You probably didn't know that FXCM posted gross revenue of $154,000,000 (yes, million) last year. How much profit they made on that revenue is another story. But money like that puts them in a position to be able to buy the assets of RefcoFX, with whom FXCM has had a recent partnership.
The deal is still not done, but when FXCM buys the RefcoFX customer base, it does bring up the following thoughts:
1. RefcoFX is huge and is a big catch for a competing firm. Customers of RefcoFX always had a good chance, better than 90%, that their accounts would be all right.
2. If a competing firm failed to buy the assets, it would be a HUGE blow to retail forex, and all dealers would suffer. Think if 15,000 clients lost all their funds. That is 10% of the active forex trading market on the retail side. It would be a massive blow.
3. RefcoFX intended all along to shed its debt (rent, electric bills, phone bills) but never the client liabilities (they owe $16 BILLION to creditors). The clients were an asset -- the cash cow -- and those clients were probably going to lose their money in the accounts on their own -- to Refco. Why shed those clients when they were the cash cow and could be sold off?
4. The bonus of trading with a big firm is that you are going to get a buyer when a problem emerges. If some po-dunk FX company with 1,000 accounts goes under, it is hardly noticed and no one buys the assets and everyone gets screwed. In this sense, if you were with RefcoFX you were actually lucky to be with them when the you-know-what hit the fan.
5. RefcoFX was NOT regulated by the CFT. That's why people could not access their funds for a while. Trade with a firm that is regulated.
Those are just a few of my thoughts today on the subject.
