In a typically laconic statement CFTC has announced that it established that Forex.com violated Section 4b(a) ofthe Commodity Exchange Act, and that this violation caused $22,231 in damages. 1 Accordingly, Gain Capital Group LLC, d/b/a Forex.com is ordered to pay to David Ni $22,23 i, plus post-judgment interest on that amount at 0.52% compounded annually from the date of this order to the date of payment, plus $50 for the cost of the filing fee.
Why is this important and what is Section 4b(a) you ask? According to the Security Exchange Act (here it’s called 6b not 4b) it’s:
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(a) Contracts designed to defraud or mislead; bucketing orders
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It shall be unlawful
(1) for any member of a registered entity, or for any correspondent, agent, or employee of any member, in or in connection with any order to make, or the making of, any contract of sale of any commodity in interstate commerce, made, or to be made, on or subject to the rules of any registered entity, for or on behalf of any other person, or (2) for any person, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery made, or to be made, for or on behalf of any other person if such contract for future delivery is or may be used for (A) hedging any transaction in interstate commerce in such commodity or the products or byproducts thereof, or (B) determining the price basis of any transaction in interstate commerce in such commodity, or (C) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof— (i) to cheat or defraud or attempt to cheat or defraud such other person; (ii) willfully to make or cause to be made to such other person any false report or statement thereof, or willfully to enter or cause to be entered for such person any false record thereof; (iii) willfully to deceive or attempt to deceive such other person by any means whatsoever in regard to any such order or contract or the disposition or execution of any such order or contract, or in regard to any act of agency performed with respect to such order or contract for such person; or (iv) to bucket such order, or to fill such order by offset against the order or orders of any other person, or willfully and knowingly and without the prior consent of such person to become the buyer in respect to any selling order of such person, or become the seller in respect to any buying order of such person.
According to this website it should prevent brokers (FCMs) from taking the opposite side of trader’s order (make market) without their consent.
So what exactly did Forex.com do in order to be fined?
Below is the full CFTC’s release:
David H. Ni v. Gain Capital Group, LLC d/b/a Forex.com –