NFA takes member responsibility action against FXDD, tries to force it to pay clients $3.3m before guilt is proven
It seems the NFA has been quite busy this week. After destroying GFT, one of America's most respectable and stable brokers (more details from us in few days), its attention then moved to its favorite target - FXDD. Ever since July 2012, when the NFA lodged its first complaint against FXDD for alleged asymmetric slippage practices, the firm has been very high on its agenda as it was the only broker who actually 'dared' to challenge NFA in court. NFA, being the government mandated dictatorship it is, didn't take this well. The result was another complaint against FXDD this time for allegedly failing to comply with AML procedures. Next step is this MRA which basically is NFA's method to assert pressure on FXDD and force it to succumb to its complaint - without waiting for court judgement.
FXDD maybe did and maybe did not practice asymmetric Slippage Slippage In financial trading, slippage refers to the difference in price between the price an order was intended or expected to be filled and the actual price an order was filled. Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. For example, in forex trading, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1080, but they only get into the market at a price of 1.1078, the slippage here would be two pips. Naturally, there is always going to be a time delay between the trader buying or selling a financial instrument, and the time that the broker is able to execute the order, even if it’s only a few milliseconds, the delay is still there.Why Slippage is an Issue in FX Trading The issue of slippage is exacerbated in high volatile markets, such as the foreign exchange market in particular, as prices can and do change within these few milliseconds, causing the order to be executed at a different price to what was originally requested. Slippage takes one of two forms. Either it is negative slippage, i.e. if the trader enters the market at an inferior position to what they requested.Positive slippage, i.e. if the trader enters the market at a superior position to what they requested, which is welcome of course. For example, if a forex trader places a trade on their broker for buying the USD/JPY at 113.05, but the broker fills the order at 113.08, it means the slippage here is a positive slippage of 3 pips.Slippage is more common in forex trading during economic news releases, when price can fluctuate up and down wildly, known as whipsaws, making it virtually impossible to enter a trade at the intended price. Slippage can also occur due to lack of liquidity, especially on large orders, where they might be an inadequate amount of interest from the other party, since ultimately, orders can only be filled at the requested price if there are enough buyers or sellers at the intended price and size of order.To help eliminate or mitigate slippage, many traders rely on limit orders rather than market orders. A limit order only fills at the price you want, or better. Unlike a market order, it won't fill at a worse price. In financial trading, slippage refers to the difference in price between the price an order was intended or expected to be filled and the actual price an order was filled. Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. For example, in forex trading, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1080, but they only get into the market at a price of 1.1078, the slippage here would be two pips. Naturally, there is always going to be a time delay between the trader buying or selling a financial instrument, and the time that the broker is able to execute the order, even if it’s only a few milliseconds, the delay is still there.Why Slippage is an Issue in FX Trading The issue of slippage is exacerbated in high volatile markets, such as the foreign exchange market in particular, as prices can and do change within these few milliseconds, causing the order to be executed at a different price to what was originally requested. Slippage takes one of two forms. Either it is negative slippage, i.e. if the trader enters the market at an inferior position to what they requested.Positive slippage, i.e. if the trader enters the market at a superior position to what they requested, which is welcome of course. For example, if a forex trader places a trade on their broker for buying the USD/JPY at 113.05, but the broker fills the order at 113.08, it means the slippage here is a positive slippage of 3 pips.Slippage is more common in forex trading during economic news releases, when price can fluctuate up and down wildly, known as whipsaws, making it virtually impossible to enter a trade at the intended price. Slippage can also occur due to lack of liquidity, especially on large orders, where they might be an inadequate amount of interest from the other party, since ultimately, orders can only be filled at the requested price if there are enough buyers or sellers at the intended price and size of order.To help eliminate or mitigate slippage, many traders rely on limit orders rather than market orders. A limit order only fills at the price you want, or better. Unlike a market order, it won't fill at a worse price. Read this Term however the key point here is that NFA won't accept any challenge to its authority. If NFA claims you did something wrong - it means you did something wrong and there's nothing you can do about it. It's a known fact among US brokers that if NFA complained against you it's better to settle than try and fight as it will cost you at least double. Since FXDD decided to fight for its innocence it invoked NFA's rage and now faces an extremely tough business decision - pay $3.3 million to clients which basically means it will admit to being guilty and will then pay additional fine of at least $3-4 million for challenging the NFA OR shut down its business. Government mandated extortion at its best.
