FXCM use sync to scam its clients

[Scoony]

Hello FPA hello fellow traders !

FXCM - one of the largest forex brokers has been caught with many lies about how they do business - still they continue their business and they are now even listed on NASDAQ - how can that be?

Well, I have actually prepared a short video with all the supporting documetation (sometimes it is hard to explain in words what happend) - to illustrate how FXCM uses its sync mechanism (Trading Station II and MT4) to scam its clients off their money and profits. I have posted this video on YouTube .

Unfortunately the quality of the recording is very bad due to the processing tools of YouTube. I can certainly send all documents in their original form.

I would appreciate your help or comments.

Thanks

Florian

 

[Jason Rogers]

FXCM Reply

Hello FPA hello fellow traders !

FXCM - one of the largest forex brokers has been caught with many lies about how they do business - still they continue their business and they are now even listed on NASDAQ - how can that be?

Well, I have actually prepared a short video with all the supporting documetation (sometimes it is hard to explain in words what happend) - to illustrate how FXCM uses its sync mechanism (Trading Station II and MT4) to scam its clients off their money and profits. I have posted this video on YouTube .

Unfortunately the quality of the recording is very bad due to the processing tools of YouTube. I can certainly send all documents in their original form.

I would appreciate your help or comments.

Thanks

Florian

Hi Florian,

I do apologize for any confusion the auto account sync may have caused you; however, a margin call will occur when you run out of margin in your account. I can understand it is frustrating to receive a margin call to only later see the market turn back into your favor; however, the margin call is an automatic procedure which closes your trades when your usable margin hits 0. If you don't have the necessary margin to sustain the positions, then the positions will be closed. This safety feature is in place to keep your account from going into debit balance.

In your case (looking at what you have described in your post and from viewing your video), you had a combined 50k position open in EUR/USD requiring €250 in margin. If you had happened to post the combined account statement, I am certain beyond a reasonable doubt that it would display your margin call occurred when the value of your account reached €250 and not a moment earlier. However, leaving out the statement of record gives a misleading view of the events.

All FXCM MT4 accounts have a read only login.
With FXCM's MT4 setup, you have a read-only login for the MT4 platform. This read only login allows you to monitor your combined account statement through FXCM's FX Trading Station II platform and the www.myFXCM.com website. While you can view your trading activity on the MT4, the statement of record is the combined account statement on Myfxcm.com and the FXTSII. You should be monitoring it to confirm all trading activity on your account. This is outlined in multiple emails sent to MT4 users, on the MT4 FAQ, and in the MT4 Execution Guidelines which detail order execution detailing important things you should be aware of. You will find that FXCM is not the only broker requiring this when a technology bridge is used to connect the MT4 interface to non-MT4 execution engine and back-office reporting.

Why is it important to monitor the read only login?
The MT4 platform will closely reflect the activity taking place on your FXCM account, but there can be times in which it may vary. This is why we provide the read-only login which we advise to keep open when you are using MT4. Whenever there is any difference between the MT4 interface and your actual account, there will be an account-sync. The account-sync is fairly explanatory in that a sync occurs to match your FXCM account balance with the MT4 platform balance. Why would there be any difference? There could be a difference in balances due to account withdrawals, deposits, rollover (swap) debits/credits, differences in the executed price on MT4 vs. FXCM's back-office or in a rare case the trade has opened on the MT4 interface but not on FXCM's back office. I would be happy to go into more detail if there are any questions about specific cases.

If you run a combined account statement on the FX Trading Station II or MyFXCM.com and compare it against the MT4 interface, you can match up in chronological order why any account syncs occurred. For example, you will commonly see an account sync right after 22:00 every day due to rollover and this appears in your video. MT4 is check with FXCM throughout the day for any differences in account balance so this can happen more than once per day if there is any difference.

Looking more closely at your margin call...
If you look closely at the MT4 statement you posted, there's a positive account sync of $942.21 at 3:02 which just so happens to match the total of the closed trades from 5 minutes prior. This indicates those trades had not actually closed, and if you included the combined account statement in your video everyone would see a completely different story and be able to verify whether the margin call occurred incorrectly or not based upon your trade losses and your account equity versus the market price when your margin call occurred.

I cannot publicly discuss private information on your account since the combined account statement was not posted, but leaving out this important piece of information paints a very misleading presentation for the forum. I can understand the confusion over the account sync and why it showed the trades closed but then reversed through an account addition 5 minutes later. For this I apologize and it would probably have caused me concern as well. However, you can be certain that your margin call will only occur whenever your account equity is equal to your used margin (in your case when account equity is equal to €250).


