Having previously spoken about the FXCM Leucadia loan, we askedis FXCM safe? Our answer was of course that we wouldnt trust our money with FXCM if we had a gun held to our head. The risk was just too high and with FXCM banned, our decision to keep the forex broker out of our award winners was fully justified.
United States forex broker FXCM nearly went broke two years ago during the Swiss currency crisis. This was of course when the Swiss National Bank (SNB) scrapped its exchange rate floor of 1.20 Swiss Francs per Euro on the 15th of January 2015. This sent the CHF rocketing and the Euro tumbling, with the biggest pain caused to both traders and forex brokers with exposure being felt in EUR/CHF.
FXCMs stock price took an absolute beating on the back of the drop because their clients were forced to take such massive losses on the back of the extreme currency volatility which left them with negative account balances that they could never pay back. This of course was the catalyst that say Leucadia step in with $300 million in financing to keep FXCM afloat as we spoke about in the article linked above.
The Commodity Futures Trading Commission (CFTC) issued an order settling National Futures Association (NFA) charges against FXCM, Chief Executive Officer Dror Niv and Managing Director William Adhout with engaging in fraudulent activities with respect to FXCMs retail customers. This was because they essentially told their clients that they were using a no dealing desk order execution model. An NDD forex broker means that orders are executed directly in the market without using a market maker or playing with the order by the broker them self before sending it on. We have always recommended trading with our best no dealing desk forex broker, FX Choice who also accept US forex traders.
So in the end, it turns out that FXCM actually werent using a NDD model and were in fact running a dealing desk by routing market orders that theyd receive through market maker Effex Capital LLC. A company that was actually supported and controlled by FXCM, allegedly in exchange for kick backs to FXCM on profitable trades.
FXCM has therefore been banned inside the US and can no longer operate inside the country. FXCM has agreed to pay a $7 million fine. They have also in the end reached a deal to sell all their United States forex traders to Gain.
With FXCM banned, US forex traders are never going to trust them again and the broker will most likely never recover from a business sense. Where the forex broker industry in the United states goes from here will be extremely interesting, especially with US President Donald Trump threatening to repeal the Dodd-Frank Act and open the country up to internationally regulated forex brokers once again.
Once again, forex traders in the US who do not trust FXCM should choose to trade forex with the winner of thebest United States forex brokeraward, TradeWiseFX.
TradeWiseFX Best United States Forex Broker
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