Complaint Matter

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

The Client used account # XXXX (USD) for active trading in Binary Options. The Client claims that he has lost all his funds (1018 USD) due to poor execution of transactions by the Broker. Also, the Client accuses the Broker in misconduct and  points to a number of irregularities in the Broker’s trading platform:

  1. Manipulation of the time parameters of the option (opening/expiry);
  2. Manipulation of the price parameters of the option (opening/expiry);
  3. Violation of the obligations declared in the Service Agreement in case of early sale of an option;
  4. The inconsistency of the current quotes on the financial instrument and the current time in two different trading platforms offered by the Broker (Binary Options/FOREX).

In connection with the above, the Client requests the Dispute Resolution Committee to investigate all unfair actions of the Broker and check the correctness of the execution of the disputed transactions (including ## 623645929, 623679962, 623684545, 624195317, 624979849, 625000743, 629517635). The Client believes that a fair resolution on the case would be to require from the Broker to return the funds in the amount of 1018 USD lost in the period of trading on the Broker’s platform. The Client provided the investigation with the history of ticks on the financial instruments in the disputed transactions, as well as the screenshots of some disputed transactions (graphs and trade specifications), which were made after the incident in the Broker’s platform, as documental evidence.

In turn, the Broker does not see any grounds for the Client’s complaint, as in his opinion all Client’s transactions were executed correctly, at real market prices. In support of his position, the Broker provided the history of tick data on the financial instruments in the disputed transactions, the history of all transactions performed by the Client, as well as the history of transactions with the financial instrument GBPUSD performed by other clients, as an example proving the Broker’s commitment to declared obligations in case of early sale of an option.

Complainant Broker
XXX YYY
Financial Commission Complaint #ZZZ
Complaint Raising Date Complaint Filing Date
08/10/2018 17/10/2018
Complaint response:

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

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. In his claim, the Client indicates the absence of accurate information (in milliseconds) regarding the time of the option opening during its lifespan in the trading platform of the Broker. This information appears only after expiration of an option or after an early sale of an option by the Client. According to the Client, this circumstance provides an opportunity for the Broker to manipulate the time parameters of the option and, as a result, the financial result of the transaction. The Client believes that the Broker is choosing the best price for them at the time of opening and closing the trade. So if the position is Short, they would choose the minimum price around the opening timestamp and the maximum price around the closing timestamp.

The experts of the DRC have found this statement of the Client worthy of attention. In their common opinion, in some cases the Client does have a valid point that the Broker chooses the worst price.

2. Also, in his claim, the Client often refers to an independent provider of financial services used for verifying the quality of transactions’ execution (execution verification software Verify My Trade) and claims that both the quotes and timestamp that the Broker publishes on his website in the appropriate section do not guarantee the Broker’s good faith and honesty, because when executing clients’ transactions, the Broker manipulates these parameters. Nevertheless, to ensure an objective investigation of the case, the DRC requested historical data on the financial instruments in the disputed transactions from other independent providers of financial services (Tradefora, Trade Proofer and Verify My Trade). The Client’s complaint was accepted by the Financial Commission on 17/10/2018. Thus, in accordance with the Financial Commission’s rules, all Client’s transactions executed no later than 45 days from 17/10/2018 were accepted for analysis in terms of the execution quality. Verification of price feeds from other sources has not identified any significant deviations in the Broker’s prices.

It should be noted, that Client complains of being fractions of a pip off the market in several cases. Unfortunately, Verify My Trade or other similar systems are not going to show anything other than “fair execution”.

3. As for the violation of the obligations declared in the Service Agreement by the Broker in case of early sale of an option mentioned by the Client in his claim, it is worth noting the following:

  • It is important to note that an early sale of an option is the Company’s right, not an obligation. If the conditions for this kind of operation are not appropriate, the early sale of an option will be low-priced or absent at all.  In this case, the Broker refers to paragraph 4.3. of the Terms of business:

4.3. An early closing of a trade can be made before the option expiry time at the Client’s request only if the Company has the technical capability to do so and there is a stable internet connection between the Client’s trading terminal and the Company service.

  •  Also it should be noted that at the request of DRC, the Broker provided a history of trading operations performed on trading accounts of other clients with some examples of early sale of an option on the financial instrument GBPUSD with a return of 40, 50, 60 and even 80% of the transaction amount. The experts of the DRC considered this information sufficient to confirm the Broker’s commitment to its obligations.
  • With regards to the size of the payout in case of an early sale of the option, it should be noted that the Broker’s method of calculating the value of an option that is out of money, using the Black–Scholes equation, which is well-known in the financial industry, is fair, according to DRC experts’ common opinion.

4. Finally, with regards to the discrepancy between the current price of the financial instrument and the current time in two trading platforms offered by the Broker (Binary Options/Forex), which the Client mentions, the following should be noted:

  • The Broker does provide its clients with two different financial products: Binary Options and Forex. For trading, the Company offers its customers two completely different trading platforms. The quotes published on different trading platforms may vary by several reasons. This is associated with different liquidity/quote providers and with a different method of pricing. However, the trend of price behavior on the charts of different trading platforms should not differ significantly.
  • An attempt to simulate such a situation in which the time on the charts in two different trading platforms offered by the Broker would differ by 1 second was not successful.  On the other hand, this fact can be explained by low quality of Internet connection or other technical issues on the Client’s side.

Summarizing all the above the experts of the DRC have made the following decision:

  1. The Financial Commission recommends the Broker to update his Terms and Conditions and to make clearer the following (additions to the Terms and Conditions):
  • Explain that the markets they offering are OTC markets and are based on their own price aggregation.  External execution verification software cannot be used as a default measure of execution validation.
  • Price that will be used to determine the opening and closing prices will be the latest price on record prior to the order being received from the client.
  • In case of an early sale of an option, the client can receive up to 60% of the invested amount back to the account contingent to the instrument and the current market volatility.
  1. The Broker has to take the appropriate measures in order to display the exact time of the opening of the option in their trading platform.  Also, if the Broker wants to be more transparent he has to show all the quotes he had on Clients’ trades and publicly share the trade feed ticks.
  2. The Client does not have sufficient grounds to assert that the disputed transactions (including ## 623645929, 623679962, 623684545, 624195317, 624979849, 625000743, 629517635) were executed by the Broker at non-market prices. As such, the claim of the Client for compensation in the amount of 1018 USD was found by the members of the Committee as having no grounds. Nevertheless, the DRC recommends that the Broker pays partial compensation to the Client in the form of bonus, as a gesture of goodwill, thus showing him gratitude for revealing the areas of improvement in the Broker’s trading evironment.

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 At Broker’s discretion
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

31/12/2018