Interview with FXCM

This my first interview with a major Forex broker. Jaclyn, Public Relations Coordinator of the FXCM broker. Decided to answer some of the questions I’ve sent them via e-mail. The questions touch various topics and should be interesting not only to the current customers of the FXCM, but also to any trader who is interested in a current on-line Forex trading situation. Bad thing is that answers sound too commercial, in my opinion. But that shouldn’t be a problem anyway.
What important features distinguish FXCM among other Forex brokers of your kind? Why do traders pick you among others?

FXCM principally stands out for the high quality of our execution and our excellent trading signals. Our No Dealing Desk system gets prices and liquidity from 7 of the world’s largest global banks and financial institutions (we plan to add more in future). FXCM streams the best available prices we receive from these institutions, plus a clearly disclosed markup, to our clients. The markup is typically one pip on either side. This pricing model clearly aligns our interests with that of the trader. Furthermore, FXCM has very strong credit relationships with these financial institutions, based on over $350 billion in monthly notional trading volume. These credit relationships aim to provide FXCM clients access to both excellent prices and deep liquidity.

All live clients at FXCM also receive free trading signals. We have collected together a number of powerful trading signals and tools from both third party providers and the DailyFX research team into a site called DailyFX PLUS. This site includes over 100 technical trading signals per day, specialized strategy pieces, and twice daily SSI positioning and Open Interest data.

What qualities are vital for every successful Forex broker, in your opinion, those things that make brokers grow?

Clients care about making money. Giving clients the best system which helps them try to make money is the most vital growth strategy. Having excellent execution with deep liquidity, low spreads, and fast confirmation is essential. We feel our No Dealing Desk system provides these things, as well as a level playing field free of dealer intervention. Having high quality trading signals and tools, such as our interactive charts and DailyFX PLUS, are also important for the client’s success. Finally, traders need to be able to concentrate on their trading. They should not be distracted by worrying about their broker’s financial stability. FXCM comfortably exceeds all current and currently proposed minimum capital requirements in the USA, is regulated on 3 continents, and is now the only retail Forex broker to post its balance sheet publicly on its website. Our clients’ ability to trade with confidence is the key to FXCM’s future growth.

Being a big company, FXCM had more than $200 million revenue in 2006. Since then, how has it grown?

The FXCM Group continues to grow strongly. We can now boast over 100,000 accounts trading on our platform, and our nominal trading volume has risen from over $100 billion per month to over $350 billion. In August 2007, we set a new record of over $500 billion in nominal volume.

MetaTrader 4 trading platform is rather popular among Forex traders. Checking your site some time ago I didn’t find any signs of its support. But now you announce that you are going to add it soon. Will it be some FXCM customization of the platform or will you go with the generic MetaTrader 4?

We are planning a soft launch of the popular MetaTrader 4 platform in February 2008, with a full launch in March. MT4 is a very popular and useful front-end platform. We’re matching that with our excellent trading backend, the No Dealing Desk system. We expect Metatrader enthusiasts will enjoy taking advantage of our great execution system, and also enjoy being able to use Metatrader with a regulated and financially secure broker.

Being one of the leading Forex brokers, do you invest in the development of new instruments or features? Something innovative, that can only be achieved with the large team of professionals.

We are constantly bringing our extensive resources to bear on developing new products. We have recently introduced a large number of platform improvements, including fractional pip pricing, one-click trading, and the ability to trade from charts. We have also added many trading resources, such as trading signals in DailyFX PLUS and the innovative SSI. The DailyFX team of analysts is constantly expanding their scope and depth of coverage, providing insightful fundamental and technical analysis as well as actionable trading setups every day for range traders, news events, hedging, and carry traders. We plan to continue expanding our offerings in the coming years and to remain on the forefront of retail Forex innovation.

Please, tell us more about FXCM managed Forex accounts. Do you plan on adding more types of them?

FXCM currently offers two Managed Account Programs, the Sentiment Program and Sentiment Aggressive Program. These automated active funds utilize FXCM’s unique SSI data to trade, and have performed well in 2007.* You can view updated results on our managed accounts webpage. We are planning to release several new managed account programs that are not correlated with our current programs, further expanding our clients’ options for managed products.

FXCM has been involved in the controversial Refco bankruptcy case. How did this fact affect your business, if at all?

Refco held an investment stake in FXCM, but was not involved in FXCM’s day-to-day operations. This stake has been sold to a very large investment bank and a number of other investors. You can read more about it on our website.

Considering the recent popularity of the e-currencies and the on-line payment systems, does FXCM plan on adding such options for the funds deposits and withdrawals, PayPal, at least?

As a trading firm regulated in the USA, UK, Hong Kong, and Canada, FXCM exercises strict anti-money laundering (AML) procedures. While these e-currency services are convenient, they are also fairly anonymous, and do not satisfy these strict AML standards. We do not currently plan to offer them.

What do you think about allowing trading accounts’ size below $300? With micro-lots maybe?

As I mentioned before, FXCM is compensated through a disclosed markup to the prices we get from several global financial institutions, acting as sort of an agency-model broker. That means that FXCM’s revenues are purely based on volume. So, FXCM is concentrating on attracting high-volume traders. We offer an expansive Gold Program for large accounts, which offers free professional charts with backtesting, specialized reps, free wire transfers, and exclusive trading commentary from our senior strategists, Kathy Lien and Boris Schlossberg. Of course, as one of the inventors of the Mini Account, FXCM has many advantages for small traders as well, including No Dealing Desk trading. All mini accounts get the same powerful trading signals in DailyFX PLUS that all other accounts get, and any new mini account holder at FXCM can get our popular FX Power Course for free. I believe the FX Power Course is a great introduction to the market, as it covers many of the basic skills that all traders need to develop.

Does FXCM plan to acquire any smaller Forex brokers in future? To increase your market presence, or to enter regional or very specific markets?

FXCM already has a worldwide presence, with clients in nearly every country. We are planning to expand our support for the Middle East by opening a Dubai office this year. As for smaller Forex brokers, it is important to note that legislation has been proposed in Congress to raise the minimum capital requirement for US-based Forex Dealer Members again, this time to $20 million. The recent raising of requirements to $5 million has already resulted in significant consolidation in the Forex market, and we expect that if this new requirement passes, there will be further consolidation.

Currently FXCM is offering a very useful Forex informational resource — DailyFX.com. Are there any plans do provide more such helpful resources in future?

One area that we have greatly expanded our offerings is the DailyFX Forum. You can access it from the DailyFX.com website. Our analysts are active participants in the forums, creating and facilitating discussion amongst traders. FXCM plans to add new sections and services here. We are also constantly improving and expanding our offerings on DailyFX, as well as our free webinar series and popular online courses.

In my opinion Forex is far from gambling, but taking in attention the current U.S. governmental campaign against on-line gambling, do you think it is possible that the Forex trading (at least through “dealing desks”) will be banned as gambling?

Forex is a newly regulated industry, and we need to uphold a higher standard of conduct. Dealing desks can work well for both client and broker, but there is a very real perception that dealing desks have an inherent conflict of interest between their clients’ profit/loss and their own firm’s bottom line. FXCM’s No Dealing Desk system eliminates this potential conflict of interest, and I think it is in the industries best interest to move in this direction.

* Past performance is not indicative of future results, as returns may vary according to market conditions.