This is why I'll say once again. Put your money with the top brokers, who have the most money, and preferably are regulated by the NFA/CFTC. I know they only regulate in the U.S., so if you must go outside the U.S., do some serious due diligence.
Queue up the Queen music. The NFA has slapped another padlock on the front door of another teetering, undercapitalized forex firm. And the winner is... Cal Financial Corporation. http://www.nfa.futures.org/basicnet/...04&contrib=NFA
Who? Well, to be honest Cal Financial wasn't exactly a dead forex firm walking (if only they were that lucky). Cal was more like a vegetable on life support- and the NFA finally decided to pull the plug. But with net capital of only $790,000 you wonder how they managed to even stay comatose all these years?
We pick up the story in the summer of 2004. Ah remember those days? A confident John Kerry was introducing a beaming John Edwards to the world and proclaiming the glory of having "good hair." England was eliminated from the Euro Cup in heartbreaking fashion to Portugal. Usher was at the top of the pop charts and Catwoman was bombing at the box office. And in Thousand Oaks, California John Indelicato had a dream: to conquer mainland China and get rich gloriously.
Cal's goal was "to develop its forex business overseas, and based on the level of success, determine whether it should take on U.S. customer accounts." To that end Cal had two principals located in China where they recruited customers under the name of the "Shanghai Carewell Financial Planning Company." But the going was tough. In a 2006 NFA audit Cal was cited for not collecting any proof of employment information for SCFP accounts. Cal responded that Chinese customers did not like to give out this kind of information so Cal instituted a don't ask, don't tell policy. Needless to say the NFA was not amused and to Cal's credit they voluntary liquidated the accounts.
But in the end it wouldn't matter anyway. On March 1, 2007, the NFA issued a complaint against Cal citing it for a variety of accounting violations that essentially finished them off. http://www.nfa.futures.org/basicnet/...px?seqnum=1069
But what stands out in the complaint are the NFA's accusations about the shoddiness of Cal's bookkeeping. The NFA charges that Cal:
a) failed to maintain, at all times, a record of customer deposits and withdrawals
b) include approximately $92,000 of its customer accounts balance in its ledger, resulting in an understatement of the amount of customer funds on deposit
c) maintain an equity run and/or similar report aggregating all balances for the firm's forex customers, including cash, open positions, and realized profit/loss
What's my point in listing all of this? It's simple: running a forex broker dealer is not easy. It requires talented, trained professionals with accounting, compliance and administrative backgrounds. It can't be done by Willie Loman alone. And the simple fact is if you are a small firm, with limited resources and limited capital on hand you just aren't going to invest your money in these things when you also have to pay for servers, sales staff, office space, etc... So you try to do the administrative stuff on the cheap. Well, you can't. John Indelicato couldn't. And the NFA by raising its capital requirements is making it clear it doesn't think anyone under $5 million can, else it wouldn't be making this proposal in the first place.
In all fairness to Indelicato, he is no fraudster. By his own account he has been in the futures business for 35 years. He's just not very good at it...
FXDD is affilliated with Traditions which is the 4th largest Financial brokerage in the world. You can google it. I believe FXDD will be able to meet all obligations. Seven
I have received a lot of feedback regarding the regulatory status of FXDD. As you know FXDD is listed in the Dead Forex Firms Walking list with a net capital of $786,000. Where did that figure come from? Well, it came from the futures affiliate (Tradition Securities and Futures Inc) of FXDD's parent company. So why is FXDD listed as a result?
It's a fair question. And the fair answer is that because FXDD is unregulated and because the average forex trader knows absolutely nothing about their financial status FXDD deserves to be judged on the closest data available. Forex traders conducting their due diligance are truly groping in the dark when trying to evaluate FXDD since they are not licensed by the NFA and do not directly report any financial data to the CFTC. That means that no one is checking in on FXDD to look at their books and make sure they are solvent. No one is checking in on their sales and marketing practices (notice that FXDD is one of the only major forex brokers that states on its website that they offer "Commission Free Trading" with no disclaimer about how they make their money on the spread.) Got a complaint about FXDD and want to file a claim or go to arbitration? Good luck. The NFA or CFTC won't hear your case because they have no jurisdiction so you'll pretty much have to rely on Judge Wapner. In the age of forex fraud I can't see how anyone would allow themselves to roll the dice and take a risk by opening an account with a firm that is completely unaccountable to any government regulators. Doesn't anyone remember RefcoFX? RefcoFX was the unregulated arm of Refco and when Refco went under and Refco's creditors looted RefcoFX's customer accounts the NFA and CFTC sat on their hands and stated they could do nothing because RefcoFX was unregulated.
