German regulators shut down FXdirekt Bank

Germany’s BaFin cites inadequate capital at FXdirekt.

Germany’s financial regulator BaFin announced Friday that it is shutting down leading German-based online FX broker FXdirekt Bank, due to inadequate capital following decreased client trading levels and losses suffered by the firm in the second half of 2012. FXdirekt had been the subject of some very negative press in its native Germany of late, with financial newsmagazine Wirtschafts Woche issuing articles entitled The dubious transactions of FXdirekt Bank, and More silver… push… push…

FXdirekt Bank had about 3,200 active customers, and held customer cash of EUR 17.2 million ($23 million). Customer deposits at FXdirekt Bank are protected under Germany’s Deposit Guarantee and Investor Compensation Act, which covers 90% of liabilities arising from securities transactions, to a maximum of EUR 20,000 per customer. It is still unclear if all client monies were intact at FXdirekt Bank.

Another note — this incident highlights to us how ridiculous and meaningless “Forex awards” are. It was quite recently, before being shut down that FXdirekt Bank won a “Best Forex Broker” award put out by German financial magazine Borse am Sonntag, Intelligent followers of the FX industry realize that most FX “awards” are given at conferences to those firms which pay to sponsor the conference, or by magazines or websites rewarding brokers which advertise. Virtually every online FX broker on earth proudly advertises all the “awards” it has won — Best Trading Platform, Best Customer Service, Best Broker in Asia….., the list is endless.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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