Polish listed brokerage XTB announced it will appeal against a $2.7 million fine handed down by the country’s financial regulator for engaging in a series of infringements to the detriment of its clients’ trading orders.
The company responded to the heavy penalty, a few hours after its announcement, by saying that it “fully” disagrees with the legal argument being pursued. The brokerage claims that its “asymmetric deviation mechanism” is not violating rules to provide the best possible deal to clients and has never affected their transaction results.
XTB also said it would challenge the ruling on the basis that the allegation of abusive price slippage took place more than one year after the KNF issued its guidelines on this issue, in May 2016. It also came almost a year after the company changed its execution system so that customers can benefit from a fairer pricing model.
According to the KNF, the best execution rules were breached by XTB’s failure to pass on positive price movements on clients’ contracts between receipt of an order and its execution, while passing on negative price changes or, in some cases, not executing the trade.
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Earlier on Tuesday, the regulator slapped the listed broker with a PLN 9.9 million ($2.7 million) fine for “irregularities in the execution of client orders,” the KNF explains.
XTB said it fully maintains “its previous position” and finds no grounds for “objections regarding the company’s operations”
XTB stressed shortly after the launch of the regulatory investigations in 2017 that it applies an execution model that passes on the full benefit of price improvements to its clients. The brokerage described the infringements alleged by the KNF as “unfounded”.
The company’s statement further reads:
“During the proceedings before the KNF, the Management Board provided the supervisor with extensive explanations as well as legal and quantitative expert opinions of independent entities confirming that the XTB application of the asymmetric deviation mechanism did not violate the principles of acting in the best interests of clients and did not affect the clients’ transaction results. KNF’s comments on the use of this mechanism relate to operations from January 2014 to May 2015. The guideline regarding the necessity of using a symmetric deviation, the KNF issued in May 2016, almost a year after the company made its own changes in your IT systems.”