Will regular foreign exchange dealers go bankrupt and run away?

Bankruptcy is becoming more and more common in the foreign exchange industry. Many problems in the foreign exchange industry began with the Cyprus financial crisis on 20 13, and the Swiss franc crash on 2 105 caused even greater panic. These unethical business practices seem to have become commonplace.

Combine these events-major bank interest rate manipulation scandals, declining trading volume and increasing regulatory pressure-with consumer complaints, and you will find that investment risks are not mysterious.

Whether you like it or not, the foreign exchange industry is definitely in transition. Unfortunately, during this period, the announcement of integration and merger, together with the occasional bankruptcy notice, appeared in front of investors.

FCA, CySEC and other regulators are determined to be responsible for their respective markets and set compliance standards at a higher level. Due to the changes in the newly formulated rules, the strategy of customer acquisition and retention must be reconstructed drastically, which directly affects the income dynamics that every trader pays attention to. Adjustment takes time and there will be winners and losers. If the world economy continues to decline, the restructuring process may become more cruel.

What is the latest information about the dealer bankruptcy announcement?

The spy briefly introduced several risk factors of bankruptcy of foreign exchange dealers: declining income, stricter supervision and fierce competition. Mergers and acquisitions are very common now, because many entities are struggling to survive. In fact, as long as we monitor the performance of current traders, we can find out whether there is a problem. If the business performance seems suspicious, then it is necessary to avoid it in time.

The following are the latest stories of three traders:

1.Gallant Capital Market, also known as GCMFX, filed for bankruptcy protection in the bankruptcy court for the eastern district of new york, USA.

However, when you carefully read the details behind it, you will see puzzling financial problems. Despite being registered in British Ville and the Islands, Salvatore Buccellato, the CEO, is an American citizen and continues to be the controlling shareholder of Gallant through his American holding company, Prime Trade Holdings Corp (similar to the China FSP dealer registered in New Zealand).

After 20 14, Gallant's main assets were sold to WSM company owned and controlled by Czech CEO Jiri Kubicek.

Why is this fact important? In the past week, Kubicek was taken away in Prague on suspicion of fraud and money laundering, and his company's investment in WSM was also investigated. The police claimed that Kubicek had used clients' funds privately and automatically. Although WSM uses proprietary robot algorithms to conduct foreign exchange transactions, using customers' funds violates regulatory requirements.

Hao only seeks to protect creditors, not a comprehensive liquidation procedure. It claims that regulated counterparties refuse to fulfill their exit commitments and it will take time to correct this situation. Whatever the reason, customers may not get their money back in a short time.

GCM Prime, another subsidiary of Prime Trade Holdings Corp in Buccellato, is leaving the company and trying to start a new business. In another statement, its management actually claimed: "GCMP Prime is an independent FCA regulatory company. GCMP Prime was not acquired by Gallant, and there is no similar management structure. It claims that customers' funds are also safely isolated. Continuing to invest in foreign exchange in another capacity is one of the common tricks used by traders.

2.LQD Market Co., Ltd. is located in Cyprus: In this special case, LQD Market is not a new bankruptcy court, but it shows how slow the bankruptcy investigation and liquidation process is possible.

LQD is one of many foreign exchange brokerage companies, which suffered serious losses in the event of 20 15 Swiss franc position. RSM, the special administrator, was appointed to handle bankruptcy cases and issued progress reports on the proceedings from time to time.

Fortunately, RSM has found and compensated the victims for more than 2.7 million dollars. After deducting bankruptcy expenses and administrative expenses, the liquidator is expected to repay about $4.4 million to customers.

3. A company located in New Zealand, distributor 1995 was established in New Zealand, but problems began to appear at the end of 20 16.

The seller complained that they didn't pay, and the customer's withdrawal request was inadvertently delayed. Usually, the management team will inform the customer that the bank is a problem and the solution will come out immediately.

Any delay in processing the withdrawal request (the company has actually stopped answering the phone) is always an early sign that the company may have financial problems. According to the report of the liquidator appointed by the court at present, it is listed that the company has debts of10 million yuan at the time of liquidation, with only assets of 40,000 yuan on the books.

Are there many similar cases in China, such as Volcker, Jiehui, Huiying, etc. If there is a problem with the withdrawal, say it is a bank problem. What is the actual situation? As we all know, these are all tricks played by foreign traders.

What caused a large number of dealers to go bankrupt? The decline in trade volume is the core of the problem.

As shown in the above figure, foreign exchange dealers have been benefiting from population growth and international operation since 1990s. The triennial "Central Bank Survey" of the Bank for International Settlements provides data on the nature and growth of foreign exchange transactions. It can be seen that the foreign exchange industry has fallen sharply in the south for the first time.

As soon as the tide comes out, some rocks are exposed, and those companies that are unprepared will have serious financial consequences. The financial crisis in Cyprus and the defection of the Swiss franc destroyed some companies, leaving many problems. It can be said that forward-looking prediction is not good, because regulators all over the world have strict compliance rules.

How do we protect ourselves from the credit risk of securities firms?

Compared with the systemic risk brought by the decoupling of SNB from the euro, the pressure brought by the Cyprus financial crisis is more isolated, while the latter is unknown. Now, many dealers have dispersed their customers' deposits into offshore tier-one bank accounts. Customers' funds can be safely protected from the interference of the company's business risks.

However, the discussion of Swiss franc is broader. The massacre caused huge losses to foreign exchange dealers and suffered huge losses in the open market. A few hours after the incident, Alpari UK, a large retail foreign exchange broker, declared bankruptcy. FXCM, another leading foreign exchange trader, reported a loss of $225 million and its share price plummeted by nearly 90%.

In this incident, IG suffered a loss of 30 million pounds. Citibank suffered a huge loss of $654.38+0.5 billion in the tragedy of the euro against the Swiss franc. This incident caused the global stock market to plummet by $654.38 billion. The Swiss national bank has never been responsible for its plunge.

How to protect yourself from the unexpected bankruptcy of potential brokers?

It is difficult and almost impossible for us to predict and prevent systemic risks. If there is a systemic recession, diversification will not work. However, a safety measure is to always ensure that your funds are segregated in offshore primary bank accounts. If the distributor accepts the tripartite trust agreement, there may be more protection measures, but this legal manipulation may be problematic for your distributor.

When traders have financial problems, they may resort to breach of contract or take improper business practices. If there are signs of this maneuver, please pay quickly. It is best to trade only with local licensed dealers and must meet the capital requirements set by local regulatory authorities. Check from time to time to ensure that the correct capital level is maintained. Finally, dealing with the bankruptcy of foreign distributors is a nightmare, because when users are hurt, you can never exercise your legal rights in foreign jurisdictions.

Bankruptcies of traders are increasing, and the bad news is just the tip of the iceberg. Financial pressure, intensified competition, declining number of transactions and economic recession threaten regulatory reform, which will all affect the survival of traders. Ask yourself if your traders are safe and reliable.