PFGBEST accounts - LIQUIDATION ONLY - NFA Problems!

[Captain Jack]

Here's a new link for PFGBest customers and creditors set up by the trustee:

http://www.pfgchapter7.com/

John

[FCM-Reform]

This week the CFTC will be holding a public roundtable to address the concerns of traders in response to the bankruptcies of PFG and MF Global. FXCM would like to announce its own proposals ahead of Thursday's meeting and encourages the public to so as well.

Proposals to Bring Full Market Transparency and Accountability to the Futures/Forex Industry

1) Require All FCM’s to Publicly Publish Their Financials Once a Quarter:
Currently, the CFTC publishes monthly “Net Capital” reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCM’s to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that a Futures Commission Merchant has.

Furthermore, the published financial statement should include everything (i.e. holding company’s financials) since what happens to other subsidiaries of the company can easily effect the regulated FCM. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence.

Too often, those FCM’s that are teetering on the edge of bankruptcy lure customers in by offering unsustainable gimmicks (dirt cheap commissions, account opening bonuses) that temporarily puts off the inevitable. Customers should be aware of the perilous finances of those FCM’s that would offer these kinds of gimmicks before opening an account with such a firm. PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match.

2) Require all FCM’s to Employ a Top Ten Accounting Firm:
There need to be much higher accounting standards than currently exist in the FCM world. The Platt Group publishes an annual ranking of public accounting firms that could be used by FCM’s. Whether it is top 10 or top 25, the main point is that FCM’s must use a nationally recognized and respected accounting firm that could apply the same tough standards to FCM’s that publicly traded companies must meet.

While no one proposal will guarantee that a future FCM will not fail, these proposals will enhance the public’s due diligence capabilities by bringing greater market transparency and accountability into the world of futures/forex trading.

Traders can show their support for these proposals by leaving comments with the CFTC using the following web page:

http://comments.cftc.gov/PublicComments ... px?id=1250



Charles Delano
Director of Government Affairs
FXCM, LLC
http://www.fxcm.com/financials.jsp

[garyfritz]

PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match.

How so? I paid $3 per lot commissions at PFG. Dukascopy is in the same range for small accounts. I believe that is a fairly normal commission level.

Tradestation Forex doesn't charge ANY commissions, and their spreads are excellent. By this logic I should run screaming? What about MB Trading with their FREE EXN plan or their "pay for limits" plan?

[FCM-Reform]

PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match.

How so? I paid $3 per lot commissions at PFG. Dukascopy is in the same range for small accounts. I believe that is a fairly normal commission level.

With PFG it was more of a case of rebates for introducers and other steep discounts that were simply uneconomical.

[garyfritz]

In other words, the telltale sign was something that customer wouldn't have seen.

It's not sufficient to post links to complex financial statements and expect customers to do their due diligence. Very VERY few people can competently read and fully understand those reports. The top-10 accounting firms doing the books need to provide understandable interpretation of the financial health of the institution, in a standardized form the public can understand and compare to other FCMs.

While increased transparency &etc are well and good, I doubt they will prevent every possible situation that could cause customer losses. Is the CFTC considering any kind of SIPC-like insurance to protect forex customer funds? Without some kind of guarantee like that, a whole lot of people are going to be unwilling to trust ANY FCM with their money.

[FCM-Reform]

In other words, the telltale sign was something that customer wouldn't have seen.

It's not sufficient to post links to complex financial statements and expect customers to do their due diligence. Very VERY few people can competently read and fully understand those reports. The top-10 accounting firms doing the books need to provide understandable interpretation of the financial health of the institution, in a standardized form the public can understand and compare to other FCMs.

While increased transparency &etc are well and good, I doubt they will prevent every possible situation that could cause customer losses. Is the CFTC considering any kind of SIPC-like insurance to protect forex customer funds? Without some kind of guarantee like that, a whole lot of people are going to be unwilling to trust ANY FCM with their money.

A simple link on the FCM's home webpage detailing basic financials wouldn't be too complex. Of course, no one plan is going to guarantee against customer losses in the event of fraud. However, the point of publishing financials is to give customers a warning if a firm is barely able to make ends meet. The CEO of PFG started stealing customer money 20 years ago precisely because his business was no longer profitable. But it's much harder to steal customer funds if more executives have to sign off on the theft, which Wasendorf never had to do in all his years at PFG where he hid the true state of the company's finances from everyone (as far as we know).

Insurance would certainly be a step in the right direction and FXCM supports it. Unfortunately, our meetings in Washington indicate insurance isn't likely to get enough support to become a reality. There is strong opposition to SIPC style insurance for futures and forex customers from some quarters in Washington as well from the CME itself due to the CME's concerns regarding how such insurance would be funded. They have testified that contract fees could be doubled under such a plan. It remains to be seen if insurance can be put into place that carries a reasonable price tage with it.

[garyfritz]

The way many people are looking at it these days is: "Either CME/FCMs fund the insurance, or **I** 'fund' it by losing my account. No thanks, I'll go back to the stock market."

[FCM-Reform]

Last Thursday the CFTC held a public hearing to determine what steps should be taken to repair the damage done by the bankruptcies of PFG and MF Global. I’d like to share with everyone some of the highlights of the hearing:

Better Accounting Standards: There was much discussion of auditing standards for both Regulators of FCM’s and the CPA’s who audit FCM’s. There was general agreement these standards need to be raised. FXCM believes FCM’s should be required to use a top accounting firm to avoid the kind of accounting issues that plagued PFG.

Additional Disclosure Requirements: An extensive discussion on FCM transparency was held and it is clear that FCM’s are going to have to make more disclosures of their books to regulators and to the public. The question is how much is to be disclosed? On the one hand there was testimony from FCM’s like Vision who publish their balance sheet on their website and on the other hand were those who were concerned that too much disclosure could lead to possible “bank runs” by investors. FXCM believes investors should be able to see a company’s audited financial statement once a quarter. Too many investors are forced to fly blind when they choose a Futures Commission Merchant or Forex Dealer. No trader should be subjected to this kind of risk post-PFG.

Insurance: Commissioner Bart Chilton released his proposal for a futures insurance fund on the same day of the hearing. Towards the end of the Roundtable the topic turned to insurance and John Roe of the Commodity Customer Coalition once again made a forceful case for a fully insured fund for the futures industry. As of now, Commissioner Chilton’s proposal does not include retail forex, but there is no reason that it shouldn’t. FXCM supports insurance for the futures/forex industry.

The CFTC will now deliberate into October before announcing their proposals. We encourage everyone to comment using the link below:

http://comments.cftc.gov/PublicComments ... px?id=1250

[AnotherBrian]

How about Capital punishment? You think that might slow things down a little?
BTW - I'm not joking. But I don't think it would ever be considered.

[garyfritz]

It works in China...

I'd be satisfied with forceful and significant but non-fatal penalties for the perps. John Corzine and his co-conspirators should be stripped of their personal wealth (to be distributed to their victims) and face looong prison terms. Consequences like that would make people think twice about robbing their customers.

Instead, Corzine is partying in the Hamptons, and they've decided they can't prosecute Goldman. The big boys buy their freedom with our money.