US forex giant Forex Capital Markets (FXCM) said Monday is has finalized the sale of news and research service DailyFX to UK peer IG Group for a price of $40 million. On closing, FXCM received $36 million in cash and will get additional $4 million on completion of certain migration requirements, the broker said in a press release. The entire received amount has already been used for the partial repayment of debt to lender Leucadia National Corp., from which FXCM drew a $300 million loan in early 2015.
As a result, the US broker has made loan repayments of $154 million to the bank with $156 million outstanding. The broker noted that after the additional $4 million is received, FXCM will have repaid more than half the debt.
“With the close of this deal we have made another positive step towards completing our goal of eliminating the Leucadia debt through the sale of non-core assets and cash generated through operations,” said FXCM CEO Drew Niv.
FXCM announced the deal with IG Group in late September. It said at the time that it would continue to offer forex trading education and news and analytics through its web domains as well as on the FXCM Trading Station platform and charting package. FXCM clients will also still have access to IG’s DailyFX PLUS. Moreover, the broker will soon launch FXCM Plus, a password protected webpage for all FXCM live clients which will include the broker’s proprietary data such as signals, sentiment data (SSI), live webinars and technical alerts.
Following the Swiss franc-related crisis from January 2015, FXCM’s clients experienced heavy losses and generated negative equity balances of combined some $225 million. This put the broker in breach of the regulatory capital requirements. To resume operations normally FXCM was forced to draw a $300 million cash credit from the US lender. It also sold its subsidiaries FXCM Japan Securities and FXCM Asia, aka FXCM Hong Kong, to its Japanese peer Rakuten Securities. In March 2016, the broker and the lender agreed on a one-year extension of the credit agreement to January 2018.
It seems the way the broker handled the CHF-related crisis was not approved by the US regulators. The Commodity Futures Trading Commission (CFTC) issues a statement in August, saying that it has filed a civil enforcement action with a local court, charging FXCM with undercapitalization, failure to timely report its undercapitalization violation, and guaranteeing against customer losses at the time of the crisis in January 2015. The procedure is ongoing.
The FXCM Group is 50.1% majority owned by FXCM Inc. The rest of the group moved to the hands of Leucadia National Corporation earlier this month as part of a a definitive agreement the two companies signed to amend the conditions of their credit letter agreements. Since Monday this week, FXCM Inc. Movied to the NASDAQ Global Market from the New York Stock Exchange.
IG Group’s lead regulator is the UK’s Financial Conduct Authority (FCA), but its subsidiaries are also regulated by the relevant authorities in the countries where they operate.