Isn’ t the Wall Street Journal, of all publications, supposed to be above this kind of journalism? The WSJ carried an article today in its popular “Heard-on-the-Street” column, entitled “The Customer Is Too Often Wrong at FXCM”. First, let’s deal with the factual part of the article:
“Casinos can be great businesses — until the gamblers run out of money”. FXCM and its top-tier competitors in the online FX trading space are not casinos, nor like casinos. Clients / patrons at casinos, both online and offline, do not “win” 30% of the time.
“But even customers who trade successfully need to overcome significant transaction fees”. FXCM, and most of its FX-brethren, does not charge any trading fees, unlike the online equity brokers. There is a buy-sell spread, fully disclosed, and that’s it. The WSJ writer John Jannarone apparently confused FXCM’s volume-based spread revenue of “$98 in trading revenue per million dollars traded” with fees. In our view, this basic error simply demonstrates Mr. Jannarone’s lack of understanding about this entire sector.
There is nothing wrong with being critical of the FX trading business. (We certainly sometimes are!). However, a critique — especially one in the WSJ — should be fair and should not contain incorrect innuendo (i.e. the casino reference), nor grossly incorrect facts (i.e. the fees nonsense). In our view, this was simply a case of wanting to write a negative article, without giving the issue its proper due, and apparently without really understanding the subject matter.
As other respected FX bloggers tweeted today,
“This strikes me as something of a hatchet job on FXCM. Their numbers aren’t any worse than anyone else” (John Forman, @RhodyTrader), and
“the reporter has no idea what he’s writing about unfortunately” (Michael Greenberg, @forexmagnates).