly committed to expanding our international reach and to that end we have dramatically strengthened the management and resources of our UK Sales and Servicing Teams as well as developing new ventures in Europe, Asia and Australia. We remain profitable and our strategy will continue to focus on growing the business in 2009.â
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Higher capital requirements are clearly squeezing smaller forex brokers and there are sure to be more brokers leaving the industry in the months to come. Traders need to be very wary of opening up long term positions with brokers who have less than $20 million in capital. As we have seen these smaller forex brokers close up shop (or raise margin requirements) with barely any warning to their customers. Traders deserve better peace of mind than that. It is hard enough just trading in these crazy markets let alone having to worry if your broker is about to close their doors and give your account the boot. Money talks in this business. If your broker canât crow about having lots of capital on hand, bewareâ¦

forexsavior · Jan 20, 2009

Crown Forex Still Under Siege

Francesc at FX Street is reporting that the SFBC investigation of Crown Forex continues and that customers still canât withdraw their funds. However, it appears the blockade may be lifted in a few weeks time.

http://blogs.fxstreet.com/francesc/2009/01/19/update-crown-forex-investigation-still-weeks-to-go/

As I know many of you are highly concerned for the sake of your money at Crown Forex as the firm is currently under SFBC (Swiss Federal Banking Commission) investigation, Iâm trying to be in close contact with management at Crown Forex and SFBC in order to keep you as best updated as possible.

Today, I got a phone call from SFBC. My counterpart was not able to confirm me when the investigation will end but from our conversation I got the feeling that we are not far from it.

I had been previously told that we could see the end during this week but it seems that the investigation will still last for some more weeks.

What I do get a confirmation is that it is totally true that SFBC does not allow traders to withdraw their money till the investigation will finish. To get this confirmation from SFBC is definitely a relief for me and I hope it is for many of you.
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This is what can happen to you if you trade with an unregulated broker. Beware Swiss brokers that do not have a banking license.

forexsavior · Jan 29, 2009

Trouble Ahead for MG Forex?

Last year Rosenthal Collins bought MG Forex just as the first capital requirement was set to kick in. RCG then announced that MG Forex was a subsidiary of Rosenthal Collins Securities, which is regulated by FINRA, not the NFA. Thus MG Forex was able to avoid the $20 million capital requirement since FINRA members need only $250,000 in capital.

That was then.

Last week FINRA released a proposal capping the margin level that forex brokers can offer at 1.5 to 1. Essentially, FINRA is saying you canât trade forex on margin.

http://www.finra.org/Industry/Regulation/Notices/2009/P117744

The rule will not effect NFA registered forex brokers. But for those forex brokers with FINRA licenses the party appears to be over. Why is FINRA doing this?

FINRA has observed a potential migration of retail forex activity from the FCM channel to Broker Dealersâ¦
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Hmmm, couldnât be that forex dealers who didnât have the capital to keep their NFA licenses were suddenly showing up to get a broker dealer license on the cheap? Well, if that was the case consider that escape hatch to be boarded up.

What will MG Forex do now?

Pippi436 · Jan 29, 2009

Well that would hurt MB Trading or Interactive Brokers too for example, which are both FINRA and NFA members.

MrAngry · Jan 30, 2009

Euromoney's weekly fix is reporting FXCM has bought out Hotspots retail offering.

Pippi436 · Jan 30, 2009

Mr. Angry: will they continue to offer the Hotspot platform or will they migrate the customers over to their own?

Hotspot retail wasn't really great in the recently, there were only 3 marketmakers left quoting prices and only in small size - the entire eur/usd book was often only 5 million deep or even less. Will be interesting what FXCM makes out of that.

MrAngry · Jan 30, 2009

It says it will migrate clients to its new Active Trader platform.

"Hotspot FXrâs retail forex business is a perfect fit with FXCMâs focus on expanding its Active Trader Group. FXCMâs Active Trader platform was developed to meet the needs of non-institutional traders exceeding $10 million in monthly volume. The Active Trader platform is revolutionary in the retail forex space, offering pricing transparency, with a five level display of market depth.

The deep liquidity available through FXCMâs Active Trader platform derives from the firmâs long standing liquidity relationships with many of the worldâs largest banks and financial institutions. The platform provides agency (no dealing desk) execution where all trades are offset, with FXCM taking no market risk. This enables FXCM to focus on obtaining competitive pricing and providing the best technology to its clients."