NFA to investigate all forex brokers for unfair trading practices

NFA says it is about to launch an investigation involving all US Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term brokers in order to find out whether they cheat their clients.

The National Futures Association says it will begin analyzing trades executed by its 16 member forex firms. The regulator will search for signs these firms are designing computer systems to take advantage of what's known in the industry as "slippage" —small price movements that happen between when a customer orders a trade and when that trade is actually executed. While some slippage is normal (currency prices naturally fluctuate 24/7), the NFA will be looking to see if trades are being executed only when the currency price moves in the firm's favor. This would indicate a firm may be violating NFA rules mandating fair business practices, says spokesman Larry Dykeman. The group can then assess fines, and in some cases may suspend or expel a firm from membership in the organization.

Those with good memory will remember that only 6 months ago Gain Capital was slapped with $459,000 fine for abusing its Virtual Dealer plugin and configuring it to unfair trading settings. The plugin was configured to accept client orders when slippage moves unfavorably against them and reject client orders when slippage goes against Gain Capital.

Virtual Dealer plugin and the likes are pure Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term and dealing programs. These programs make a good job at reducing brokers' risk by accepting or rejecting orders without broker intervention and according to preset configuration. The main idea behind these plugins is to protect the broker from being exploited by certain traders who will try to gain pips they shouldn't gain when they give an order hoping that by the time the order is accepted by the broker the market already moved a pip or two in their favor. This obviously makes it not trading but exploiting loops in brokers' systems. On the other hand, brokers (some would even say that most brokers) exploit the configuration of these plugins and set them to only accept orders when the market moves against their clients thus profiting a pip or two against a client in almost every trade. When you add those pips up you get quite a nice, zero risk, daily profit for the broker. NFA is concerned exactly with this.