1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

IKON GM Nailed by the NFA for Using a Virtual Dealer Plugin

Discussion in 'Forex Articles' started by Pharaoh, Oct 29, 2010.

  1. Pharaoh

    Pharaoh Colonel

    Joined:
    Oct 3, 2007
    Messages:
    19,621
    Likes Received:
    2,181
    IKON GM Nailed by the NFA for Using a Virtual Dealer Plugin
    by Pharaoh

    Just when I thought I had my writing addiction cured

    As infuriated as I am and the CFTC and NFA for some of their incredibly moronic new regulations, this time I have to deeply thank the NFA for watching out for forex traders.

    Bruce from Dallas left a review a few hours ago about an NFA action against IKON Global Markets. One of the Review Moderators passed it to the AsstModerator. He called me to ask if I was busy. I'm always busy with something, but I dropped everything once I read the NFA finding. My thanks to all involved.

    Most of you have heard of Virtual Dealer Plugins. These are pieces of software that let a broker rig things so that slippage almost always goes against traders and almost never in their favor. In the real world, positive slippage and negative slippage should be about equal over time. Using the plugin, if real slippage is in a trader's favor, some or all of it doesn't show in the platform and the broker keeps that money. Some of these plugins can force extra slippage against a trader on open and close, even when there's plenty of liquidity and the markets are calm. Some can delay an order open or close by a few seconds and will always execute the order in the trader's platform at the worst price during those few seconds. If the broker gets a real price on the order that's better, the broker pockets the difference. No matter how it's done, slippage in favor of a trader gets reduced or eliminated and slippage against a trader is charged or increased. This is Asymmetical Slippage.

    No forex brokerage will publicly admit to using software like this. Some may even claim that they've never heard of such a thing. To admit to using a virtual dealer plugin or anything similar would be an admission that the broker is stacking the deck against traders and that the broker is improperly taking money that belongs to a trader.

    The NFA cited IKONGM for using Asymmetrical Slippage Settings. IKON GM and it's Director, Diwakar Jagannath, were also cited for failing to supervise the firm's operations. IKON and Jagannath settled with the NFA Business Conduct Committee in a way that allowed them to neither admit nor deny the complaint. They agreed to the following:

    1. Within thirty days of the effective date of a Decision accepting their Offer, IKON shall refund to customers the amount of negative slippage they experienced on the trades that were placed in their accounts, which were attributable to the Virtual Dealer Plug-in that IKON used on its MetaTrader trading platform. IKON further agreed to provide verification to NFA that these refunds were paid and received by customers.

    2. Within thirty days of the effective date of a Decision accepting their Offer, IKON shall pay the amount of $320,000 to NFA as a monetary sanction.


    So, let me see if I'm reading #1 right. It seems to say that while not admitting that they used a Virtual Dealer Plugin to take money from traders., Ikon Global Markets has agreed to refund clients for negative slippage caused by the Virtual Dealer Plugin that IKON has installed on its MT4 backend.

    The original NFA Complaint confirms this usage of the Virtual Dealer Plugin. It says:

    In November 2007, IKON purchased an add-on to the MetaTrader platform called the "Virtual Dealer Plug-|n," which it began using in December 2007.

    That document confirms that IKON stopped using the Virtual Dealer Plugin in April 2010, immediately after NFA expressed its concerns about the propriety of the asymmetrical slippage settings.

    s I see it, this pretty much says, "IKON Global Markets used a virtual dealer plugin to cheat traders and now is going to pay back what they took."

    I'm very happy to see that the NFA is forcing not just a refund of money that was taken by this evident manipulation of slippage, but that they nailed IKON for $320,000 penalty. I hope that money comes out of the salaries of those behind this incident and isn't somehow passed on to traders.

    This isn't even IKON GM's first NFA penalty of the year. Last year, an account management company called CFS Capital Management was accused by the NFA of improperly moving money between different client accounts. You can read the FPA Scam Article on that company here as the NFA Decison regaring IKON's involvement here. It turns out that at least some of those managed accounts were at IKONGM, and the NFA hit them for a $20,000 penalty in March 2010.

    IKONGM and those who were behind this there should be ashamed. I would expect some no-name offshore bucketshop to pull a stunt like abusing trader with a virtual dealer plugin. I expect much better behavior from a name brand US based forex broker. Those new NFA and CFTC restrictions on traders are chasing enough clients offshore. Scandals like this will only further erode confidence in US brokers.

    My only hope is that IKON GM and its senior management will view this as a wake up call. They've tuned off the Virtual Dealer Plugin and will likely be under more intense NFA scrutiny for awhile. Whether they really can learn from these mistakes remains to be seen.


    NFA Case Summary for IKON's Assymetrical Slippage Settings

    NFA Complaint with dates of Virtual Dealer Plugin purchase and installation

    NFA Decision against IKON for Asymmetrical Slippage


    Good job, NFA!

