Compliance – Insuring Integrity of Trades or Outright Theft?

[Scam Investigations Committee]

Traders keep reporting a common problem in the FPA's reviews and to our Scam Investigators. They trade. They make some profits. Then they try to withdraw some of their money. That should be the end of the issue.

Instead, all of their trades have to be audited by the broker's Compliance Department. Profitable trades that where opened during normal market conditions are suddenly erased as being Out of Market or Off Quotes. In some cases, trades that had been made many months ago are nullified. A brokerage will suddenly decided that most or all profitable trades were due to lag trading. In some cases, trades opened for 5 minutes, 10 minutes, or more are called scalping and are disallowed.

The FPA contacted several brokerages that don't have a reputation for this sort of thing to ask them about it. They all agreed that if there is a real error in price feed, that the trade should be corrected or nullified. We agree with that. They also said that this sort of error is typically detected very quickly, almost always within a few days. This makes sense to us.

One thing they also agreed on. If a trader does find a totally new and undetected method of cheating, then the trades should be annulled. We agree with this. We also believe that any serious brokerage will detect lag trading fairly soon. We think that brokers that disallow spike trading or scalping should detect this within a week or so also.

In light of this, we want to set some sort of reasonable time frame for brokerages to verify trades. This should be long enough for brokerages to protect themselves from unscrupulous traders who try to violate the trading terms. It also has to be short enough that a legitimate trader who runs afoul of the trading terms has a chance to still remember the trades and provide evidence that the terms are not violated. Also, the time should be short enough that the trader doesn't waste a lot of time and effort with a broker who is just going to take all the profits away.

Of course, if some enterprising trader finds a new and unexpected way to steal money from a broker, that would be a different situation. In those cases, there would be no time limit, but the broker would need to prove to the FPA just how this new form of crime managed to bypass their safeguards.

Please vote and let us know your opinion. You will need to be logged in to your forum account to vote – not just the password to the Daily Signals.

 

[NZ Chris]

Compliance – Insuring Integrity of Trades or Outright Theft

It always strikes me that the Brokers can make up their minds what is a Scalp or off market quotes when and as they like. I always think that if they quote the price then they should honour it. That price came from the market. If the Broker wishes to trade that "in house" and the trader profits, then that is the risk they take. With so many traders failing I don't believe the Brokers are short of profits. If the trader can't trust his broker's prices (and we often can't) then this business is more corrupt than a politicians allowances.

As they always said on Hill Street Blues, "be careful out there"

 

[Brendan Wood]

So if the broker I am using is not a bucket shop am i allowed to do "scalp" trades? and also, what is considered a scalp trade? If im trading a 15 minute window, and i have trades open for a few minutes or more, who are they to decide I shouldn't be doing that?

More details would be a appreciated..

I am new to trading and kinda figured I could hold a 1 minute position or 2 hours, if i so wished?

Thanks

 

[wizardt]

what gives them the right

if a broker cant fill the order we get little error messages that say so but to audit you and nullify trades i call bull**** (sorry for the foul language) if they accept the order and you profit there loss i dont here of any broker nullifying a trade you lost pips in why arent they nullifying those sounds like these brokers are scam artist and they need to be boycotted. would be nice if a list of these brokers could make a shame on you list see if they would change there tune then i bet they would

 

[Brendan Wood]

so they only nullify the winning trades huh? does sound particularly dodgy...

 

[Pyer2]

Not At All - A Deal Is A Deal

I voted 'two weeks' because there wasn't an option of 'not at all'. As several others have already pointed out, they would never nullify a losing trade. If there platform has a weakness that allows so called 'misquotes' to be traded then they should take it on the chin and fix the weakness that is causing the misquotes. How many of these 'misquotes' are responsible for taking out other traders stop losses? It's a circus if you ask me. If the order is accepted then I believe the trade is a deal and must be honored. The trader has to honor it if it's a loser!

 

[duck]

A trader may well develop some trading system that works profitably against quotes as provided by the broker. If so, the trader should not be penalized. It is the brokers responsibility to provide valid quotes (that's part of what they're being pay for, right?) so I don't see how a trader should be penalized for that. Yes, it assumes the broker's system isn't being hacked.

In any event, waiting for a trader to withdraw his profits is absolutely the wrong time to be informing a trader that his trading system/strategy doesn't really work, and the reason should be obvious.

Should a broker have reason to leave the door open for auditing trades, they need to have some kind of means of allowing traders to look back on their trades and see them become certified. Otherwise they may well initiate new trades believing they have a higher (or lower) account balance than they really have.

 

[BrainSwan]

Outright Theft.

Also, if they audit the winning trades, they should also audit the losing trades. i.e. What if you had a stop loss triggered by a "duff" price... ?

I would like to see stats of where there was a "duff" price, how many profitable trades were nulled vs non profitable ones for the same price spike say...

The whole thing smells - I work in IT for a trading floor, and if the system cocks up a traded price, only in *certain* circumstances (both parties agreeing it's a cock up) does the trade get nulled. More often than not, the trade stands.

In theory, if there is a "duff" price there will be winners and losers - so they should just swallow it. When you click on the "Deal" button, you entering into a contract... they are very keen to tell us this when it's in their favour.

My 2cents - apologies for rant!

Stu

 

[rubitz]

Trade Nullification

Trades made in the open market which were made contingent on the price feed provided by such broker should never be nullified. It is the only thing that compels any broker to provide clean feeds and I would go so far as to insist that the brokers very credibility hinges on their ability to provide reliable & tradable price data. Because of the vested interest in the traders failure brokerages which take the other side of the trade will always be suspect and subject to scrutiny.
My advice would be that if any broker cancels a trade after the fact, leave em, find a more credible broker immediately. Nothing is harder to live down than "I should have ....last time they..."

Goog luck & many pips

 

[Strategyrunner]

Private Investor

I commend you for the work that you are doing. I was not familiar with the policy of auditing after the fact and wish to raise a couple of points. It would seem only fair that brokers audit losing trades also. I have heard brokers claim when not wishing to honor a trade that there was a 50 50 chance it could have gone the other way. If all the winning trades are losers it would seem to me that all the losing trades could be winners.

The other issue that I see is Brokers will flash a message usually within a second if there is a issue closing a trade. If they can identify this problem then it would appear that all trades could be analyzed by a computer within seconds by adding a few lines of additional code. Regardless, once a spot trade for currency is accepted and confirmed that should be final. To me it fits the UCC definition of a Negotiable Instrument Sight Draft or Check Pay to the order of... Trader

It is almost impossible to prove right or wrong when brokers issue trading software that generates error reporting to Microsoft and run software upgrades during the trading day. Before I was with Dukascopy I have even had print screen snapshots disputed and I have received an adjustment from another Broker just for the asking. I gave a very basic information, asked if they wished proof, was asked what I lost and I replied I am not EXACTLY SURE. I was asked what I thought would be fair. Less than 5 minutes on the phone and a credit issued in about 15 minutes. It is like you say..."There are good Brokers and Bad Ones" and I am sure there are Traders that could be classified that way too.

I am sure that if all Traders work together with Forexpeacearmy, post truthful experiences unworthy Brokers could be effectively boycotted and starved out of business.

Sincerely submitted,

Alex Findlay