On Monday, February 8th, 2017 the CFTC’s National Futures Association charged Forex Capital Markets LLC, Chief Executive Officer Dror Niv and Director William Adhout with “engaging in fraudulent activities with respect to its FXCM’s retail customers,” by telling them they used a
“No Dealing Desk” order execution model, meaning orders would be executed directly in the market without using a liquidity provider, or market maker.
But in fact, FXCM used a “Dealing Desk” model, by routing orders through market maker Effex Capital LLC that was actually supported and controlled by FXCM, allegedly in exchange for kick backs to FXCM on profitable trades.
According to MarketWatch.com:
“There were several other charges in the NFA’s complaint, but the gist was that FXCM, Adhout and Niv would be permanently barred from NFA membership, and FXCM could no longer operate in the U.S.”
“The CFTC also found that FXCM willfully made false statements to the National Futures Association in order to conceal FXCM’s role in the creation of its principal market maker as well as the fact that the market maker’s owner had been an FXCM employee and managing director. FXCM also agreed to pay a $7 million fine and never seek to register with the CFTC, and the two founding partners, Dror Niv and William Ahdout, will withdraw from CFTC registration. FXCM, Niv and Ahdout didn’t admit or deny the findings.”
This has created a lot of uncertainty and questions in the minds of traders, wondering what to do next.
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As you may know, the number of Forex firms in the U.S. are already limited.
That’s because ever since the Dodd Frank act was put into place, it has been extremely difficult for a Forex firm to exist due to its burdensome level of regulations.
But, just a few days ago, on Friday, February 3rd, President Trump signed an executive order taking aim at the regulatory labyrinth created by Dodd-Frank, the massive 24,000-page law passed in the wake of the 2008 financial crisis.
“We expect to be cutting a lot out of Dodd-Frank,” Trump said, after morning meetings with business leaders.
The truth is, when Trump does this, it will jump start the FX industry in the U.S. again.
And in particular, after Dodd-Frank is out, we can get hedging and better leverage options back.
And I fully expect to see more FX firms here in the U.S. to provide better competition.
Even with the exit of FXCM from the U.S. market, there is still a lot of opportunity to make great money trading Forex.
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To your trading success,
Dustin Pass
