Gaitame gets suspended for a month over forex rate spikes (updated)
The Financial Services Agency has issued to Gaitame.com Co. a one-month business suspension order starting Oct. 1 for repeatedly providing
The Financial Services Agency has issued to Gaitame.com Co. a one-month business suspension order starting Oct. 1 for repeatedly providing erroneous exchange rates.
This is going to be a huge financial loss for Gaitame, arguably the largest forex broker in the world, as being out of business for a month will immediately cause it to lose a month’s volume – that’s a few millions dollars right there, not to mention all the accounts that will surely be moved to other brokers during this suspension period and the immense damage to its reputation. Unless this is what the FSA wanted, it’s better that they just place huge fines instead, otherwise they might kill the local industry.
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It’s not clear for now what exactly happened, however it seems that there was a spike in forex rates, much beyond actual levels, which obviously stopped out many traders. If this is the case then this is potentially very bad news for Integral who has become Gaitame’s liquidity aggregation provider only 3 months ago. The liquidity aggregation should have smoothed out or even completely eliminated the spikes, however it hasn’t – it would be interesting to know whether the settings (assuming there are such settings) were recalibrated by Gaitame itself which eventually led to these uncontrolled spikes.
As a side, the report also mentions that Gaitame has 500,000 accounts and about $1.65 billion in client assets. Which is now certainly making it the biggest forex broker in the world.
“This marks the first time that a broker of foreign exchange margin trades is being hit with a business suspension order because of system glitches. In July and September, system errors at Gaitame.com led the firm to supply customers with yen-euro and yen-dollar rates that deviated sharply from actual market levels.
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The FSA issued a business improvement order to Gaitame.com on Sept. 10. But the system malfunctioned again this past Wednesday, resulting in the shutdown of a server handling customer transactions. Many customers were impacted by the latest glitch, which led to the forced execution of trades to square positions.
All transactions, except those entailing position closures by customers, will be subject to the suspension. The FSA has established a two-week window before then to enable customers to move transactions to other companies.
During the business suspension, Gaitame.com will have to investigate the repeated errors and set up a system oversight structure. Accounts at Gaitame.com totaled 500,000 as of June 30, while total assets under its custody reached nearly 100 billion yen as of July’s end, according to the brokerage.”
Update:
Integral’s official response: “Actions taken by the Financial Services Agency (FSA) related to the performance of Gaitame’s systems are unrelated to Integral’s technology. Integral has been supplying feeds to 100s of institutions around the world during this time frame with no issues. Our customers can be assured that they have been receiving and will continue to receive excellent liquidity and prices.”
If that’s the case I guess it only leaves one possible culprit – Gaitame itself.
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good news, the regultors are starting to take action to clean up the industry..
‘But the system malfunctioned again this past Wednesday, resulting in the shutdown of a server handling customer transactions.’
this was convenient!
good news, the regultors are starting to take action to clean up the industry..
‘But the system malfunctioned again this past Wednesday, resulting in the shutdown of a server handling customer transactions.’
this was convenient!
Only harsh punishments will make brokers behave. How come they never make mistakes where you win money instead of losing?
Only harsh punishments will make brokers behave. How come they never make mistakes where you win money instead of losing?
mike its too harsh becasue?
this product is exposed to much interference as we cannot benchmark a price. its my word against yours. when we deal wita a reseller e.g. fx broker issung their own price we are trusting them.
brokers break clients trust when spikes, price changes etc etc take place.
its about time brokers have to take mroe responsibility wethers its a technology or server issue.
mike its too harsh becasue?
this product is exposed to much interference as we cannot benchmark a price. its my word against yours. when we deal wita a reseller e.g. fx broker issung their own price we are trusting them.
brokers break clients trust when spikes, price changes etc etc take place.
its about time brokers have to take mroe responsibility wethers its a technology or server issue.
come on mike your not serious….. brokers make errors all day long, if you assess the regualtory framework its all about self regulation. apart form a few broekrs who have gone bankrupt themselves the regualtiors have not shut anyone down. we knwo that the regualtors are funded by their clients so that wont be happening. this is an eye openeer for all the dishonest broekrs out there who know as a market maker and even ecn broekr they have the capacaity to cause grief to traders. if you look at most broekrs charts as an example, who many spikes? if… Read more »
come on mike your not serious….. brokers make errors all day long, if you assess the regualtory framework its all about self regulation. apart form a few broekrs who have gone bankrupt themselves the regualtiors have not shut anyone down. we knwo that the regualtors are funded by their clients so that wont be happening. this is an eye openeer for all the dishonest broekrs out there who know as a market maker and even ecn broekr they have the capacaity to cause grief to traders. if you look at most broekrs charts as an example, who many spikes? if… Read more »
mike have a look through the fines spread betting comopanies have faced in UK.
