Over two months after US exit, FXCM claims no negative impact on Chinese business

Maria Nikolova

In tune with previous statements, FXCM claims the US exit did not have a negative impact on its Chinese operations.

It has been more than two months since FXCM was forced to quit the US retail FX space after regulators published their findings into the misleading business practices of the company concerning (inter alia) its dealing desk and positions in Effex Capital.

The first announcements following the settlements with US regulators included assertions by the broker that the US events from early February this year will not affect its non-US business. Moreover, these announcements claimed that the exit will even help the company focus on its overseas business.

We still have no details about the restructuring of FXCM’s non-US operations, apart from a handful of filings with UK and Australian regulators, pointing to the resignation of Drew Niv from Forex Capital Markets Limited (FXCM UK) and the ceasing of Forex Capital Markets LLC of being an authorized representative of FXCM Australia Pty Ltd. The solid information about what has been going on inside FXCM since February 6, 2017 is scarce indeed.

That is why we were curious to check out an announcement from the company about its Chinese operations, dated April 20, 2017. Alas, it did not shed much light on the structure (any structural changes) affecting FXCM’s Chinese business.

In tune with previous reports, FXCM stated that its US exit did not impact its overseas operations and referred to numbers showing its US business accounted for a smaller part of accounts than its Chinese business. Let’s mention now that Global Brokerage Inc (NASDAQ:GLBR), formerly known as FXCM Inc, no longer posts operating metrics on its website – you have to look for these on the websites of FXCM UK or FXCM Australia. The data is also published on FXCM’s Chinese-language website. But let’s note that there is no such thing as “FXCM China”. There is FXCM Group and a number of subsidiaries.

In the announcement from April 20, 2017, FXCM says it remains committed to its Chinese operations and refers to the growing importance of the Chinese market.

Formally, what businesses does FXCM have in China? According to the latest annual report of the broker, FXCM has “multiple offices in China”. FXCM’s subsidiaries in China as of December 31, 2016 (the latest official information we have) are Technementals Technology (Shenzhen) Co., Ltd. and FXCM Consulting Limited.

The way that FXCM is currently reiterating its commitment in China is by training services. The rest are claims and promises that have yet to materialize. These include an upgraded trading platform, to mention one example.

It is yet unclear how Chinese IBs have reacted to FXCM’s US exit, as FXCM’s Chinese operations are heavily dependent on IBs. All we have are numbers posted on websites of FXCM companies that are not public and now the problem with trustworthiness arises. Given that FXCM misled US regulators and customers in its reports, how are we supposed to trust the numbers in these press releases confined to operating metrics?

So, yes, it is good that FXCM is bolstering its training services in China. But is this a big deal, especially in the present circumstances? No. The big deal is the business structure and the particular changes affecting FXCM’s business after what happened in the US. Do we remain skeptical about statements that the US events from February this year had no impact on FXCM’s overseas operations, including China? Yes.

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