Australian Regulator Cancels License of FX Broker Enfinium Post-Mortem
- After an investigation into the broker’s alleged virtual dealer malpractices between 2010 and 2013 yielded no results due to the company not maintaining adequate records of its operations, ASIC cancelled its license.
In a world where recent tumultuous events are likely to put increased regulatory scrutiny on the foreign exchange industry, the conclusion of a recent investigation by the Australian Securities and Investments Commission (ASIC) is likely to reinvigorate the debate. The Australian regulator has announced that it canceled the license of foreign exchange broker Enfinium.
The main issue with ASIC’s announcement is... the broker ceased operating back in 2013 and this regulatory action is hardly effective, nor is it protecting any clients retroactively.
Use of "Virtual Dealer"
In its announcement, the Australian regulator highlighted that the firm has been suspect of using a “virtual dealer” plug-in in its MT4 offering. The tool unscrupulously used by many companies mainly in the binary options industry has been designed in principal to combat latency issues providing traders with arbitrage opportunities.
However, when used inappropriately it can introduce a trade execution delay between 1 and 10 seconds resulting in re-quotes and possible slippage for the trader trying to open a position. In the cases when a broker misuses the functionality, the plug-in only works if the price of the asset in question moves against the direction of the trade of the client, resulting in an unfavorable advantage for market making brokers.
According to an investigation conducted by ASIC, between 2010 and 2013 the Virtual Dealer plug-in settings had been changed 271 times. At the time, Enfinium kept no adequate records of the changes made. The announcement by the regulator details that a number of Enfinium employees had "manager" access with special rights for administering the MT4 platform.
The access granted to these employees of the broker included editing and deleting clients' open positions, which has been classified by ASIC as “dangerous.” The regulator states that the company did not maintain any records of the use of the “virtual dealer” plug-in and did not monitor the use of the tool internally.
In addition Enfinium’s employees who had access to the tool were never trained, while the order management functionality and the virtual dealer settings changes were never identified by the broker as potential risks.
Enfinium Liquidation
The license of Enfinium was cancelled due to the company ceasing to provide financial services in Australia, with the firm appointing administrators on 1 October 2014 and being wound up by creditors on 6 November 2014.
Back in 2010, Enfinium bought Vantage FX, with the combined entities being bought by Hong Kong-based AIP Global in 2012 along with Go Markets. After a period of operating as individual brands but sharing common resources such as the FX Copy social trading network, Go Markets was sold off in 2013.
Since then, the Enfinium brand ceased to operate, with VantageFX remaining as the only one functioning.
ASIC Commissioner Greg Tanzer said in the regulator’s announcement, “Margin foreign exchange businesses that utilise the Meta Trader Trading Platform Trading Platform In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real Read this Term and use the Virtual Dealer plug in, need to ensure they have robust Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term systems. These systems must ensure the client is not disadvantaged to the benefit of the broker. Any tool that has the potential to advantage a broker needs to be carefully managed.”
In a world where recent tumultuous events are likely to put increased regulatory scrutiny on the foreign exchange industry, the conclusion of a recent investigation by the Australian Securities and Investments Commission (ASIC) is likely to reinvigorate the debate. The Australian regulator has announced that it canceled the license of foreign exchange broker Enfinium.
The main issue with ASIC’s announcement is... the broker ceased operating back in 2013 and this regulatory action is hardly effective, nor is it protecting any clients retroactively.
Use of "Virtual Dealer"
In its announcement, the Australian regulator highlighted that the firm has been suspect of using a “virtual dealer” plug-in in its MT4 offering. The tool unscrupulously used by many companies mainly in the binary options industry has been designed in principal to combat latency issues providing traders with arbitrage opportunities.
However, when used inappropriately it can introduce a trade execution delay between 1 and 10 seconds resulting in re-quotes and possible slippage for the trader trying to open a position. In the cases when a broker misuses the functionality, the plug-in only works if the price of the asset in question moves against the direction of the trade of the client, resulting in an unfavorable advantage for market making brokers.
According to an investigation conducted by ASIC, between 2010 and 2013 the Virtual Dealer plug-in settings had been changed 271 times. At the time, Enfinium kept no adequate records of the changes made. The announcement by the regulator details that a number of Enfinium employees had "manager" access with special rights for administering the MT4 platform.
The access granted to these employees of the broker included editing and deleting clients' open positions, which has been classified by ASIC as “dangerous.” The regulator states that the company did not maintain any records of the use of the “virtual dealer” plug-in and did not monitor the use of the tool internally.
In addition Enfinium’s employees who had access to the tool were never trained, while the order management functionality and the virtual dealer settings changes were never identified by the broker as potential risks.
Enfinium Liquidation
The license of Enfinium was cancelled due to the company ceasing to provide financial services in Australia, with the firm appointing administrators on 1 October 2014 and being wound up by creditors on 6 November 2014.
Back in 2010, Enfinium bought Vantage FX, with the combined entities being bought by Hong Kong-based AIP Global in 2012 along with Go Markets. After a period of operating as individual brands but sharing common resources such as the FX Copy social trading network, Go Markets was sold off in 2013.
Since then, the Enfinium brand ceased to operate, with VantageFX remaining as the only one functioning.
ASIC Commissioner Greg Tanzer said in the regulator’s announcement, “Margin foreign exchange businesses that utilise the Meta Trader Trading Platform Trading Platform In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real Read this Term and use the Virtual Dealer plug in, need to ensure they have robust Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term systems. These systems must ensure the client is not disadvantaged to the benefit of the broker. Any tool that has the potential to advantage a broker needs to be carefully managed.”