FXCM's NDD Forex Execution
To address the very first slide of your video, FXCM is not a market maker. Everyone is entitled to his or her own opinion, but not his or her own facts. In this case, the information you posted is not factual. FXCM does not make a market for forex transactions and we do not decide at which price the trades are closed at. A margin call is an at best market order and designed to close your trades immediately so that your account does not go into a debit balance. The last thing we want to occur is for you to owe FXCM money. When your Usable Margin reaches €0, the margin call occurs automatically and immediately. There is no delay. With NDD forex execution, every trade is offset immediately back to back with one of multiple banks providing liquidity on our platform. FXCM is compensated by a pip mark-up added to the pricing displayed on the platform. FXCM does not profit when our traders lose or lose when our traders profit unlike many other brokers that take the opposite side of their traders positions with their dealing desk. We released more information on this through our Forex Execution Center yesterday which you can read more about on the Forex Peace Army website https://www.forexpeacearmy.com/fore...xcm-explains-their-no-dealing-desk-forex.html. I would be happy to answer any questions you have about FXCM's NDD forex execution.

I'm truly sorry that the margin call on your account, as a result of the market going against your positions, resulted in a negative opinion of FXCM, and I do wish you all the best with your trading.

Jason
FXCM

 

[SMFX]

...To address the very first slide of your video, FXCM is not a market maker. Everyone is entitled to his or her own opinion,....

Jason, FXCM outsource their Market Maker services. That's clearly detailed in FXCM's SEC filings. So your statement is clearly wrong and misleading.

The SEC filing also state FXCM had a total revenue of $264 mill in the 9 months to Sep 2010, and a staggering $234 mill of that was from "Retail trading revenue". So retail trading account constituted about 88% of your company's revenue.

In the SEC filing, there's also a nice description of what "Retail trading revenue" means:

"Retail Trading Revenue — Retail trading revenue is our largest source of revenue and is primarily driven by: (i) the number of active accounts
and the mix of those accounts, such as low versus high volume accounts; (ii) the volume these accounts trade, which is driven by the amount of
funds customers have on deposit and the overall volatility of the FX market; (iii) the size of the markup we receive, which is a function of the mix of
currency pairs traded, the spread we add to the prices supplied by our FX market makers and the interest differential between major currencies and
the markup we receive on interest paid and received on customer positions held overnight; and (iv) the amount of additional retail revenues earned,
including revenues from contracts-for difference (CFD) trading, fees earned through white label relationships and payments we receive for order
flow from FX market makers. In addition, 11% and 3% of our retail trading revenues for the nine months ended September 30, 2010 and twelve
months ended December 31, 2009, respectively, were derived from such additional retail revenues earned."

So there you have it. Most of the revenue your company makes is from various mark-ups, including payments from FXCM's contracted Market Makers.

This information is spread throughout your company's SEC filings, so it's hard to deny it.

Seems that orders placed on FXCM trading platform are going through a market maker after all, who are in turn providing payments back to FXCM. I'm amazed you've denied this. Florian was correct.

 

[Scoony]

Hi Florian,

I do apologize for any confusion the auto account sync may have caused you; however, a margin call will occur when you run out of margin in your account. I can understand it is frustrating to receive a margin call to only later see the market turn back into your favor; however, the margin call is an automatic procedure which closes your trades when your usable margin hits 0. If you don't have the necessary margin to sustain the positions, then the positions will be closed. This safety feature is in place to keep your account from going into debit balance.

In your case (looking at what you have described in your post and from viewing your video), you had a combined 50k position open in EUR/USD requiring €250 in margin. If you had happened to post the combined account statement, I am certain beyond a reasonable doubt that it would display your margin call occurred when the value of your account reached €250 and not a moment earlier. However, leaving out the statement of record gives a misleading view of the events.

All FXCM MT4 accounts have a read only login.
With FXCM's MT4 setup, you have a read-only login for the MT4 platform. This read only login allows you to monitor your combined account statement through FXCM's FX Trading Station II platform and the www.myFXCM.com website. While you can view your trading activity on the MT4, the statement of record is the combined account statement on Myfxcm.com and the FXTSII. You should be monitoring it to confirm all trading activity on your account. This is outlined in multiple emails sent to MT4 users, on the MT4 FAQ, and in the MT4 Execution Guidelines which detail order execution detailing important things you should be aware of. You will find that FXCM is not the only broker requiring this when a technology bridge is used to connect the MT4 interface to non-MT4 execution engine and back-office reporting.