Unfortunately the American public is unaware of how NFA operates but something must change as otherwise NFA will eventually shut this market down completely.
Regardless of the above, NFA also claims that FXDD's regulatory capital repeatedly fell under the requirements and hence NFA is taking this action in order to make sure FXDD will be able to pay the $3.3 million it may owe clients if it's found guilty.
When contacted by 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 trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. 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 trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term Magnates FXDD issued the following statement: "FXDD's capital position is sound and customer funds are not and have never been at risk. Customer trust is at the forefront of everything we do and FXDD has always sought to comply with net capital requirements and maintain excess net capital. FXDD is in compliance with its present net capital requirement of approximately $21m. In fact FXDD's net capital exceeds this requirement. Throughout this entire process trading operations in the US and abroad have and will continue to operate as normal.
FXDD is committed to full compliance with all pertinent regulations and laws related to its business. FXDD continues to disagree with the NFA on the merits of its complaint. The company will continue to work with the NFA to come to a constructive resolution."
The NFA Member Responsibility Action:
NOTICE OF MEMBER RESPONSIBILITY ACTION:
On December 7, 2012, NFA's Executive Committee issued a Member Responsibility Action (MRA) against FX Direct Dealer, LLC (FXDD), whereby:
1. Prior to the resolution, and during the pendency, of In the Matter of FX Direct Dealer, LLC, NFA Case No. 12-BCC-021 ("BCC case"), FXDD must demonstrate to NFA that it is financially able to make restitution to customers in the amount of approximately $3.3 million for damages allegedly sustained by customers as a result of FXDD's asymmetrical price slippage practices, as alleged in the Complaint in the above-cited case. In order to demonstrate its ability to make restitution to customers, FXDD is required to deposit – and keep on deposit during the pendency of the BCC case – $3.3 million in a bank escrow account or in an attorney trust account, acceptable to NFA, or post a bond in such amount with NFA. Moreover, FXDD may not consider any funds on deposit in a bank escrow account or attorney trust account as a current asset for purposes of calculating the firm's capital, as such funds are restricted. FXDD's obligation, hereunder, shall terminate when all of the following conditions have been met: the BCC case is resolved; there is a final determination of the amount of restitution, if any, that FXDD owes to customers as a result of its asymmetrical price slippage practice; and FXDD fully pays customers such restitution amount, if any, as finally determined.
2. In the event FXDD fails to comply with the requirements of paragraph 1, above, by Noon (CDT) on Friday, December 14, 2012, the following measures will become effective immediately:
a. FXDD shall be prohibited from accepting or placing trades for any customer accounts except for the rollover of currently existing customer positions and/or liquidation of existing customer positions. In taking any action to rollover or liquidate customer positions, FXDD must act in the best interest of its customers.
b. FXDD shall be required to liquidate all positions held in any account for any FXDD principal, employee, or affiliate and is prohibited from initiating any additional positions in such accounts; and
c. FXDD shall be prohibited from distributing, disbursing or transferring any funds, except to existing customers, without the prior approval of NFA. Further, FXDD shall be required to provide notice to NFA of any distribution, disbursal or transfer of any funds to any customer on the same business day that any such distribution, disbursal or transfer occurs. Such notice shall include, at least, the date of the distribution, the name, address and account number of the recipient, identification of the FXDD account from which funds are distributed and to which funds are distributed, and the amount of the distribution.
This action is effective immediately and is deemed necessary to protect FXDD's customers and former customers who were harmed by FXDD's asymmetrical price slippage practices and ensure that they receive full restitution from FXDD for the damages they sustained as a result of such practices, which are alleged to total approximately $3.3 million.
The MRA shall remain in effect until the resolution of the BCC case and upon a final determination of the amount of restitution, if any, that FXDD owes to customers as a result of its asymmetrical price slippage practices.
