FXCM stock tanking, losing 50% day after CFTC ban

Now is a great time to see the aftermath of the damage being brought to FXCM in the wake of the ruling in which the US Commodity Futures Trading Commission (CFTC) banned FXCM Inc (NASDAQ:FXCM) from its home US market, as well as a permanent registration ban for CEO Drew Niv.

Today the stock is tanking by over 50%, with the company losing half of its previous day value in less than 24 hours.

At the time of this writing, FXCM is down to  $3.10, down $3.75 on the day, good for a 54.74% plunge at around 2:30pm EST.

Chart courtesy of Google Finance, FXCM stock tanked on Tuesday the 7th of February.

Summary of what happened yesterday:

  • FXCM, Niv, and co-founder William Ahdout are prohibited from registering with the CFTC, acting in exempt capacities or acting as principals, agents, officers or employees of registrants.
  • CFTC’s Order also holds FXCM, Niv, and FXCM Holdings responsible for FXCM’s false statements to the National Futures Association.

FXCM is (or rather, was) the leading market share retail forex dealer in the US, as well as the largest ex-Japan broker worldwide.

The CFTC announced it was settling charges against FXCM, its parent company, FXCM Holdings, and the two founding partners, Drew Niv, and William Ahdout, who were, respectively, Chief Executive Officer of FXCM and Managing Director of FXCM.

The CFTC Order finds that, between September 4, 2009 through at least 2014, FXCM engaged in false and misleading solicitations of FXCM’s retail customers by concealing its relationship with its most important market maker and by misrepresenting that its “No Dealing Desk” platform had no conflicts of interest with its customers. The Order finds FXCM, FXCM Holdings, and Niv responsible for FXCM making false statements to the National Futures Association (NFA) about its relationship with the market maker.

The Order requires Respondents jointly and severally to pay a $7 million civil monetary penalty and to cease and desist from further violations of the Commodity Exchange Act and CFTC Regulations, as charged. FXCM, Niv, and Ahdout agree to withdraw from CFTC registration; never to seek to register with the CFTC; and never to act in any capacity requiring registration or exemption from registration, or act as a principal, agent, officer, or employee of any person that is registered, required to be registered, or exempted from registration with the CFTC.

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