Forex Dealer MG Financial (MG Forex) announced today that they had been acquired by Rosenthal Collins Group (RCG.)
MG Financial was one of the first entrants in the retail FX space. The firm began offering online Forex trading in 1997. The then cutting edge trading platform employed a web page based interface broken up into frames. The quote board frame reloaded itself every 60 seconds, thus providing clients with “real-time” pricing. This service was part of the dawn of the online retail FX industry.
Several U.S. retail Forex dealers trace portions of their roots to MG Forex. Drew Niv, CEO of FXCM one of the world’s largest FX dealers, got his start at MG as did Eduard Yusupov, FXCM’s Chief Dealer. MG employees went on found software firm ACT Forex which initially powered brokers such as IFX Markets USA, CMS Forex and many others.
Despite its initial leading position, MG has largely been a failure. Having contributed to the founding of several fast growing and successful FX Dealers, MG itself has made very little progress over the years. The firm whose original name was Money Garden and whose tagline read “Yeah we grow the stuff” had largely failed to deliver on that promise. MG’s primary shareholders Mikhail Dvortsov and Alexander Mikhlin have largely been disconnected from the operations of the firm, which is rumored to have been ruled like a fief by the firm’s reclusive chief dealer, Dixon (Tak) Fung.
One of MG’s major contributions to the market had been the creation of financial portal Forexnews.com. Unfortunately MG’s lack of focus on customer acquisition eventually led to its loss of senior analyst Ashraf Laidi, the driving force behind forexnews.com, to competitor CMS Markets.
Though neither MG Forex nor Rosenthal Collins commented on the specifics of the transaction beyond saying that it was an all equity swap, one has to assume the sale price was rather paltry given the firm’s lackluster growth and level of desperation. The firm had been significantly short of capital coming into the Adjusted Net Capital Requirement increases and its relatively poor growth and lack of significant market share made it an uninspiring target for funding by private equity firms.
Rosenthal Collins’ significant capital base leads one to believe that we will be seeing a more aggressive and competitive stance from MG in the coming months. Nevertheless the acquisition brings a mixed bag to an industry desperately in need of a positive PR boost. RCG’s reputation in the Futures space is somewhat dubious. Despite the fact that RCG Managing Director Douglas O. Kitchen serves on the Board of Directors of the National Futures Association (NFA) and is a member of the NFA’s Executive Committee, the firm has a less than stellar regulatory record. Rosenthal Collins Group has been a party to 15 NFA arbitration cases and 194 Commodities Futures Trading Commission (CFTC) reparations cases. The firm has also been subject to 41 exchange initiated regulatory actions and 4 CFTC regulatory actions. In fact, just this past August the CFTC sanctioned Rosenthal Collins Group $310,000 for failing to enforce compliance procedures and diligently supervise employees. Surprisingly (or not) RCG has never been subject to a single NFA regulatory action.
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