FXCM’s US market exit brings to an end a three-year digital advertising agreement with FX Publications, Inc., sealed in connection to the deal to sell DailyFX to IG Group.
Back in September 2016, when FXCM Inc, now known as Global Brokerage Inc (NASDAQ:GLBR), announced the sale of its news and research website DailyFX to IG Group Holdings plc (LON:IGG), the focus of many media reports was on the timing of the deal closure and the sale price. These aspects of the agreement were considered crucial with regards to FXCM’s efforts to advance in the repayment of the $300 million loan to Leucadia. So, all eyes were on the $40 million price IG was about to pay for DailyFX.
There were other aspects of the deal, however. One of them was that FXCM was set to continue to be an advertiser to United States and Canadian residents on the DailyFX English version of the website. More precisely, FXCM back then also entered into a three -year digital advertising agreement with FX Publications, Inc. The agreement provided for advertisements to be published on the DailyFX website in exchange for cash consideration payable by FXCM every quarter based on the number of leads generated by those advertisements. Until the website migration related to the sale is completed, the quarterly installment payable was about $0.7 million.
FXCM’s report for the first quarter of 2017 sheds light on changes to this agreement. The broker said that as a result of withdrawing from business in the United States and terminating its registration as a retail foreign exchange dealer with the US National Futures Association (NFA) earlier this year, the company has concluded that it will no longer benefit from the digital advertising agreement, as it cannot advertise on the DailyFX website or benefit from leads.
Putting it otherwise, FXCM has determined that the digital advertising agreement with FX Publications, Inc. represents “a contract with no future benefits”.
In money terms, the company recorded a charge of $4 million in the first quarter of 2017. As of March 31, 2017 and December 31, 2016 , the company registered a liability of $4.2 million and $0.4 million, respectively, related to the digital advertising agreement. FXCM said it was in negotiations to terminate and settle the contract but noted that there was no certainty at this time that favorable terms will be reached.
The changes to the advertising contract involving DailyFX form a part of the restructuring that the FXCM family of companies undergoes as a result of the settlements with US regulators in February this year in response to findings about the broker’s misleading business practices and statements.
Another aspect of the restructuring concerns FXCM’s workforce. The broker has apparently enlarged the scale of planned staff reductions, with the number of employees to lose their jobs due to the restructuring at 170. This compares with previously announced plans for 150 layoffs.