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Online social trading platform and broker Darwinex announced on Tuesday it has terminated its relationship with the newly-delicensed US arm of forex broker Forex Capital Markets (NASDAQ:FXCM) and will no longer serve it as an introducing broker (IB).
Earlier on Tuesday we informed you Forex Capital Markets LLC, the brokerage’s US arm, has been banned by the US National Futures Association (NFA) and has agreed to withdraw from registration with the US Commodity Futures Trading Commission (CFTC) and never to seek to register with it. The decision, which will become effective later this month, means that FXCM is no longer authorized in the country and cannot provide forex trading services.
The US regulators accused FXCM in engaged in numerous false and misleading activities with the intend to solicit retail forex customers, including taking positions against clients, concealing important market maker information and misrepresenting that its “No Dealing Desk” platform had no conflicts of interest with its customers. In addition, the broker’s principals made false statements to the NFA in regards to these practices. The brokerage neither admitted nor denied the allegations, but nevertheless agreed on a $7 million settlement.
According to Darwinex’ statement, the social trading provider was not aware of the fraudulent practices and, had it known, it would have terminated its partnership with FXCM earlier.
“Needless to say – our relationship with FXCM is terminated effective immediately, and had we known that their “No Dealing Desk” model was anything but, that they were going to great lengths to trade against their clients (as cited by the CFTC lawsuit), such a deal would never have come into existence to begin with,” Darwinex said in a statement.
Darwinex intends to find another US partner for which to serve as an IB. It is taking propositions from clients in choosing the right partner.
“We will do our very best to find alternative arrangements going forward, and would be grateful if you could share – out of the dwindling list of CFTC authorized broker-dealers – would be your preferred execution venue to list your DARWIN for non US investors,” it said.
Darwinex is part of Tradeslide Trading Tech, a company licensed and regulated by the UK Financial Conduct Authority (FCA). The social platform supports trading in forex and contracts for difference (CFDs) instruments. Darwinex was set up in 2012 but started operations in 2014.