Customer Complaint Dated April 25th 2023

The Financial Commission / Case Examples / Customer Complaint Dated April 25th 2023

Complaint Matter

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

The client used trading accounts ## 57454, 123052, 156338, and 226712 for active transactions with Forex and CFD market instruments. By the time of the incident, the Client had opened several Long positions on the financial instrument USDRUB on the indicated accounts:

  • Trading account #57454

The total volume of the Long position on the USDRUB instrument was 12.2 lots;

  • Trading account # 123052

The total volume of the Long position on the USDRUB instrument was 12.2 lots;

  • Trading account # 156338

The total volume of the Long position on the USDRUB instrument was 13.2 lots;

  • Trading account #226712

The total volume of the Long position on the USDRUB instrument was 10.2 lots.

Thus, the total volume of the Client’s Long position before the incident was 47.8 lots. To ensure the fixation of potential profit on all specified positions, the Client set pending Sell Limit (Take Profit) orders at the price level of 77.77.

The incident on the Client’s trading account occurred on Tuesday, March 21, 2023, at 04:00 (time GMT). At the specified time, as a result of an unfavorable change in the price of the USDRUB financial instrument, the margin level on the Client’s trading accounts fell below critical (60%), resulting in positions ## 28807109, 28807614, 28808095, 28808455, 28808666, 28808838, 28809129, 28810459, 28810910, 28811586, 28811728, 2881292 9, 28807115, 28807609, 28808100, 28808447, 28808671, 28808822, 28809138, 28810465, 28810923, 28811515, 28811844, 28813094, 28807088, 28807182, 28807594, 28808051, 28808441, 28808681, 28808816, 28809116, 28810468, 28810917, 28 811534, 28811743, 28812921, 28807147, 28807971, 28808043, 28808226, 28808433, 28808661, 28808903, 28810451, 28810930, 2881150 4, 28811851, 28812880 Clients were forcibly liquidated by the Broker (Stop Out). The total amount of the Client’s financial losses as a result of the incident amounted to 13,742,000 RUB.

The Client does not agree with the Broker’s decision on his claim (see below) and believes that the disputed positions were liquidated by the Broker unlawfully. In support of his position, the Client points to two circumstances: firstly, the closing of these positions was carried out by the Broker at prices significantly different from the current market prices of other independent financial service providers, secondly, the liquidation of the disputed positions occurred 3 hours earlier, What usually happens when a trading session for the USDRUB financial instrument opens on the Broker’s platform.

In connection with the above, the Client requests the Resolution Committee of the Financial Commission to verify the correctness and legality of the Broker’s actions during the incident and also to oblige the latter to compensate for financial losses in the amount of 13,742,000 RUB, which arose as a result of the incorrect, in the Client’s opinion, forced liquidation of these positions.

For its part, the Broker does not see any grounds for the Client’s claim and believes that all of his transactions were executed correctly, at market prices current at the time of the transaction and in full compliance with the provisions of regulatory documents, as well as the trading conditions accepted by the Company. In support of its position, the Broker provided the history of the Client’s trading operations, as well as the trading server log records during the incident.

Complainant Broker
XXX YYY
Financial Commission Complaint #ZZZ
Complaint Raising Date Complaint Filing Date
15/04/2023 25/04/2023
Complaint Response:

The decision on this complaint is based on the information provided by the brokerage company XXX  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:

According to information received from the Broker, the company does not influence the flow of quotes that are broadcast on the platform. The Broker claims that the positions indicated by the Client ## 28807109, 28807614, 28808095, 28808455, 28808666, 28808838, 28809129, 28810459, 28810910, 28811586, 28811728, 2 8812929, 28807115, 28807609, 28808100, 28808447, 28808671, 28808822, 28809138, 28810465, 28810923, 28811515, 28811844, 28813094, 28807088, 28807182, 28807594, 28808051, 28808441, 28808681, 28808816, 28809116, 28810468, 28810917, 28811534, 28811743, 28812921, 28807147, 28807971, 28808043, 28808226, 28808433, 28808661, 28808903, 28810451, 28810 930, 28811504, 28811851, 28812880 were closed at current market prices available at the time of the incident and received from the Broker’s liquidity provider.

  1. Regarding the time of liquidation of positions on the Broker’s platform, which is also mentioned by the Client in the text of his complaint. In this regard, it should be noted that according to the information specified in the specification of the USDRUB financial instrument on the Broker’s website, the trading session for the specified instrument on the Broker’s platform begins at 07:05 GMT. In response to a request from the Resolution Committee, the Broker reported that the Company’s liquidity provider provides quotes for the USDRUB currency pair around the clock, while trading conditions for the USDRUB currency pair in the period from 15:55 to 07:05 GMT correspond to the term “Thin Market” defined in section 14 Client Agreement:

14.1. In this Agreement, the following terms have the following meanings: − “Market Conditions Other than Normal” means “Thin Market” or “Fast Market”. … − “Fast market” means a market condition characterized by rapid exchange rate changes in a short period of time. Often accompanied by price gaps. Typically occurs immediately before and/or immediately after one or more events: a. publication of the main macroeconomic indicators for the global economy that have a high degree of influence on financial markets; b. announcement of interest rate decisions by central banks or their committees; c. speeches and press conferences of the heads of the Central Bank, heads of state, finance ministers and other important statements; d. conducting foreign exchange interventions by government organizations; e. terrorist acts of national (state) scale; f. natural disasters that caused the introduction of a state of emergency (or similar restrictive measures) in the affected areas; g. the outbreak of war or hostilities; h. political force majeure events: resignations and appointments (including based on election results) of representatives of the executive branch of states; i. other events that have a significant impact on the dynamics of the instrument’s exchange rate.

