The Polish Supreme Administrative Court (NSA) dismissed the cessation appeal filed by XTB (WSE:XTB) concerning the Polish Financial Supervision Authority (KNF) decision to impose a financial penalty of PLN 9.9 million (over $2.2 million) on the brokerage in 2018.

Penalty Imposed on XTB Upheld

According to the KNF's press release published on Wednesday, it was the second cessation appeal by former X-Trade Brokers. The Polish regulator fined the broker in September 2018, and the publicly-listed company appealed the decision. However, the Voivodship Administrative Court in Warsaw rejected XTB's rationale and upheld the verdict. Now, a similar conclusion has been made by the NSA.

The KNF fined the company for violating the Polish Financial Instruments Trading Act concerning the provision of brokerage services without considering the client's best interests. From 1 January 2014 to 31 May 2015, the company used an asymmetrical setting of the deviation parameter in the execution of client orders in the instant model.

XTB, as the counterparty to the transaction, has enabled full transmission of execution losses to clients through asymmetric price slippage. Conversely, the broker reaped profits from advantageous price movements. This means that XTB executed client orders when the slippage benefits them, while clients did not receive any price enhancement if their orders were executed at a better price than expected.

The following is a translated excerpt from the KNF's statement: "In addition, XTB applied the delay parameter to a selected group of clients, subject to observation by the Trading Department, as a tool for additional verification of the price in the placed orders, causing the suspension of execution of the orders of such clients for the time specified by this parameter expressed in milliseconds."

“In connection with the judgment of the Supreme Administrative Court, which upheld the verdict of the Warsaw Administrative Court dismissing our complaint against the decision of the KNF, we declare that, even though we consider it to be unfair, we recognize it and thus end our battle concerning the revocation of the KNF’s decision,” XTB’s press office commented in a written statement sent to Finance Magnates via e-mail

Interestingly, in reaction to the Polish court's decision, XTB shares grew dynamically. In just 15 minutes, they recorded a jump of almost 5%, once again approaching the historical highs at PLN 35.30 reached on 21 February 2023.

XTB's CEO Omar Arnaout on 2022 Results

In its preliminary quarterly financials published a month ago, the Polish FX/CFDs broker listed on the Warsaw Stock Exchange has disclosed a substantial decline in profits for the fourth quarter of 2022. While the company's revenue increased yearly, it significantly decreased from the previous quarter.

Official figures revealed that XTB's total operating income or revenue for October to December came in at PLN 216.7 million (approximately $49 million), representing a significant drop of nearly 45% from the PLN 391.3 million it generated in the preceding quarter. This indicates that Q4 was the worst-performing quarter in 2022 for XTB, which generated revenues of PLN 439.8 million and PLN 396.4 million in Q1 and Q2, respectively.

Finance Magnates recently sat down with the CEO of XTB, Omar Arnaout, who has been heading the broker since March 2017, to discuss the financial results of 2022, rising client metrics, and other developments in the company.

"The fourth quarter of 2022 was an excellent period for XTB from the operational perspective. We managed the biggest marketing campaign in the history of the company, onboarding over 50,000 new clients and generating the highest quarterly volume in the history of XTB. On the other hand, market conditions were not favorable for us, thus the lower net profit," Arnaout commented.

The entire Finance Magnates interview with the XTB's CEO can be found here.