CFDs and Their Platforms in Germany

CFDs and Their Platforms in Germany

FXCM, an online provider of foreign exchange trading related services, announced January 6 that it has entered into a partnership with a German broker, FXFlat, as part of its strategic expansion into the German market.

The immediate consequence of the partnership is that FXFlat’s customers can access the FXCM Trading Station and MetaTrader 4 Platform trading services.

Rafael Neustadt, the CEO and managing director of FXFlat, said in a statement, “With this cooperation we are further expanding our extensive range of excellent trading tools, attractive costs and transparent solutions.”

Contracts for Difference

From the German point of view, too, this deal marks a step in the domestication of a once-unfamiliar market, the trade in Contracts for Difference (CFD). These are useful devices for betting on the movement of assets, inclusive of currencies, without investing in the assets. FXFlat’s customers will now be in a position to benefit from the No Dealing Desk Forex and from the Enhanced CFD execution models that FXCM offers.

CFD has existed in the English-speaking world for decades.  But in Germany it has been around for barely one decade. Over that period, it has gradually been taking volume away from a more familiar instrument known as Zertificaten (Certificates). Zertificaten are traded without the counterparty guarantee of central clearing that CFDs possess.

Just by way of example of gradual acceptance of these products in German, I’ll mention that DAB Bank, based in Munich, clambered on board the CFD bandwagon in December 2013, adding them to its product line, with the help of its Margin Trader platform and with a subsidiary, Italy’s Fineco Bank, serving as market maker.

As it happens, FXCM has only recently enhanced its own market making technology for CFD trading. It now allows scalpers and algo traders to trade index contracts without trade restrictions. So, its new German friends have a lot to look forward to.

Also, FXCM has said that it is ready to offer a credit facility to qualified Protrader brokers.

For the rest of the world, the partnership serves as a reminder of a perennial truth: that the nature of the contracts available for trade and the nature of the infrastructure employed to trade them are always interrelated.  For any asset (X) and any platform best suited for X (Y), we can safely say that X and Y are co-defined, so that whatever aids or impedes the growth of one aids or impedes the growth of the other.

FXCM History

As to FXCM as a corporation, it has had an intriguing recent history.

In early September 2015, it (NYSE:FXCM) received notice from the New York Stock Exchange that its average closing price had fallen below $1 over a period of 30 trading days, which put it in non-compliance with that exchange’s listing standards, and started the ticking of a six-month clock.

The company brought itself back into compliance quickly with a 1-for-10 reverse stock split, effective October 1.  Allow me to interject a personal aesthetic opinion at this point: I hate the term “reverse stock split.” It’s an accepted term and there’s nothing to be done about it but, damn if it doesn’t sound unnecessarily weird. A quick check with a thesaurus tells me that one common antonym for “split” is “juncture.” That sounds right: a stock juncture. That would be so much better.

Anyway: FXCM’s stock price has done well since the stock juncture of October 1.  It hit a low of $5.30 on December 11, amid uncertainties arising out of its outstanding indebtedness to Leucadia National Corp., and its efforts to restructure the same (NYSE:LUK).  Soon thereafter though the stock saw a year-end rally that took it almost to $20. It has fallen back a bit since then, but remains well above $15. So without the stock juncture it would have returned to compliance with the listing requirements.

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