Why is it important to monitor the read only login?
The MT4 platform will closely reflect the activity taking place on your FXCM account, but there can be times in which it may vary. This is why we provide the read-only login which we advise to keep open when you are using MT4. Whenever there is any difference between the MT4 interface and your actual account, there will be an account-sync. The account-sync is fairly explanatory in that a sync occurs to match your FXCM account balance with the MT4 platform balance. Why would there be any difference? There could be a difference in balances due to account withdrawals, deposits, rollover (swap) debits/credits, differences in the executed price on MT4 vs. FXCM's back-office or in a rare case the trade has opened on the MT4 interface but not on FXCM's back office. I would be happy to go into more detail if there are any questions about specific cases.

If you run a combined account statement on the FX Trading Station II or MyFXCM.com and compare it against the MT4 interface, you can match up in chronological order why any account syncs occurred. For example, you will commonly see an account sync right after 22:00 every day due to rollover and this appears in your video. MT4 is check with FXCM throughout the day for any differences in account balance so this can happen more than once per day if there is any difference.

Looking more closely at your margin call...
If you look closely at the MT4 statement you posted, there's a positive account sync of $942.21 at 3:02 which just so happens to match the total of the closed trades from 5 minutes prior. This indicates those trades had not actually closed, and if you included the combined account statement in your video everyone would see a completely different story and be able to verify whether the margin call occurred incorrectly or not based upon your trade losses and your account equity versus the market price when your margin call occurred.

I cannot publicly discuss private information on your account since the combined account statement was not posted, but leaving out this important piece of information paints a very misleading presentation for the forum. I can understand the confusion over the account sync and why it showed the trades closed but then reversed through an account addition 5 minutes later. For this I apologize and it would probably have caused me concern as well. However, you can be certain that your margin call will only occur whenever your account equity is equal to your used margin (in your case when account equity is equal to €250).


FXCM's NDD Forex Execution
To address the very first slide of your video, FXCM is not a market maker. Everyone is entitled to his or her own opinion, but not his or her own facts. In this case, the information you posted is not factual. FXCM does not make a market for forex transactions and we do not decide at which price the trades are closed at. A margin call is an at best market order and designed to close your trades immediately so that your account does not go into a debit balance. The last thing we want to occur is for you to owe FXCM money. When your Usable Margin reaches €0, the margin call occurs automatically and immediately. There is no delay. With NDD forex execution, every trade is offset immediately back to back with one of multiple banks providing liquidity on our platform. FXCM is compensated by a pip mark-up added to the pricing displayed on the platform. FXCM does not profit when our traders lose or lose when our traders profit unlike many other brokers that take the opposite side of their traders positions with their dealing desk. We released more information on this through our Forex Execution Center yesterday which you can read more about on the Forex Peace Army website https://www.forexpeacearmy.com/fore...xcm-explains-their-no-dealing-desk-forex.html. I would be happy to answer any questions you have about FXCM's NDD forex execution.

I'm truly sorry that the margin call on your account, as a result of the market going against your positions, resulted in a negative opinion of FXCM, and I do wish you all the best with your trading.

Jason
FXCM

Hello Jason,

I know exactly how a margin call works and that there are several ways to deal with it...HOWEVER, what I am REALLY complaining about is that the POSITIONS WERE CLOSED ON MT4 but NOT ON FXCM. So your dealers had until the next morning to decide when would be the best moment to liquidate my positions and to scam another 162 US$ off me.

After all, when I open or close a position on MT4 I do NOT have to do it again or at the same time on your FXCM platform, right. Why would a position closed by a margin call (your dealing desk) be different??? When a position is closed it should be closed on both platforms - and that's it! but of course if you need to make extra money off your clients that is a great opportunity...

Needless to say that due to internal errors (not the VPS charges) FXCM owed me money which could have been used to maintain the position. Is that also my fault? Or was it just a great time/opportunity to scam me off my money?

Well you know what you should do...

Florian

 

[Albert.b]

Jason, FXCM outsource their Market Maker services. That's clearly detailed in FXCM's SEC filings. So your statement is clearly wrong and misleading.

The SEC filing also state FXCM had a total revenue of $264 mill in the 9 months to Sep 2010, and a staggering $234 mill of that was from "Retail trading revenue". So retail trading account constituted about 88% of your company's revenue.

