FXCM house of cards: 150 employees laid off
FXCM begins to display damage to its commercial structure following its exit from its own domestic market as 150 staff are let go
In the aftermath of the astonishing revelations that FXCM has been banned from operating in the United States for trading against its customers, the beginning of what could well be the dismantling of one of the world’s largest electronic trading companies is beginning to make its presence felt.
Just one day after the Commodity Futures Trading Commission (CFTC) took its action against FXCM, reaching a settlement of $7 million and insisting that FXCM along with CEO Drew Niv and senior Managing Director William Adhout withdraw from the US markets altogether, the company has now let 150 of its staff go.
Just minutes ago, FXCM filed with the Securities and Exchange Commission (SEC) stating that in connection with its withdrawal from business in the United States pursuant to the settlement agreements with the NFA and the CFTC, the Company intends to implement a restructuring plan that includes the termination of approximately 150 employees, which represents approximately 18% of its global workforce.
The Company expects to recognize most of these pre-tax restructuring charges in the three months ending March 31, 2017 and potentially in subsequent quarters.
In addition to the vast toll this has taken on its workforce and overall operations, the firm has now had to restructure its liability to Leucadia, having stated today that withdrawing from its US business will free capital that will be used to repay a portion of the outstanding loan from Leucadia National Corporation to the Company. FXCM has also stated that proceeds from the account sale also would be used to repay the loan from Leucadia.
It is worth noting that at present, there is no formal figure placed on the proposed sale of customer accounts, however it is clear that GAIN Capital will take them onboard. Bearing this in mind, it is not necessarily possible to consider that the sale of US customer accounts will cover any aspect of a loan, especially considering that Leucadia has a 49% direct interest in FXCM’s operations.
All eyes will be on the ensuing events, as the US authorities have led this charge, British, Australian, European and Singaporean authorities may follow, as the execution methodology that caused FXCM to fall foul of the regulators in the US was actually being used on a global scale, therefore there is every possibility that authorities in other regions may take a similar view, a potential outcome to which only time will tell.
FXCM today confirmed that its settlement with the CFTC for $7 million will be reflected in the Company’s results for the year ended December 31, 2016. The Company’s U.S. business had unaudited 2016 net revenues of approximately $48 million and generated an pre-tax loss, but the costs associated with the business will not be transferring to GAIN Capital once the customer accounts are transferred.
FXCM has also confirmed that Withdrawing from the US business will free approximately $52 million in capital, however it hangs in the balance as to what will occur in other markets where FXCM has presence, if regulators will follow the US perspective, or whether clients will leave of their own accord.