but also bear in mind that when you sign up with your broker your terms and coniditons state that they are incharge of the price, they are the market. no matter how hard a cleint triesd they cannot take them to court.
plus the evidence? can you tell me how the regualtor can regualte this, that emans they have to look at all tick data form all the price providers, pirces move in miliseonds my friend..
in a way if this is the first offical case, its about time!
mike have a look through the fines spread betting comopanies have faced in UK.
but also bear in mind that when you sign up with your broker your terms and coniditons state that they are incharge of the price, they are the market. no matter how hard a cleint triesd they cannot take them to court.
plus the evidence? can you tell me how the regualtor can regualte this, that emans they have to look at all tick data form all the price providers, pirces move in miliseonds my friend..
in a way if this is the first offical case, its about time!
‘i still feel it’s too harsh a decision for a first time error’
your only saying that coz u might lose our adverising revenue!!!!!!!!!! :}}
‘i still feel it’s too harsh a decision for a first time error’
your only saying that coz u might lose our adverising revenue!!!!!!!!!! :}}
Oh,
Give me a break, Michael.
It clearly says that they have repeatedly provided erroneous prices. The right punishment is the one that hurts them the most and will make them think twice before doing it again.
If this was a system glitch they could have told their customers that they had a glitch and that they will compensate anyone who got hurt as a result.
— Asaf.
Oh,
Give me a break, Michael.
It clearly says that they have repeatedly provided erroneous prices. The right punishment is the one that hurts them the most and will make them think twice before doing it again.
If this was a system glitch they could have told their customers that they had a glitch and that they will compensate anyone who got hurt as a result.
— Asaf.
I can show you a broker that from now on will not show “uncontrolled” spikes 😉
I admit – it’s pretty harsh punishment but if it’s going to make this problem go away than I’m all for it.
Giving the company a fine is usually not doing the trick for companies in this space that make so much money. They pay the fine and then change their customer agreement to say that they run “virtual dealer” and present to the NFA or other regulatory body that the customer have agreed to them running the “virtual dealer”.
— Asaf.
I can show you a broker that from now on will not show “uncontrolled” spikes 😉
I admit – it’s pretty harsh punishment but if it’s going to make this problem go away than I’m all for it.
Giving the company a fine is usually not doing the trick for companies in this space that make so much money. They pay the fine and then change their customer agreement to say that they run “virtual dealer” and present to the NFA or other regulatory body that the customer have agreed to them running the “virtual dealer”.
— Asaf.
‘but see how regulators worldwide handle these issues: they don’t just shut their shop’
mike we appreciate the defence but this is a unlawful act. you wouldnt like your bank to say actually sir the interest rates changed negative and your savings have been wiped out.
‘but see how regulators worldwide handle these issues: they don’t just shut their shop’
mike we appreciate the defence but this is a unlawful act. you wouldnt like your bank to say actually sir the interest rates changed negative and your savings have been wiped out.
Michael – it happens all day long and with the brokers that would least expect.
The last we heard from the NFA is that now they feel confident that they have addressed the issue of sales practices with the brokers and are going to focus on fair execution moving forward.
— Asaf.
Michael – it happens all day long and with the brokers that would least expect.
The last we heard from the NFA is that now they feel confident that they have addressed the issue of sales practices with the brokers and are going to focus on fair execution moving forward.
— Asaf.
the issues of fraud in the retail forex market is immaterial when you compare it to the amazing innovation by ordinary people and the contributions to a field dominated only by those who are affluent. it is funny when i read sometimes that forex is gambling, but what is futures? stocks? — oh they call it investing. what high leverage and smaller contracts has really caused is it has made trading inexpensive. the lowering the bar of entry has allowed the common folk to speculate in the world economies, pay attention for the first time to what obama is doing,… Read more »
the issues of fraud in the retail forex market is immaterial when you compare it to the amazing innovation by ordinary people and the contributions to a field dominated only by those who are affluent. it is funny when i read sometimes that forex is gambling, but what is futures? stocks? — oh they call it investing. what high leverage and smaller contracts has really caused is it has made trading inexpensive. the lowering the bar of entry has allowed the common folk to speculate in the world economies, pay attention for the first time to what obama is doing,… Read more »