Exclusive: DirectFX closes down in Chicago after slow, steady exit to the East

FinanceFeeds has held the opinion for quite some time that, for good quality companies with a large capital base and the level of expertise suited to supporting and sustaining it, a return to the US market would be an excellent move.

Despite the $20 million net capital adequacy requirements and strict daily reporting required by the National Futures Association (NFA), the attraction of operating in the world’s most organized retail financial services market, under a very highly regarded regulatory structure, and the ability to attract a discerning customer base which is often well versed in multi-asset investment and has a very high average deposit and lifetime value, with very little domestic market competition, is highly attractive.

The exodus of many overseas firms almost six years ago from the US market proved that many retail firms at the time were not prepared to go the hard yards and raise their commitment, meaning that only those with domestic market origins and vast resources remained.

Until now.

This week, FinanceFeeds exclusively reported that IG Group is heading back to North America, regaining its widely renowned foothold in Chicago, having applied for an RFED and FDM (Forex Dealer Member) membership from the NFA.

This is a very welcome move and in our opinion a very opportune time for a high quality, well established company to enter the United States retail FX market, and in this case in its Chicago heartlands.

This month, however whilst the publicly listed stalwarts of London make their entry, some of the old school depart.

FinanceFeeds has learned that DirectFX has closed its Chicago office in its final stage of moving away from the West, and concentrating ever more on the East.

Senior executives of DirectFX have moved on following the closure, and are, according to many conversations this week, optimistic about the spearheading of expansion to the US by household names of good standing from across the pond, and are in agreement that this is the right time to come to America’s retail sector instead of move away from it.

DirectFX is a well established name in North America and has a long history.

The company began focusing on other regions at the beginning of this decade, however, beginning with its commercial direction to look away from NFA  membership.

The concern about maintaining regulatory compliance began in 2007, when the NFA ordered Direct Trading Group LLC and its principal to pay a $40,000 fine. Direct Trading Group LLC at the time was an introducing Broker located in Chicago, Illinois.

By 2010, the firm had recinded its NFA license and began its focus on China and the surrounding areas of the APAC region.

Direct FX has now completed its exit from all of its US operations, and it is worth looking at the background of the company in order to demonstrate the historical path that the company trod which led it toward the mainland Chinese market and the development of a multi-product trading environment. The firm has been established in Australia since 2012, after buying the ASIC license from ODL Securities before it was acquired by FXCM as ODL Securities was focusing its UK spread betting and CFD entities and no longer needed the ASIC license.

In terms of origin, however, Direct FX can trace its establishment back to 2006 in the United States, when it was a Forex Dealer Member of the NFA.

Speaking to a senior executive at the firm, it was explained “Direct FX is a traditional and diversified FX broker with many retail clients, and our main focus is to work with more institutional partners that require access to top tier liquidity from overseas and well recognized prime brokerages, thus we provide the clearing and STP execution that Chinese clients and portfolio managers demand from us as the broker.”

The exit from the US had perhaps been on the cards for some time for Direct FX, especially since the rescinding of its NFA license and overt interest in Asian business.

Earlier this year, Direct FX entered into a partnership with DriveWealth which has a relationship with ICBC which is now a NYSE member firm. Chinese investors can that way invest in US firms like Amazon, Apple, Google, alongside Chinese stocks like Baidu and Alibaba, and the company also developed a solution that allows the trading of OTC derivatives and exchange listed futures on one MetaTrader platform, courtesy of a partnership with CQG.

Direct FX has garnered a substantial client base in Korea, China, and South East Asia, and this is really where the priorities lie for the firm, however with skilled executives having now moved on and very little competition combined with a good quality long-term-orientated and analytical potential client base, now is still the time to stump up the capital and get an NFA membership.