In the SEC filing, there's also a nice description of what "Retail trading revenue" means:

"Retail Trading Revenue — Retail trading revenue is our largest source of revenue and is primarily driven by: (i) the number of active accounts
and the mix of those accounts, such as low versus high volume accounts; (ii) the volume these accounts trade, which is driven by the amount of
funds customers have on deposit and the overall volatility of the FX market; (iii) the size of the markup we receive, which is a function of the mix of
currency pairs traded, the spread we add to the prices supplied by our FX market makers and the interest differential between major currencies and
the markup we receive on interest paid and received on customer positions held overnight; and (iv) the amount of additional retail revenues earned,
including revenues from contracts-for difference (CFD) trading, fees earned through white label relationships and payments we receive for order
flow from FX market makers. In addition, 11% and 3% of our retail trading revenues for the nine months ended September 30, 2010 and twelve
months ended December 31, 2009, respectively, were derived from such additional retail revenues earned."

So there you have it. Most of the revenue your company makes is from various mark-ups, including payments from FXCM's contracted Market Makers.

This information is spread throughout your company's SEC filings, so it's hard to deny it.

Seems that orders placed on FXCM trading platform are going through a market maker after all, who are in turn providing payments back to FXCM. I'm amazed you've denied this. Florian was correct.

I assume that all orders at some point, have to go through a Market Maker!

If they did not, how would our orders be filled?

Getting a commission for passing on business, I think you will find, is normal business practice!

 

[Jason Rogers]

NDD vs. Dealing Desk Forex Execution

Jason, FXCM outsource their Market Maker services. That's clearly detailed in FXCM's SEC filings. So your statement is clearly wrong and misleading.....

Hi SMFX,

What you posted directly contradicts Florian’s statement that FXCM makes money from trader losses and confirms what I outlined in my previous explanation about how FXCM is compensated. Second, pointing out that FXCM is a broker for retail traders in the forex market is fairly obvious and along the same lines of pointing out that eTrade is a stock broker for retail stock traders.

If from reading that paragraph in the S1 you come to the conclusion that FXCM is a market maker, then it’s important to understand exactly what a market maker is and does.

A market maker makes the market...meaning decides the prices you can buy and sell at and the liquidity available at those prices. Whenever your broker is making the market (or acting as the principal in the transaction), the broker is selling to and buying from its traders...taking the opposite side of those positions. This is why the broker can profit from traders losses. Whenever you want to buy EUR/USD, the brokers dealing decides at what price and what amount you can buy at regardless of what the banks are quoting or willing to accept. The broker’s dealers can control all trading conditions including putting restrictions on orders or sending re-quotes. Your broker’s dealing desk is the market maker.

Of course in any type of speculation, whether it be forex, futures or equities, there always has to be someone on the other side of that trade. When you buy someone else sells. When your forex broker is making the market, the broker is the other side of that trade.

With NDD forex execution, your buy order is matched up with one of the banks as the seller. The pricing on the platform automatically reflects the best bid/ask being received from the banks plus a pip mark-up which is FXCM's commission. When you click on the buy price, the order is routed straight through to the bank offering that buy price. If the deal is done, you have a long position and the bank has a short position. FXCM has been compensated by the pip mark-up. The information you quoted from the S1 confirms this, and makes it clear that FXCM is compensated from trading volume and not client losses.

Yes again, there are multiple market makers on the other side of your position which provide liquidity onto our platform. There has to be a seller when you want to buy, and there has to be a buyer when you want to sell, as in any market. The major difference with NDD forex execution is that FXCM is not making the market thereby controlling pricing and liquidity which can work against you. FXCM is compensated by the volume of transactions going through our system and not trader losses which can happen when your broker is making the market.

I know that it's sometimes hard to visualize how the order execution can vary between a dealing desk and NDD forex execution which is why we put together a video walking through step by step what happens to your trade when executed http://www.fxcm.com/fxcm-forex-execution.jsp .

Please let me know if you have any questions.

-Jason

 

[Jason Rogers]

I assume that all orders at some point, have to go through a Market Maker!

If they did not, how would our orders be filled?

Getting a commission for passing on business, I think you will find, is normal business practice!

You're exactly correct. If someone along the line wasn't willing to take the other side of your position, orders would not be filled. What matters is if those orders are filled in a fair and transparent way.

