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Screenshot of a breaking news alert e-mail from Q2 2017
Retail FX broker FXCM Group LLC has put out an interesting press release (see text below), stating that it has agreed to terminate its Management Agreement with parent company Global Brokerage Inc (NASDAQ:GLBR). FXCM and GLBR became effectively separated when Leucadia National Corp (NYSE:LUK) took a direct equity stake in FXCM last year, and the two appointed separate management teams earlier this year following the resignation of FXCM founder Drew Niv.
To be honest, we’re not really sure what it truly means, other than some management services which were provided by GLBR to FXCM which will no longer be provided. FXCM (the operating company) has been run for the past few months by CEO Brendan Callan with the backing of Leucadia Managing director Jimmy Hallac. GLBR is now run by Ken Grossman.
From an optics perspective, FXCM (the operating company) is trying to distance itself as much as possible from GLBR, given that GLBR seems about ready to circle the drain. GLBR is facing a Nasdaq delisting notice deadline at the end of this month, which if it happens would trigger a technical default in GLBR’s $172 million of outstanding Convertible Notes requiring the company to repurchase all of the Convertible Notes for cash. Cash, which it doesn’t have. Even if the Converts don’t need to be repaid early, they come due in less than a year.
FXCM, meanwhile, continues to march along with healthy FX trading volumes and light at the end of the tunnel as it is close to repaying its loan to Leucadia. A default / bankruptcy at the company which owns a chunk of its shares (that is, GLBR, if it happens), really shouldn’t affect the operating company FXCM directly. Especially since its real controlling shareholder, Leucadia, is very hands-on involved and has a vested interest in continuing to see the company do well. Presumably, the Convert owners (and any other GLBR debtors) would just step into GLBR’s shoes as minority shareholders of FXCM. But again, in a reputation and perception driven business like financial services, a “default” at a large shareholder would not be a good thing for business.
And so, the continued “separation” of FXCM from GLBR.
The text of FXCM’s press release follows:
FXCM Group Terminates Management Agreement With Global Brokerage
New York, October 2, 2017 — FXCM Group, LLC (“FXCM Group” or “FXCM”), a leading international provider of online foreign exchange trading, CFD trading, spread betting and related services, today announced that the Management Agreement between FXCM and Global Brokerage Holdings, LLC (“Holdings”) had been terminated.
The termination of the Management Agreement was mutually agreed by the parties and reflects the continuing separation of FXCM from Global Brokerage.
Brendan Callan, CEO of FXCM, stated:
We are extremely pleased to have taken this step. I believe that operating on a standalone basis is better for the firm, our stakeholders and most importantly our clients. FXCM continues to invest in our product offering and look forward to launching a new Web platform and MT5 in the coming months.
Jimmy Hallac, Chairman of the Board of FXCM and Managing Director of Leucadia, stated:
The termination of the Management Agreement represents the fact that FXCM and Leucadia continue to work closely to ensure that FXCM’s operating businesses are independent, strong, and built for future growth.
FXCM Group is a holding company of Forex Capital Markets Limited, inclusive of all EU branches (FXCM UK), FXCM Australia Pty. Limited, (FXCM AU), and all affiliates of aforementioned firms, or other firms under the FXCM group of companies.