This is why you should really understand what your broker is offering

In light of recent events, most brokers have been very forgiving of negative account balances. This is partially due to the guarantee outlined in the terms and conditions stating that the client’s account cannot go negative. This is also partly to prevent clients from taking their business elsewhere. It makes more sense for brokers to take a loss and proceed with business as usual with clients racking up those commissions. Most brokers have reserves well above the regulatory minimum so tapping into that reserve to pay off liquidity providers does not pose as a problem.

FXCM is a very interesting case. They are still struggling to collect from negative account balance holders. With no announcement of forgiving negative balance accounts, they went ahead and issued a letter stating account mergers actions. In other words, clients with a negative account will have their funds from a positive account transferred over to cover up for the losses.

Leaprate states clients may have a right to refuse to pay as FXCM clearly stated in their policy that they will “not to pursue claims for negative equity against our customers.” Thereby, any client of FXCM’s should be assured that their losses can never exceed their account balance. FXCM could be on the brink of losing even more if faced with lawsuits. This will not be surprising and it is about time that their corporate practices have caught up to them. This is by far one of the most unethically operated brokers with multiple fines by the NFA, CFTC, and FCA.


Not in any given order:

Fined $200,00 for dealing with an unregistered firm and failure to report trading data

Fined $2 million for slippage malpractices through the abuse of the Virtual Dealer Plugin (VDP)

Fined $6.7 million for withholding UK’s customers profits

Fined over $14.2 million for failure to supervise customer accounts


Meanwhile, FXCM’s representative, Jason Rogers, has been responding to many of these claims in several trading forums and communities. The blame was often placed on technology, which were hopeless attempts to offset to persuade clients it did nothing wrong. It’s funny how they warn the risks of offshore brokers, yet all ASIC regulated offshore brokers were able to sustain SNB losses and proceed on with business as usual.

On another note, most broker websites will feature a risk warning disclosure similar to the one below:

Risk Disclosure
Risk Disclosure

Often times, new traders will neglect to read the full company policy. However, risk warning messages on the front page will somewhat prepare traders for the event of having a negative balance. Keep in mind that brokers that have forgiven negative balances this time around may not be so generous in future events.



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