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FXCM UK Reaches Settlement with the FCA for Trade Execution Practices During 2006-201
NEW YORK & LONDON, Feb 26, 2014 (BUSINESS WIRE) -- FXCM Inc. (“FXCM”) , a leading online provider of foreign exchange (forex) trading and related services to retail and institutional customers worldwide, announces that its U.K. subsidiaries, Forex Capital Markets Limited (“FXCM Ltd”) and FXCM Securities Limited (“FXCM Securities”) (together “FXCM UK”), has entered into a settlement with the Financial Conduct Authority (“FCA”). The settlement addresses trade execution practices concerning the handling of price improvements on FXCM UK’s offsetting orders from August 2006 – December 2010.
Under the terms of the settlement, FXCM UK has agreed to pay fines totaling £4 million to the FCA and to provide approximately $10 million in restitution to the affected clients. FXCM recorded a reserve $15 million in the third quarter of 2013 for this matter and will record an additional $1.9 in the fourth quarter to reflect the terms of the settlement and related expenses. All clients receiving restitution will be notified within 60 days. Of the approximately $10 million being credited under this settlement, the impact on individual traders was typically very limited and averaged $3.70.
“This settlement is a significant step in our efforts to put this legacy trade execution issue behind us,” said Brendan Callan, FXCM UK’s Chief Executive Officer. “We are also pleased with the FCA’s 12 Feb 2014 MarketWatch Newsletter article on trade execution standards and we hope that it helps improve execution practices across the industry. We believe it is imperative that all firms operating in the retail FX and CFD market uphold the same high standards and execution policies which we fully implemented back in 2010. A recent analysis of trades over a six month period demonstrates how our customers have benefitted from our enhanced trading execution policy,” he added.
Price Improvements at FXCM today: Clients Received Over $15.5 Million Dollars from Price Improvement Technology during the Past Six Months
Analyzing a total of 43,128,901 forex and metal trades executed by FXCM during the six month period of August 2013 –January 2014, 6,391,641 or 15% of the trades benefitted from price improvements totaling $15,726,247. Of the total number of trades executed, 4,648,672 trades were limit and limit entry orders. Sixty percent of those limit and limit entry orders were positively slipped providing clients $7,296,520 in price improvements. Of the total trades executed in the six month period of August 2013 – January 2014 clients were executed at their requested price 73% of the time with no slippage. Only 12% of orders were slipped negatively. FXCM is currently one of the only firms in the industry to give price improvements on market and limit orders.
FXCM strongly believes that a No Dealing Desk execution model offers clients full transparency and best execution . The firm considers the NDD business model to be the most equivalent execution model to exchange traded products by offering competitive, market driven prices that are sourced from multiple liquidity providers.
FXCM firmly believes that a No Dealing Desk execution model is the future of the industry and continues to promote the benefits of this model to FXCM customers and prospects.
History:
FXCM’s platforms display the best bid/ask spread streamed from the firm’s liquidity providers plus FXCM’s mark-up. Every FXCM NDD forex trade is automatically offset in a two-step process, designed to ensure that FXCM does not profit from a trader’s losses. In the first step of the execution process, a trader clicks on the price and the order is sent to FXCM. In the second step, FXCM automatically sends the client’s order to one of its liquidity providers to offset the trade.
As of August 2010 FXCM enhanced its trading execution policy to help ensure that clients benefit from both steps (the client’s order to FXCM, and FXCM’s order to its liquidity providers) of positive slippage on all market, limit and limit entry orders. The policy was further enhanced in December 2010 to address all order types, including stop and margin call orders, through FXCM’s No Dealing Desk (“NDD") forex execution model.
FXCM’s execution system prior to August 2010 only offered price improvements to clients in the first step of the process. If a better price became available on FXCM’s platform in the fraction of a second after the client submitted the order but before the order was received by FXCM, the client would benefit from the price improvement. However, FXCM’s previous execution system did not provide clients with price improvements in the second step of the execution process if FXCM was able to offset the order at a better price, excluding FXCM’s markup.
FXCM Inc. FXCM -1.24% is a global online provider of foreign exchange (forex) trading and related services to retail and institutional customers world-wide.
At the heart of FXCM's client offering is No Dealing Desk forex trading. Clients benefit from FXCM's large network of forex liquidity providers enabling FXCM to offer competitive spreads on major currency pairs. Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. FXCM's U.K. subsidiary, Forex Capital Markets Limited, also offers CFD products with no re-quote trading and allows clients to trade oil, gold, silver and stock indices along with forex on one platform. In addition, FXCM offers educational courses on forex trading and provides free news and market research through DailyFX.com .
First, I want to thank you for sharing this article. Let me use this opportunity to say that traders have a right to be upset with us. FXCM should have passed on positive slippage to our clients from the beginning.
While the FCA settlement was announced just this Wednesday, the time period this relates to actually occurred from 2006 to 2010. Our system was updated in 2010 to pass all potential price improvements to clients, and our clients have received the benefit of price improvements since that time. Like the NFA action discussed in 2011, this FCA settlement has to do with positive slippage not being passed on in full when transactions were offset with liquidity providers prior to the 2010 update.
It's important to note that FXCM is currently one of the only firms in the industry to give price improvements on market and limit orders. I have mentioned over the past couple of years how many traders with other brokers currently experience re-quotes if the market moves in their favor, but often don't receive re-quotes for the better price when the market moves against them. Earlier this month in their newsletter, the FCA announced a thematic review of best execution, which we welcome to introduce best execution standards across the industry that benefit traders in the same way our traders have benefited for years.
Taking a look at FXCM price improvements today…
Analyzing a total of 43,128,901 forex and metal trades executed by FXCM during the six month period of August 2013 -January 2014, 6,391,641 or 15% of the trades benefitted from price improvements totaling $15,726,247. Of the total number of trades executed, 4,648,672 trades were limit and limit entry orders. Sixty percent of those limit and limit entry orders were positively slipped providing clients $7,296,520 in price improvements. Of the total trades executed in the six month period of August 2013 - January 2014 clients were executed at their requested price 73% of the time with no slippage. Only 12% of orders were slipped negatively. As mentioned before, FXCM is currently one of the only firms in the industry to give price improvements on market and limit orders.
At FXCM, there are no re-quotes and traders benefit from the positive slippage in full whenever it's available.
If you have questions about our services at FXCM please send me a Private Message.
