The Forex industry was hit by big news today as FXCM settled with the U.S. Commodity Futures Trading Commission (CFTC) to put an end to the accusation that the company misled retail FX customers. The US market opened today with FXCM’s share price down by about 50% of yesterday’s value, ticking at $3.32 (-51.57%) as of writing.
The settlement requires founders Drew Niv and William Ahdout jointly to pay a $7 million civil monetary penalty and, along with FXCM, to withdraw from CFTC registration and never seek to register or work at a company that is required to do so ever again. In sum, it means that FXCM, Drew Niv and William Ahdout are banned from the US within the Forex industry activity.
The respondents were being charged of misleading retail Forex customers “by concealing its relationship with its most important market maker and by misrepresenting that its “No Dealing Desk” platform had no conflicts of interest with its customers”, from September 4, 2009 through at least 2014. The CFTC was also accusing FXCM of making false statements to the National Futures Association (NFA) about its relationship with the market maker.
Things started to crumble at FXCM since January 2015 after the SNB flash crash that exposed the company to a client negative balance of $225 million, to which Leucadia lent a $300 million lifeline. From then on, FXCM began its asset selling spree: sold FXCM Asia to Rakuten Securities; sold FXCM’s Faros Trading Unit to Jeffries; sold FXCM Securities to AS Expobank, among other deals. The latest being the sale of DailyFX to IG Group for $40 million in late 2016.
The settlement made with the CFTC leads inevitable to the end of the FXCM operation in the US, including the termination of about 150 employees. As previously reported, the client base was sold to GAIN Capital.
The FXCM operation in the US generated net revenues of $48 million in 2016. While representing ‘just’ 18% of its global business, FXCM occupied a 34% share of the US retail Forex market.
With FXCM clients being automatically transferred, GAIN Capital will see its market share rise from 24% to 58%, the absolute majority of the US retail FX market.
In consequence of the permanent ban on Drew Niv and William Ahdout’s activities that require registration (or exemption) in the CFTC and NFA, Fastmatch announced today the appointment of Brian Friedman and Jimmy Hallac, the President and the Managing Director at Leucadia National Corporation, to replace the Mr. Niv and Mr. Ahdout on the board of directors of Fastmatch.