FXCM
| Company type | Private |
|---|---|
| Industry | Financial services, Foreign exchange trading |
| Predecessor | Shalish Capital Markets |
| Founded | 1999 in New York, United States |
| Headquarters | London , United Kingdom |
Area served | Global (excluding U.S. markets) |
Key people | Brendan Callan (interim CEO), Jimmy Hallac (chairman) |
| Products | Foreign exchange trading, Contracts for difference (CFDs) on indices and commodities |
| Owner | Jefferies Financial Group |
| Parent | FXCM Group |
FXCM, or Forex Capital Markets, operates as a retail broker specializing in foreign exchange trading. It facilitates forex speculation and offers trading in contracts for difference (CFDs) on leading indices and commodities such as gold and crude oil. The firm is headquartered in London.
FXCM faced prohibition from U.S. markets due to fraudulent activities against clients. Its previous parent company, Global Brokerage, Inc., filed for bankruptcy protection in December 2017. Currently, FXCM Group is owned by Jefferies Financial Group (formerly known as Leucadia National Corporation). Since January 2015, shareholders of Global Brokerage have seen their investments decline by more than 98%.
In February 2017, FXCM consented to a $7 million settlement with the U.S. Commodity Futures Trading Commission (CFTC) over allegations of deceptive misrepresentation to both customers and regulators. As part of the resolution, FXCM surrendered its CFTC registration and agreed never to reapply, effectively excluding it from U.S. trading activities. Regulatory scrutiny led to the resignation of three senior executives, and the principal owner rebranded the company as Global Brokerage Inc.
Global Brokerage declared bankruptcy in November 2017 and completed restructuring by February 2018. Although it nominally holds a 51% ownership stake in FXCM Group, contractual arrangements with Jefferies Financial Group and FXCM adjust its economic interest to a range between 10% and 50%. Jefferies continues to act as the effective parent entity.
A Managing Director from Jefferies—who owned 49.9% prior to bankruptcy—was appointed chairman of FXCM Group’s board. Additionally, FXCM’s U.S.-based accounts were transferred to Gain Capital, involving approximately 40,000 client accounts at an estimated price of $375 each.
1999–2008: Establishment and Refco involvement
Founded in 1999 in New York, Forex Capital Markets emerged as one of the pioneers developing an electronic trading platform for the foreign exchange market. Originally called Shalish Capital Markets, the company adopted the FXCM name after its first year. By 2003, FXCM expanded operations to London under regulation by the UK Financial Services Authority.
In January 2003, FXCM entered into a partnership with Refco, a prominent U.S. futures brokerage, which acquired a 35% equity interest and licensed FXCM’s software for its clientele. Refco filed for bankruptcy in October 2005 following the discovery of a $430 million fraud; its CEO Phillip R. Bennett was subsequently convicted. Refco agreed in November 2005 to sell its 35% share back to FXCM for $110 million; however, creditors later invalidated this transaction and rejected a higher $130 million bid from FXCM. Ultimately, Refco’s stake was sold to a group including Lehman Brothers Holdings.
2009–2014: Regulatory challenges and public listing
In May 2010, FXCM acquired the UK-based ODL Group after having purchased its U.S. operations in January 2009. This strategic acquisition positioned FXCM as the largest retail forex broker worldwide, boasting over 200,000 clients and assets nearing $800 million.
FXCM launched its initial public offering (IPO) in December 2010 on the New York Stock Exchange under the ticker symbol FXCM, raising $211 million by pricing shares at $14 each. The IPO documentation highlighted FXCM’s no dealing desk execution approach, generating revenues primarily through price markups rather than proprietary trading gains.
In August 2011, the National Futures Association imposed a $2 million fine on FXCM due to slippage-related misconduct; affected clients received compensation within one month. Subsequently, in October 2011, the Commodity Futures Trading Commission mandated FXCM to pay $14.2 million in restitution connected to slippage issues. Class action lawsuits followed, accusing FXCM of fraud and racketeering related to misleading investors during its IPO process. Between 2005 and January 2017, FXCM was subject to numerous regulatory actions including CFTC reparations and National Futures Association arbitration rulings.
In June 2012, FXCM purchased a controlling interest in Lucid Markets for $176 million net of cash holdings. Lucid ranked among the largest foreign exchange traders globally with volumes comparable to major investment banks. Additionally, FXCM collaborated with Credit Suisse to develop FastMatch, an electronic communication network (ECN). Throughout 2013 and early 2014, FXCM invested in Infinium Capital Management by acquiring trading desks and assets from this high-frequency trading firm.
In February 2014, the UK Financial Conduct Authority fined both FXCM and FXCM Securities Ltd £4 million for slippage violations and failing to disclose an ongoing CFTC investigation. Including client restitution payments totaling £6 million, overall fines amounted to £10 million ($16.9 million).
2015–2017: Swiss franc spike and loss of U.S. license
On January 15, 2015, FXCM suffered a $225 million loss triggered by a sudden jump in the Swiss franc exchange rate, which caused the company to fall below required regulatory capital thresholds. The following day, Leucadia stepped in with a $300 million bailout loan featuring an initial interest rate of 10%, potentially increasing to 17%, to help FXCM meet capital adequacy standards. Later that month, FXCM waived 90% of negative balances for client accounts impacted by the franc’s extreme volatility. In September 2016, Leucadia agreed to extend the loan maturity by an additional year.
In February 2017, the CFTC imposed a $7 million penalty on FXCM, Inc. and three of its founding partners for deceptive practices related to its "no dealing desk" approach, which routed trades through Effex Capital—an entity allegedly controlled by FXCM. As a result, both FXCM and its founders were prohibited from trading by the CFTC and NFA. Subsequently, FXCM, Inc. changed its name to Global Brokerage, Inc., appointed Brendan Callan as interim CEO succeeding Drew Niv, and installed Jimmy Hallac from Leucadia as chairman. The company sold all 40,000 U.S. client accounts to Gain Capital.
Global Brokerage retained its NASDAQ listing under the ticker "GLBR," but received a warning in May 2017 due to insufficient market capitalization. By August 2017, FXCM divested its stake in FastMatch ECN for $46.7 million to partially reduce its outstanding debt to Leucadia, which still stood at $66.8 million. In October 2017, FXCM Group terminated its management contract with Global Brokerage. By November, FXCM disclosed that Global Brokerage owned 50.1% of the equity but held a minority share of economic interest, while Leucadia possessed 49.9% equity alongside a majority 65% economic interest.
2017–present: Bankruptcy proceedings and acquisition by Jefferies
Global Brokerage, Inc. filed for Chapter 11 bankruptcy protection in November 2017 and was subsequently removed from NASDAQ in December of that year. The company emerged from bankruptcy reorganization in February 2018, with its economic interest in FXCM Group fluctuating between 10% and 50% based on distributions made by FXCM. That same month, FXCM adopted the branding "FXCM: A Leucadia Company." As of March 2018, FXCM continued to rank as the second-largest retail forex broker outside of Japan.