It seems the NFA has been quite busy this week. After destroying GFT, one of America's most respectable and stable brokers (more details from us in few days), its attention then moved to its favorite target - FXDD. Ever since July 2012, when the NFA lodged its first complaint against FXDD for alleged asymmetric slippage practices, the firm has been very high on its agenda as it was the only broker who actually 'dared' to challenge NFA in court. NFA, being the government mandated dictatorship it is, didn't take this well. The result was another complaint against FXDD this time for allegedly failing to comply with AML procedures. Next step is this MRA which basically is NFA's method to assert pressure on FXDD and force it to succumb to its complaint - without waiting for court judgement.
FXDD maybe did and maybe did not practice asymmetric Slippage Slippage In financial trading, slippage refers to the difference in price between the price an order was intended or expected to be filled and the actual price an order was filled. Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. For example, in forex trading, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1080, but they only get into the market at a price of 1.1078, the slippage here would be two pips. Naturally, there is always going to be a time delay between the trader buying or selling a financial instrument, and the time that the broker is able to execute the order, even if it’s only a few milliseconds, the delay is still there.Why Slippage is an Issue in FX Trading The issue of slippage is exacerbated in high volatile markets, such as the foreign exchange market in particular, as prices can and do change within these few milliseconds, causing the order to be executed at a different price to what was originally requested. Slippage takes one of two forms. Either it is negative slippage, i.e. if the trader enters the market at an inferior position to what they requested.Positive slippage, i.e. if the trader enters the market at a superior position to what they requested, which is welcome of course. For example, if a forex trader places a trade on their broker for buying the USD/JPY at 113.05, but the broker fills the order at 113.08, it means the slippage here is a positive slippage of 3 pips.Slippage is more common in forex trading during economic news releases, when price can fluctuate up and down wildly, known as whipsaws, making it virtually impossible to enter a trade at the intended price. Slippage can also occur due to lack of liquidity, especially on large orders, where they might be an inadequate amount of interest from the other party, since ultimately, orders can only be filled at the requested price if there are enough buyers or sellers at the intended price and size of order.To help eliminate or mitigate slippage, many traders rely on limit orders rather than market orders. A limit order only fills at the price you want, or better. Unlike a market order, it won't fill at a worse price. In financial trading, slippage refers to the difference in price between the price an order was intended or expected to be filled and the actual price an order was filled. Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. For example, in forex trading, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1080, but they only get into the market at a price of 1.1078, the slippage here would be two pips. Naturally, there is always going to be a time delay between the trader buying or selling a financial instrument, and the time that the broker is able to execute the order, even if it’s only a few milliseconds, the delay is still there.Why Slippage is an Issue in FX Trading The issue of slippage is exacerbated in high volatile markets, such as the foreign exchange market in particular, as prices can and do change within these few milliseconds, causing the order to be executed at a different price to what was originally requested. Slippage takes one of two forms. Either it is negative slippage, i.e. if the trader enters the market at an inferior position to what they requested.Positive slippage, i.e. if the trader enters the market at a superior position to what they requested, which is welcome of course. For example, if a forex trader places a trade on their broker for buying the USD/JPY at 113.05, but the broker fills the order at 113.08, it means the slippage here is a positive slippage of 3 pips.Slippage is more common in forex trading during economic news releases, when price can fluctuate up and down wildly, known as whipsaws, making it virtually impossible to enter a trade at the intended price. Slippage can also occur due to lack of liquidity, especially on large orders, where they might be an inadequate amount of interest from the other party, since ultimately, orders can only be filled at the requested price if there are enough buyers or sellers at the intended price and size of order.To help eliminate or mitigate slippage, many traders rely on limit orders rather than market orders. A limit order only fills at the price you want, or better. Unlike a market order, it won't fill at a worse price. Read this Term however the key point here is that NFA won't accept any challenge to its authority. If NFA claims you did something wrong - it means you did something wrong and there's nothing you can do about it. It's a known fact among US brokers that if NFA complained against you it's better to settle than try and fight as it will cost you at least double. Since FXDD decided to fight for its innocence it invoked NFA's rage and now faces an extremely tough business decision - pay $3.3 million to clients which basically means it will admit to being guilty and will then pay additional fine of at least $3-4 million for challenging the NFA OR shut down its business. Government mandated extortion at its best.