But in the interest of fairness I'm going to relocate FXDD off the Dead Forex Firms walking list and onto a new list. Call it the "Unknown Unknowns" list becaue no one has any idea when or if FXDD might explode. Now I'm not saying FXDD is a bucketshop or that they are in immediate danger of collapse. In all likelihood the NFA capital requirement increase will have no effect on them (although it remains to be seen how it will effect Tradition.) But since they are unregulated and answer to no one how the hell is anyone to know exactly who or what they are?
But since they are unregulated and answer to no one how the hell is anyone to know exactly who or what they are?
THAT is basically one of the big reasons I'm dropping them, myself, and that's a PERSONAL decision on my part, without a solid 'backing' for that decision. Considering their parent company, 'Campagnie Financiere Traditions' (I forget the exact spelling, sorry...), is one of the world's largest brokers, which is one of the big reasons that I went with them in the first place. (They're listed on the Swiss stock exchange, have been for years.) Also, Tradition Asiel Securities are big, as well, not just Traditions NA. So, they MIGHT be fine, and they might not, but, as you mentioned, not easy to figure out, without doing a bit more research than I've done myself...
(I wonder if fxdd-auto's figures are included there, as well??? Just musing...)
In my case, another of my PERSONAL concerns is that with the way I trade, an account that I can trade smaller amounts than a straight mini account is VERY important to me, and actually a bigger factor in my personal decision.
(Also, might note that the $786k is from May. NO idea what's going on since then. They might have more capital now - or not...)
I really haven't done all that much research into fxdd, myself, so please do NOT consider me an 'authority' on the subject. I'm NOT! I'm just trying to make the best decisions for ME, which others may or may not agree with...
Just my OPINION,
Jeff
__________________
Life is not measured by the number of breaths you take, but by the moments that take your breath away.
Actually, as of the next couple of days, I've narrowed it down to using just 2 brokers. Don't have the funds to diversify too much (yet?)
Can't spare $2k to open even a minimum mini account there, but thanks for the info!
Got lots of work to do on the small stuff I DO have.
Jeff
__________________
Life is not measured by the number of breaths you take, but by the moments that take your breath away.
So what happened at Nations? Why was the NFA forced to take an "emergency Action" and shut them down? Well, because it was basically one of the industry's worst nightmares come true. An undercapitalized firm suffered massive losses and was forced to cover them with customer funds. Here is what the emergency action states:
"On Saturday, July 21, 2007, Nations sent to NFA, via e-mail, notice that it had fallen under the minimum required adjusted net capital."
On Monday, July 23, 2007, NFA sent a letter to Nations notifying the firm that as it was unable to demonstrate compliance with the minimum requirements Nations was to cease doing business. That same day, NFA received another notice from Nations representing that the firm had fallen under the required minimum "due to losses in the forex markets." This letter also indicated that Nations was attempting to raise $5 million "to make customers whole." (YIKES! "make customers whole?!" Who on Earth is going to give Nations $5 million?! While nations has been successful at making a fool of their customers they certainly won't be making them whole.)
Nations also provided NFA with a Form 1-FR as of July 20, 2007, which indicates that Nations owes customers trading in on-exchange futures more than $3 million and customers trading Forex more than $5 million. (Wow. What an implosion. They are $8 million in the hole? What the hell were they doing over there going to Vegas and playing craps with customer funds?)
This looks like another messy court case. With financials like this I expect the creditors will be coming out of the woodwork laying claim to what's left of Nations. If they're lucky they might be able to seize a fax machine or two, but as for customer funds, well, looks like some stripper in Vegas got her hands on that money first...
Re: NFA Dead Forex Firms Walking
Nations Blows Up
Hybrid Mode
