FDIC insurance is irrelevant. Margin requirements and deposits are irrelevant. The entire account, at all times, is fully exposed to the credit risk of GAIN Capital or any other unregulated FX broker. The customer receives no insurance and no priority in a broker bankruptcy. These outfits profit by exposing customer funds to credit risk. Come the day of reckoning, their operators walk away rich, and the customers walk away busted. Customers take the credit risk of financing the operation, while the operators collect the resulting reward. Traders should not be marks. They should demand compensation for their credit risks.
If I had some reason to consider opening an account or prime brokerage relationship with Goldman Sachs, or anywhere else, I would perform my due diligence before I took the risk. I would look both ways before I cross the street. I would not bury my head in the sand, which seems to your approach. I don't know if you are a profitable trader, but if you are, then I would predict that you will someday lose everything. I say this because you sound like you fundamentally do not believe in monitoring your risks.
If you are interested in this subject google CFTC v. Zelener. CFTC is trying to regulate FX but there is legal wrangling as to what is a spot contract and what is a futures contract. Not as simple as it seems. Geo.
Great link. Thanks GEO. Here is a post on the CFTC website for others: The proposed language, however, would apply only to certain retail foreign currency transactions â futures and âfutures look-alikeâ contracts as were involved in the Zelener case. Its scope is narrow, as it also makes clear that legitimate spot transactions (such as the purchase of foreign currency at a currency exchange) are not included within the jurisdiction of the CFTC. Another Info bit: Retail forex fraud is a significant concern for the CFTC. In the last 4 years, the CFTC has brought 79 enforcement actions involving forex fraud against unsuspecting retail customers. In these 79 cases, there were 23,000 victims who invested approximately $350 million. Courts have awarded approximately $267 million in customer restitution and civil penalties in these cases. The Commission has been able to recover some funds for distribution to customers, but the total amount of funds frozen and/or distributed is less than $15 million.
Jimrockford you are correct. Something didn't seem right. If I deposit my own $ into an account at a bank and the bank is FDIC insured I would always be able to get some form of interest. Gain sets up the account and keeps the interest and the account is on their books.
good read re refco http://quote.bloomberg.com/apps/news?pid=10000103&sid=aKGJd31_yYQM&refer=news_index
If it were my money I know what I would do. I was an attorney and I never told people what would happen, I told them what could happen. You always have to allow for "unforseeable" outcomes. Hell it would be mal practice not to.
pretty scary... when u read that and see how much bennett, grant & co took away from the firm to the tune of $2bio+ u wonder how he cld let itself get caught for 'only' $400m... unless of course there is a much bigger hole out there thats just waiting to be found... how long more for the current group's DD to complete?
why does refco fx allow their clients to still trade they could loose there money and have less assets. Why didnt they suspend trading also? anyone