 

[SMFX]

Hi SMFX,

What you posted directly contradicts Florian’s statement that FXCM makes money from trader losses and confirms....n

No it doesn't Jason. It supports it.

FXCM use "Market Makers" to process their customer's orders. It states that clearly in your company's SEC documents. Have you seen the documents I'm referring to? That document even details the way FXCM are remunerated by the Market Makers who process their customers orders.

The Dealing Desk might not be located in your offices technically, but it does exist, and that's where your customers orders are routed.

So the NDD marketing is very misleading. BTW there was another broker who claimed something similar when they outsourced their dealing desk, and they were heavily fined by the NFA.

I understand how your industry works, and now that your compnay is publicly traded it's pretty easy for me to access various documents that detail your company's operations.

The reason I'm posting this is to just make traders, and new traders in particular wary of the aggressive marketing spot fx brokers are using, which is often misleading. The regulators really need to clean this industry up.

 

[vincam]

FXCM use "Market Makers" to process their customer's orders. It states that clearly in your company's SEC documents. Have you seen the documents I'm referring to? That document even details the way FXCM are remunerated by the Market Makers who process their customers orders..

Does it say they get paid for the volume of transactions as Jason says or paid some comission off of causing trader losses? I think that is what he is saying is that FXCM does not gain by causing you a loss, if the Market Makers they contract manipulate the price to cause you a loss FXCM does not profit from it. They do, but not FXCM. So what can we do? Nothing except trade and hope for the best.

I do want to make one comment though, I only trade options that have price basis on the underlying of spot forex and the price behaves exactly the same. The market will hit my loss level to the pip, or seemingly move in ways sometimes to cause me losses but my instument is based on the underlying, it has no influence on the market nor does the broker, they cannot manipulate the price, it is based on a Reuters feed, and yet the market behaves exactly the same as when I traded spot. I think many of the wierd things that happen in the market to cause losses are simply market based and not always broker based.

I do wish brokers did not have so many excuses to escape trades, they may be legit reasons but how do we know? Whatever they say about bad tick, low liquidity spike from our IB, error in our platform, your doing arbitrage, we have to accept. Tough to make money in this arena, damn tough.

 

[Jason Rogers]

No it doesn't Jason. It supports it.

FXCM use "Market Makers" to process their customer's orders. It states that clearly in your company's SEC documents. Have you seen the documents I'm referring to? That document even details the way FXCM are remunerated by the Market Makers who process their customers orders.

The Dealing Desk might not be located in your offices technically, but it does exist, and that's where your customers orders are routed.

So the NDD marketing is very misleading. BTW there was another broker who claimed something similar when they outsourced their dealing desk, and they were heavily fined by the NFA.

I understand how your industry works, and now that your compnay is publicly traded it's pretty easy for me to access various documents that detail your company's operations.

The reason I'm posting this is to just make traders, and new traders in particular wary of the aggressive marketing spot fx brokers are using, which is often misleading. The regulators really need to clean this industry up.

Hi SMFX,

FXCM is proud to be a publicly traded company on the NYSE since it makes our finances, business practices, and execution much more transparent for our traders. They know our interests are aligned with theirs since we don't profit off of our traders losses with NDD forex execution.

The company you mentioned being fined by the NFA is also publicly traded. If you were to read their S1 you could easily compare NDD execution against a broker acting as the market maker. The contrast is very apparent in how a brokers dealing desk can profit by trading against their clients; whereas, FXCM is compensated based on volume using NDD forex execution.

As mentioned in my previous post, yes, there are multiple banks (market makers) providing liquidity on FXCM's platform. Whenever you want to buy, there has to be someone on the other side ready to sell for that trade to be done. Albert's question was spot on "If they did not, how would our orders be filled?". For this reason, market makers exist in every market.

What matters is whether your broker itself is acting as the market maker for the trades. If your broker is acting as the market maker, that means their dealing desk controls the prices you see on the platform, the prices your orders are filled at, what amount you can trade, any orders restrictions, and if/when you receive re-quotes. This is clearly a conflict of interest since the broker can control the trading environment to their benefit and your detriment. FXCM obviously believes No Dealing Desk forex execution is a better method because it eliminates this conflict of interest. Every order is offset with one of the banks (market makers) providing liquidity on the platform and FXCM is compensated for that volume through the pip mark-up.

I'm happy we're having this discussion because traders really need to understand the conflict of interest involved with trading against a brokers dealing desk and how NDD (STP) forex execution eliminates that conflict of interest.

-Jason