For this reason, the Company decided to establish a trading break for clients and limit their ability to conduct trading operations on the thin market during the specified period of time. During the trading break established for clients, the company constantly calculates and monitors the level of margin on clients’ trading accounts at current market rates provided by the liquidity provider. Calculation and control of the margin level is carried out in order to timely liquidate trading positions in cases where the margin level on the client’s account falls below 60% and approaches negative values. In such cases, in accordance with Section 11 of the Trading Regulations and the definition of Stop Out, the Company has the right to close any or all open trading positions without the client’s consent and prior notice.

  1. According to the trading conditions specified in the corresponding section on the Broker’s website, as well as in the Broker’s regulatory documents, trading accounts ## 57454, 123052, 156338, and 226712 of the Client have Stop Out at the level of 60%. The opening of trading accounts of the specified type by the Client means the latter’s agreement to accept the trading conditions offered by the Broker. In this regard, it should be noted that, according to the information provided by the Broker, the positions disputed by the Client are ## 28807109, 28807614, 28808095, 28808455, 28808666, 28808838, 28809129, 28810459, 28810910, 28811586, 28811728, 28812929, 28807115, 28807609, 28808100, 28808447, 28808671, 28808822, 28809138, 28810465, 28810923, 28811515, 28811844, 28813094, 28807088, 28807182, 28807594, 28808051, 28808441, 28808681, 28808816, 28809116, 28810468, 28810917, 28 811534, 28811743, 28812921, 28807147, 28807971, 28808043, 28808226, 28808433, 28808661, 28808903, 28810451, 28810930, 2881150 4, 28811851, 28812880 were closed in accordance with the provisions of Section 11 of the Trading Regulations, that is, due to a decrease in the margin level on trading accounts below 60%:

11.1. Margin is a collateral that provides the opportunity to receive funds for temporary use to carry out speculative transactions on the Trading Platform. 11.2. The margin level in the Trading Platform is calculated using the following formula: (Funds/Collateral)*100%. 11.3. The Company has the right to reject any trading order to open a trading position if there is insufficient free margin on the Client’s trading account. 11.4. The Client undertakes to maintain a margin level of at least 60%. 11.5. The Company has the right but is not obligated, to close any or all open trading positions if the margin level on the Client’s trading account falls below 60%. Typically, but not necessarily, the most unprofitable open trading position is closed first. 11.6. Forced closure of the Client’s trading position by the Company is called stop out.

  1. To ensure an objective investigation, the Resolution Committee requested the history of quotes for the financial instrument in the Client’s disputed positions at the time of the incident from other independent financial service providers. The Financial Commission uses several different sources such as Verify My Trade, Tradeproofer, Tradefora, TrueFX, FX Benchmark and some others to check the quality of trade execution. According to the general opinion of the Committee members, the financial result obtained by the Client in these transactions (-13,742,000 RUB) should be cancelled by the Broker. The Committee members came to this conclusion after comparing the Broker’s quotes offered to the Client with quotes obtained from other reliable sources. During the period of the incident (03/21/2023, 04:00 GMT), quotes for the financial instrument USDRUB in the Broker’s quote stream differed significantly from quotes received from other independent financial service providers and thus did not reflect the real situation on the market. In this regard, it is also worth noting that the Broker did not agree to disclose its source of quotes for the financial instrument USDRUB in response to a request from members of the Resolution Committee, citing the NDA signed with the quote provider.

Based on the above information, the Resolution Committee made a decision in favour of the Client. The Committee experts came to a consensus that the Broker’s forced liquidation of disputed positions ## 28807109, 28807614, 28808095, 28808455, 28808666, 28808838, 28809129, 28810459, 28810910, 28811 586, 28811728, 28812929, 28807115, 28807609, 28808100, 28808447, 28808671, 28808822, 28809138, 28810465, 28810923, 28811515, 28811844, 28813094, 28807088, 28807182, 28807594, 28808051, 28 808441, 28808681, 28808816, 28809116, 28810468, 28810917, 28811534, 28811743, 28812921, 28807147, 28807971, 28808043, 2880822 6, 28808433, 28808661, 28808903, 28810451, 28810930, 28811504, 28811851, 28812880 of the Client during the incident occurred incorrectly. In accordance with the decision made, the Broker must cancel the financial result obtained by the Client in the disputed transactions and return funds in the amount of 13,742,000 RUB to the Client’s corresponding trading accounts.

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 13,742,000 RUB
If you have any questions regarding this investigation, please send them to the following address [email protected]
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

02/06/2023
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