The Securities and Futures Commission of Hong Kong just announced that it has taken action against the local subsidiary of GMO Click, GMO-Z.com Forex HK Limited. The financial regulator has identified deficiencies in the order execution and slippage handling procedures of the brokerage.
In conjunction with an independent third party reviewer supplied by GMO Click, the SFC concludes that GMO-Z.com Forex HK executed 243 transactions for 17 clients involving more than
$270,000 at the last tradable price instead of the next available price. According to the SFC, the order execution and slippage handling procedures and the relevant policies were inadequate.
Resulting from the investigation, the SFC is imposing a fine of $1.6 million on the company.
The electronic trading system which the Hong Kong branch of GMO-z.com used at the time didn’t operate as intended and under specific circumstances could have affected the execution of clients. The brokerage didn’t inform its clients that order execution would not be confirmed until the company had hedged its risk exposure.
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The SFC also states in a Statement on Disciplinary Action that there was a lack of policies and procedures in the process and controls over the making of manual adjustment on client order executions.
According to the regulator, manual adjustments appeared uncommon and were usually made in favour of clients. The risks arose from the lack of documented policies and procedures that could be made to client order executions.
“In determining the sanction, the SFC considers that GMOHK’s cooperation has significantly expedited the investigation and disciplinary proceedings. Similar failures would have resulted in a substantially higher level of fine,” the regulator highlights in its statement on the matter.
GMO Click’s Hong Kong subsidiary is the first one that the company opened outside of Japan.
The action on the part of the regulator comes after a complaint about the execution of a liquidation order was filed on the 24th of August 2015. The SFC made enquiries into the order execution procedures and slippage handling policies over the period from October 2015 to June 2016.