Complaint Matter

Mr. XXX has lodged his complaint with the Financial Commission on the following grounds:

The Client used account # XXX for active trading in the Forex market. A number of Short positions with the financial instrument AUDUSD were taken by the Client on the specified account before the incident (see statement). The Client had his pending Stop Loss order established on 0.70444 price level. The volume of aggregate Short position taken by the Client was 950 lots (95000000 AUD).

The incident on the Client’s account occurred on Monday, July 1, 2019, at 00:00:36 (server time), i.e. seconds after market open after a weekend. Due to the deficit of margin which resulted from the expansion of the spread in the financial instrument AUDUSD, the majority of Client’s positions were liquidated by the Broker (Stop Out). The amount of loss incurred by Stop Out totaled 66060.01 USD.

The Client claims that the quote 0.70516 at which a part of his Short positions was liquidated never existed in the period of the incident. The quotes range was from 0.7026 to 0.7035 and the Bid price at the time of liquidation was 0.70268. In Client’s opinion, the Broker has widened the spread intentionally up to 24.8 pips (0.00248) in order to liquidate the Client’s positions. The Client claims that he searched a lot of brokers and banks and didn’t find any spreads like the one offered by the Broker.

The Client is not satisfied with the Broker’s decision (see below) and requests the Dispute Resolution Committee to check the correctness of the execution of the transactions closed by Stop Out. The Client believes that the Broker should compensate all losses (66060.01 USD) incurred by the liquidation of positions. The Client provided the screenshot of his trading account taken from the Broker’s mobile trading app, as documentary evidence.

In turn, the Broker does not see any grounds for the Client’s complaint, since in their opinion all Client’s positions were closed correctly, at real market prices and in accordance with the provisions of the regulatory documents. The Broker provided the investigation with the Client’s trading history, the server log records, the fix log records, as well as the history of tick data on the financial instrument AUDUSD at the time of the incident, as documental evidence.

Complainant Broker
XXX YYY
Financial Commission Complaint #ZZZ
Complaint Raising Date Complaint Filing Date
01/07/2019 03/07/2019
Complaint response:

The decision on this complaint is based on the information provided by the brokerage company YYY and Mr. XXX.

After a comprehensive analysis of the documentary evidence provided by the Client and the Broker the Dispute Resolution Committee of the Financial Commission has come to the following conclusions:

1. First of all, it should be noted that during rollover periods, in particular, during weekend rollovers, market very often experiences a significant decrease in liquidity combined with significant increase in volatility. In turn, this circumstance radically changes the flow of quotations, leading to a dramatic expansion of spreads and generating price gaps. The Client should be aware that trading in such market conditions is accompanied by significant risks.

2. Secondly, according to the information provided by the Broker (the history of ticks on the financial instrument AUDUSD in the period of the incident), the quotes and the size of the spread on the currency pair AUDUSD the Broker received from their LPs, fully correspond to what the Company offered to its clients. The quotation 0.70268/0.70516 (which was used for positions liquidation) is the product of quotation received from LP and the Broker’s income (mark-up) in the amount of 6 pips (0.0006).  The Broker claims that at 21:00:36.024 UTC a Stop Out was triggered on the Client’s account. After that the situation developed as follows:

  • All Client’s orders were sent for closure, but due to very thin liquidity at the opening of the market, only a part of them was executed (## 1509763411, 1509763437, 1509763438, 1509763440, 1509765028, 1509765029, 1509765030, 1509765033, 1509765101, 1509765112, 1509765123, 1509765551, 1509765558, 1509765559, 1509765573, 1509765731, 1509765737, 1509765742, 1509765747).
  • The rest of the orders returned to the Client’s account, where the account status has already changed after a number of trades were closed. This was the reason why the system did not re-send the rest of the Client’s transactions for execution of a Stop Out. However, the price still satisfied the conditions for execution of the Stop Loss order and liquidity was enough to close three more positions (## 1509769282, 1509769287, 1509769292).
  • Then the price changed and ceased to satisfy the conditions for execution of the Stop Loss, so all other positions remained in the market and were closed by the Client few hours later (## 1509769277, 1509769279, 1509769284, 1509769285, 1509769288, 1509769293, 1509769295, 1509769399, 1509769278, 1509769278, 1509769281, 1509769283, 1509769286, 1509769289, 1509769290, 1509769291, 1509769294, 1509774775).

3. To ensure an objective investigation of the case the DRC requested historical price data on the financial instrument in the disputed transactions from other independent providers of financial services. Comparison of Broker’s quotes offered to the Client with the quotes received from other independent sources confirmed the fact that the quotes published by the Broker at the time of the incident (21:00:36.024 UTC) reflected the actual situation on the market. As such, taking into account the abnormal market conditions in the period of the incident, the experts of the DRC have found the execution the disputed transactions ## 1509763411, 1509763437, 1509763438, 1509763440, 1509765028, 1509765029, 1509765030, 1509765033, 1509765101, 1509765112, 1509765123, 1509765551, 1509765558, 1509765559, 1509765573, 1509765731, 1509765737, 1509765742, 1509765747 as correct and legitimate, since the quotes of the financial instrument AUDUSD published by the Broker in the period of the incident were consistent with acceptable market prices.

4. The trading terms on the Client’s account suggest a floating spread and a Stop Out at 30% level. This information is clearly defined on the Broker’s website (“Trading conditions” section). By opening a trading account of the selected type, the Client agreed to accept the trading terms provided by the Company. At the time of the incident the Equity/Margin ratio on the Client’s account fell below the critical level (30%). As such, due to insufficient margin, the disputed transactions ## 1509763411, 1509763437, 1509763438, 1509763440, 1509765028, 1509765029, 1509765030, 1509765033, 1509765101, 1509765112, 1509765123, 1509765551, 1509765558, 1509765559, 1509765573, 1509765731, 1509765737, 1509765742, 1509765747 were closed automatically, at prices available on the market (Stop Out). This fact is confirmed by the records from the server log and fix log provided by the Broker.

5. As for the disputed transactions ## 1509769282, 1509769287, 1509769292 (which, according to the Broker were returned to the Client’s account and afterwards were closed by Stop Loss, since the price satisfied the conditions for execution of Stop Loss and liquidity was enough to close those orders), in general opinion of the DRC members, the financial results (-32562.86 USD) received by the Client on these three disputed orders should be cancelled by the Broker. Experts of the DRC have come to such a conclusion after comparison of the Broker’s quotes offered to the Client with the quotes received from other reliable sources.  At the time of the incident (21:01:04 UTC), the quotes on the financial instrument AUDUSD in the Broker’s quote feed differed significantly from the quotes received from other independent providers of financial services and, as such, did not reflect the actual situation on the market.

Summarizing all the above the Dispute Resolution Committee has made a decision in favor of the Client.

In accordance with the decision of the DRC, the Broker has to cancel the financial results on the disputed transactions ## 1509769282, 1509769287, 1509769292, and partially satisfy the Client’s requirements for   compensation (66060.01 – 32562.86 = 33497.15 USD).

This complaint was reviewed by the members of the Dispute Resolution Committee of the Financial Commission and was processed by the Head of the Committee.

Ruled in Favor Compensation
Client 33497.15 USD
If you have any questions regarding this investigation, please send them to the following address info@financialcommission.org
Acknowledgement
I certify that all information was considered by the Dispute Resolution Committee of the Financial Commission and hereby confirm that the decision was made fairly, impartially and without interference. I am confident that the information provided in the document is true.
Signature Designation Date
 Anatoly Bulanov

Head of DRC

08/08/2019