Customer Complaint Dated September 17th 2023

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:

1. First of all, it should be noted that according to the information provided by the Broker:

a) The Client’s orders for MT5 account # XXX were executed at the next available prices provided by the Broker’s Liquidity Providers. The Broker indicates that slippage can be positive or negative depending on factors like available liquidity, order type and volume.

b) The Broker’s execution model of Limit and Stop orders assumes activation only after a trigger price indicated in the order is hit. When the price of the asset reaches the trigger price, a Market order is sent. A Market order will be executed at the current market price. The reason for this is to avoid clients’ order rejections due to not available liquidity at a certain price.

с) In the Broker’s opinion, Market execution ensures that clients can trade under live streaming and best executable prices with immediate confirmations by the interbank market where Buy and Sell orders are matched up.

d) The execution prices came directly from the LPs and no wrongdoing is recorded anywhere from outside, as confirmed by the FIX log records. The Company is dependent on 3rd parties which it has no control over.

2. Second, in order to make an objective decision on this case the DRC has analyzed the trading activity in the Client’s account # XXX. 

a) The general analysis of the transactions performed by the Client showed the following:

• The Client’s trades were carried out in the period from 10.10.2022 to 06.09.2023.
• The Client’s trades were made with the financial instruments of the FX market (major and cross-currency pairs).
• The volume of the trades performed by the Client ranged from 0.01 lots to 1.3 lots.
• The duration of the Client’s trades ranged from several minutes to several hours.
• Most of the Client’s trades were carried out during the hours of inactive market (immediately after the Rollover).
• Most of the Client’s trades were opened via Buy Limit/Sell Limit orders.

b) The analysis of the financial results of transactions performed by the Client showed the following:

• After 870 transactions the Client made a net profit in the amount of 10 USD.
• The share of profitable trades performed on the Client’s account was 607 or 69.77%.
• The share of unprofitable trades performed on the Client’s account was 263 or 30.23%.

с) The analysis of the execution quality of the trades provided by the Client for the investigation, which included 373 trades, showed the following:

• The share of trades opened with negative slippage was 56 or 15.01%.
• The share of trades opened with zero slippage was 77 or 20.64%.
• The share of trades opened with positive slippage was 240 or 64.34%.

3. Third, the DRC has also verified the validity of the Broker’s allegation regarding the Client’s abusive trading strategy aimed at finding the vulnerabilities of their technical equipment and software for profit. For this purpose, the DRC has examined the documentary evidence provided by the Broker, as well as the history of price data on the financial instruments in the disputed transactions, obtained from independent providers of financial services. To ensure an objective investigation Financial Commission uses several various sources, such as Tradeproofer, Tradefora, Verify My Trade, TrueFX, FX Benchmark and some others to verify the execution quality of trades. The analysis of the execution quality of the profitable transactions made by the Client in the period before July 24, 2023, showed that at least a part of them were opened and/or closed at prices much better than actual market prices available in the period of the incident (above the average or/and awesome execution).

4. Fourth, based on the analysis of the history of the Client’s trading operations and the FIX log records provided by the Broker, it can be concluded that the Client indeed might have used special technical means (EA) exploiting inefficiencies in the Broker’s quotation system: on the daily basis, in the period immediately after the Rollover the Client placed pending Buy Limit/Sell Limit orders with Take Profit and Stop Loss orders attached to them (If Done type orders), on multiple financial instruments. The Client’s trading strategy is based on making profits from the sporadic market fluctuations that occur in the period of illiquid market, at the expense of the favorable execution (zero slippage or positive slippage) of Limit Orders at the Broker. In this regard it should also be noted that according to the Broker, the Company does not apply any filters on its pricing as they believe that pricing should always reflect market conditions.

5. Fifth, the DRC members expressed their common opinion regarding the fact that, by its definition, a Buy Limit/Sell Limit order (including Take Profit orders) assumes execution at the requested price or at the best price at the time of order execution. Using this type of order, a trader understands and expects that their trade order given to a broker will be guaranteed to be executed at a price not worse than they requested. The Financial Commission also follows this approach, as this is an example of Fair Business Practice widely recognized throughout the financial services industry. So, in the general opinion of the DRC members, negative slippage for Limit orders for retail client is unacceptable, because it is against the definition of the Limit order. Buy Limit/Sell Limit orders (including Take Profit orders) should be placed on the market as Limit orders, and then at low market liquidity they will simply not be executed but will remain in the system in the waiting mode until market conditions allow their execution.

6. Finally, from the technical point of view, MT4/MT5 platform allows to execute Limit orders with any slippage. Depending on the bridge software, brokers could execute Limit orders on LPs as actual Limit orders, execute them as Market orders on LPs after triggering of Limit price in MetaTrader, not to mention B-booking them with/or without slippage.

Thus, on one hand the DRC members agreed that the Broker has sufficient grounds to claim that the Client indeed used special technical means (EA) exploiting inefficiencies in the Broker’s quoting system.

In this regard, the experts of the DRC expressed a common opinion on the organization of the process of trading low-liquid financial instruments during a period of low market activity: if a broker cannot provide a normal supply of prices, they should prohibit trading or look for another source of quotations. Currently, there are many companies offering high-quality Market Data that can be used without any risk to business. The experts of the DRC believe that the Broker should bear the risks associated with the quality of the quotations supplied.

On the other hand, the experts of the DRC expressed a common opinion that the Broker must adhere to the principles of Fair Business Practice, which in this particular case assumes the following: if the Broker does not have the technical ability to place Buy Limit/Sell Limit orders (including Take Profit orders) as Limit orders on the LP side, then they must either prohibit clients from using orders of this type on their platform (so as not to mislead the clients), either update the technical part of their infrastructure to place such orders as Limit, or accept the risk that they will have to cover negative slippage when executing pending orders from clients from their own funds. 

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. 

Head of DRC