Unfortunately the American public is unaware of how NFA operates but something must change as otherwise NFA will eventually shut this market down completely.
Regardless of the above, NFA also claims that FXDD's regulatory capital repeatedly fell under the requirements and hence NFA is taking this action in order to make sure FXDD will be able to pay the $3.3 million it may owe clients if it's found guilty.
When contacted by 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 trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. 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 trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term Magnates FXDD issued the following statement: "FXDD's capital position is sound and customer funds are not and have never been at risk. Customer trust is at the forefront of everything we do and FXDD has always sought to comply with net capital requirements and maintain excess net capital. FXDD is in compliance with its present net capital requirement of approximately $21m. In fact FXDD's net capital exceeds this requirement. Throughout this entire process trading operations in the US and abroad have and will continue to operate as normal.
FXDD is committed to full compliance with all pertinent regulations and laws related to its business. FXDD continues to disagree with the NFA on the merits of its complaint. The company will continue to work with the NFA to come to a constructive resolution."
The NFA Member Responsibility Action:
NOTICE OF MEMBER RESPONSIBILITY ACTION:
On December 7, 2012, NFA's Executive Committee issued a Member Responsibility Action (MRA) against FX Direct Dealer, LLC (FXDD), whereby:
1. Prior to the resolution, and during the pendency, of In the Matter of FX Direct Dealer, LLC, NFA Case No. 12-BCC-021 ("BCC case"), FXDD must demonstrate to NFA that it is financially able to make restitution to customers in the amount of approximately $3.3 million for damages allegedly sustained by customers as a result of FXDD's asymmetrical price slippage practices, as alleged in the Complaint in the above-cited case. In order to demonstrate its ability to make restitution to customers, FXDD is required to deposit – and keep on deposit during the pendency of the BCC case – $3.3 million in a bank escrow account or in an attorney trust account, acceptable to NFA, or post a bond in such amount with NFA. Moreover, FXDD may not consider any funds on deposit in a bank escrow account or attorney trust account as a current asset for purposes of calculating the firm's capital, as such funds are restricted. FXDD's obligation, hereunder, shall terminate when all of the following conditions have been met: the BCC case is resolved; there is a final determination of the amount of restitution, if any, that FXDD owes to customers as a result of its asymmetrical price slippage practice; and FXDD fully pays customers such restitution amount, if any, as finally determined.
2. In the event FXDD fails to comply with the requirements of paragraph 1, above, by Noon (CDT) on Friday, December 14, 2012, the following measures will become effective immediately:
a. FXDD shall be prohibited from accepting or placing trades for any customer accounts except for the rollover of currently existing customer positions and/or liquidation of existing customer positions. In taking any action to rollover or liquidate customer positions, FXDD must act in the best interest of its customers.
b. FXDD shall be required to liquidate all positions held in any account for any FXDD principal, employee, or affiliate and is prohibited from initiating any additional positions in such accounts; and
c. FXDD shall be prohibited from distributing, disbursing or transferring any funds, except to existing customers, without the prior approval of NFA. Further, FXDD shall be required to provide notice to NFA of any distribution, disbursal or transfer of any funds to any customer on the same business day that any such distribution, disbursal or transfer occurs. Such notice shall include, at least, the date of the distribution, the name, address and account number of the recipient, identification of the FXDD account from which funds are distributed and to which funds are distributed, and the amount of the distribution.
This action is effective immediately and is deemed necessary to protect FXDD's customers and former customers who were harmed by FXDD's asymmetrical price slippage practices and ensure that they receive full restitution from FXDD for the damages they sustained as a result of such practices, which are alleged to total approximately $3.3 million.
The MRA shall remain in effect until the resolution of the BCC case and upon a final determination of the amount of restitution, if any, that FXDD owes to customers as a result of its asymmetrical price slippage practices.