The Client has lodged this complaint with the Financial Commission on the following grounds:
The Client used account # 1700091006 for active trading operations with the instruments of FX market and CFDs. On the day of the incident, 11.05.2022, in the period from 19:26 to 20:06 (server time) the Client consecutively, at intervals of several seconds, opened 60 Long positions with the financial instrument USTEC, with a total volume of 300 lots. The Client decided not to use pending Stop Loss orders to limit their possible financial losses. 3 minutes after the moment of opening the last Long position # 58208820 in the specified series of transactions, following an unfavorable change in the price of the financial instrument USTEC, the Client tried to reduce financial losses by making short-term Short transactions, with a total volume comparable to the volume of previously opened Long positions, i.e. by hedging the positions opened initially. Despite the efforts made, in the period from 20:06:58 to 20:07:01, the Client’s Long positions ## 58208081, 58208093, 58208083, 58208104, 58208109 were forcibly liquidated by the Broker due to deficit of margin (Stop Out). At the same time, Short positions ## 58208887, 58208895, 58208897, 58208900, 58208901, 58208903 with a total volume of 100 lots, opened by the Client for the purpose of hedging, were closed by the latter at current market prices with a total loss of 1183 USD.
All further actions of the Client, starting from 20:15:28 and up to 21:47:06, consisted in opening and closing a large number of short-term Short positions and several Long positions in order to reduce the total losses incurred on the Client’s account earlier. Nevertheless, the logical result of all trading activity of the Client during the specified period was the complete zeroing of the account, after a series of several Stop Outs. The total losses of the Client in the specified series of transactions amounted to 47913 USD.
The Client claims that in the period of the incident, he successfully opened and closed hedging Short positions, gradually reducing the total losses on open Long positions, however, starting from 20:46:59 (server time) he lost this opportunity, since the Broker’s terminal began to display the message “No money.”
The Client believes that due to the lack of accessible and intelligible information about the trading platform’s hedging mechanism provided on the Brokers website or/and in the regulatory documents, during his first days of trading the Client had lost 82000 USD and later due to another mis-info about that mechanism provided in the email correspondence regarding this issue the Client had lost another 48000 USD. The Client claims that some days later, after the incidents the Broker sent him an e-mail accepting that more explanation is needed for the hedging mechanism and would put more info to their pages. As such, the Client feels misled since he was not provided the necessary information by the Broker and blames the latter for the financial losses.
The Client does not agree with the Broker’s decision (see below) and requests the Dispute Resolution Committee of the Financial Commission to check the legitimacy of the Broker’s actions in the period of the incident. The Client believes that a fair resolution of the dispute would be for the Broker to return the funds in the amount of 48000 USD lost in the period of the incident. The Client provided the investigation with the e-mail correspondence between him and the Broker regarding this complaint, the screenshots with information on the disputed transactions and the screenshot showing the balance of the Client’s account before the incident, taken from the Broker’s trading platform, 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 actual market prices and in full compliance with the provisions of the regulatory documents and trading rules established by the Company. The Broker provided investigation with the history of trading operations performed by the Client, the server log records, as well as the Broker’s official response on this complaint, as documentary evidence.
|Financial Commission Complaint||#ZZZ|
|Complaint Raising Date||Complaint Filing Date|
The decision on this complaint is based on the information provided by the brokerage company XXX and The Client.
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:
a) The Client’s positions will be forcibly liquidated by the Broker if the margin level falls below the critical level of 50% specified by the Broker;
b) The Client’s positions will be forcibly liquidated by the Broker if there are no Client’s funds left on the trading account;
c) 100% hedging (locking) on trading accounts with a floating spread is impossible, due to the absence of a fixed difference between the Buy and Sell prices. In the case of position hedging (which was the case in this case), spread widening automatically reduces the unrealized positive financial result on profitable positions, while increasing the unrealized negative financial result on unprofitable positions. In some market situations, spread widening can lead to undesirable consequences, such as Stop Out.
d) Asymmetrical unwinding of a hedged position will result in an unhedged position which is treated as a newly opened position. Thus, margin for this position is calculated based on the increased margin requirements and is distributed proportionally between the open transactions that involve the hedged financial instrument.
Thus, in order to fix the floating losses on previously opened Long positions, the Client opened a comparable volume of Short positions (190 lots) without any problems with the Broker’s hedging mechanism, thus freeing up the maximum possible margin for opening new positions. At the same time, the volume of hedged positions amounted to 380 lots (190*2), while the remaining Short positions with a volume of 15 lots were unhedged. A further increase in the volume of Short positions became unavailable for the Client due to the requirement of 100% margin for maintaining them (margin deficit). The Client tried to reduce his financial losses by operating 15-20 lots in unhedged Short positions, but did not succeed in this matter.
15.1 Upon opening a Transaction, you will be required to pay us the Initial Margin for that Transaction, as calculated by us.
15.2 You acknowledge that the Initial Margin for certain Transactions (for example, Share CFDs) will be based on a percentage of the Contract Value of the Transaction and therefore, the Initial Margin due for such Transactions will fluctuate in accordance with the Contract Value.
15.3 Initial Margin is due and payable to us before you enter into a Transaction (and for Transactions that have a fluctuating Initial Margin based on a percentage of the Contract Value, immediately on opening the Transaction and thereafter immediately on any increase in Contract Value taking place).
15.4 You agree that for different Financial Products there will be different Margin requirements and they may be displayed on the Website. The Margin requirements are subject to change without notice to you so you should make yourself aware of the Margin requirements.
15.5 You also agree that you have a continuing Margin obligations to us to ensure that at all times during which you have open Transactions you have Margin Cover in your Account and that it is positive at all times.
15.6 You must maintain at least the amount of Margin Cover required by us whether or not we give any notice to you to make those payments.
15.7 It is solely your responsibility to monitor and to satisfy all Margin Cover requirements.
15.8 You are required to maintain the Margin Cover, which might mean you must pay more Margin, whether or not we give you a Margin call and even if you are not contactable.
15.11 XXX may (without notice to you) Close Out, but will not be obliged to Close Out or to attempt to Close Out, some or all Open Positions, at that time or any later time as we determine (whether in our discretion or by automatic trading platform management) if:
(a) your Account Value falls below the Liquidation Level; or
(b) you fail to maintain the required Margin Cover; or
(c) at any time, and from time to time, XXX determines that the value of all of your Open Positions (and not taking into account any cash balance in your Account) represents a substantial net unrealized loss to you such that, in our belief, the continued trading, or failure to Close Out, one or more of your Open Positions will or is likely to materially prejudice your Account Value.
15.12 Details of Margin amounts paid and owing by you are available by logging onto your Account.
Summarizing all the above the Dispute Resolution Committee has ruled in favor of the Broker. In the general opinion of the DRC members, in the period of the incident the Broker acted in full compliance with the provisions of the regulatory documents and trading rules established by the Company. The Client’s financial losses have nothing to do with the settings of the hedging mechanism applied on the Broker’s platform. The Client chose very aggressive trading strategy and was ready for the loss of entire balance on his trading account. Analysis of the history of the Client’s trading operations performed on trading account # 1700091006 in the period from 19.11.2021 to 11.05.2022 confirms this fact (more than 10 Stop Out events). Accordingly, the claim of the Client for compensation of losses in the amount of 48000 USD was found by the members of the Committee as having no grounds.
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|
|If you have any questions regarding this investigation, please send them to the following address [email protected]|
|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.|
Head of DRC