    MORE INFO: Looks like I missed another big broker getting nailed. Gain Capital/Forex.com got nailed for using the Virtual Dealer Plugin and more. More details are given farther down in this thread.

    IKON and Forex.com are 2 of America's biggest brokers. How many more are using this cheating software?
     
    #1 Pharaoh, Oct 29, 2010
    Last edited: Oct 31, 2010
    ztraderzzr likes this.
  2. Nimzo

    Nimzo Recruit

    Joined:
    Feb 6, 2009
    Messages:
    2
    Likes Received:
    0
    Well done NFA, but what about us?

    Glad they got got, but concerned for the thousands of MT4 users out there. How do we keep safe - ditch our MT4 and go direct? And are we sure that brokers don't do this without MT4 as the front end?

    Just wanting to manage our risk
     
  3. PipStar

    PipStar Sergeant

    Joined:
    Oct 14, 2007
    Messages:
    223
    Likes Received:
    5
    Pharaoh,

    I don't think this has come to the attention of the FPA yet but Ikon GM are not the only ones caught using the Virtual Dealer Plugin against its clients.

    There is also a case against FOREX.COM/Gain Capital before the NFA for use of this plugin and it may warrant some research from you:

    http://www.nfa.futures.org/basicnet/CaseDocument.aspx?seqnum=2461

    I have just found out on the NFA site that it has been resolved with Forex.com/Gain fined USD 459k and agreeing to refund clients losses:

    http://www.nfa.futures.org/basicnet/CaseDocument.aspx?seqnum=2622


    I wrote this in another forum regarding the Forex.com case:
    I think that this may just be the tip of the iceberg (and it has been proven to be so far). I'm sure that now NFA has realised that brokers are using this virtual dealer plugin to rip off traders they will also audit the other brokers that have not been caught yet. It will be interesting to see who is next.

    From my understanding in reading the charges against Forex.Com/Gain, NFA is saying that it is an unfair practice so I can't see how it will be allowed to continue.
     
  4. RahmanSL

    RahmanSL Major

    Joined:
    Jan 16, 2010
    Messages:
    2,508
    Likes Received:
    195
    Sounds like IKON installed a "One-Arm_bandit" into their trading platform!
     
  5. Pharaoh

    Pharaoh Colonel

    Joined:
    Oct 3, 2007
    Messages:
    19,621
    Likes Received:
    2,181
    PipStar,

    Thanks for the info!

    Looks like that adds Gain/Forex.com to the brokers that should be hanging their heads in shame!

    Does anyone know any other brokers formally busted for this?
     
  6. Praetorians

    Praetorians Recruit

    Joined:
    Oct 29, 2010
    Messages:
    2
    Likes Received:
    0
    Looks like you have more things to do, i use Figfx.com, cos I'm interested with their bonus offer, I trade there for small lots first just to increase the money (0.01-0.10lot) and after i get the money to play a bigger lot like 0.50 or 1 lot i keep getting requote even the price isn't moving while i sent my order, and in same case i set my tp, the price passed my tp but my position not closed, the price bounced back again and my trades losing its profit... when i try to close it manually the requote keep coming, when i agree with the requote price the process will take about 10 seconds at least before it executed, most of the time there will be another requote...

    I dont know how to make some evidence on this case cos i already loss the profit i made cos the requote keep coming when i try to close my position. i trade using scalping method hunting less than 10 pips there cos they offer 1 pips spread, but when i set tp to 10pips the price passed the tp sometimes till 3-4pips but my position not closed.

    I dont know what to say know, i just want you to look for that broker cos i guess they use same thing with Ikon for cheating their client.

    Thanks.
     
  7. romeofx

    romeofx Recruit

    Joined:
    Apr 18, 2008
    Messages:
    1
    Likes Received:
    0
    liteforex should be checked

    I ve traded with lite forex (straighthold) over time.I ve found out they used it a lot.they need some checking too
     

    Attached Files:

    • 1.
      1.gif
      File size:
      25.4 KB
      Views:
      1,030
    • 2.
      2.gif
      File size:
      25.5 KB
      Views:
      998
    • 3.
      3.gif
      File size:
      24.8 KB
      Views:
      1,001
    • 4.
      4.gif
      File size:
      25.7 KB
      Views:
      998
    • 6.
      6.gif
      File size:
      25.8 KB
      Views:
      996
  8. PipStar

    PipStar Sergeant

    Joined:
    Oct 14, 2007
    Messages:
    223
    Likes Received:
    5
    The case against Forex.Com/Gain was even worse. On top of using the plugin they were also doing margin call of some clients accounts by reducing their leverage on friday nights.

    So if you were opening positions using margin 200-1 they would reduce margin to 50-1 for example on friday night to margin call those who were carrying big losing positions so the clients losses would be their gain.
     
  9. P.Mitchum

    P.Mitchum Recruit

    Joined:
    Nov 21, 2009
    Messages:
    9
    Likes Received:
    0
    I'm actually one of Ikons customers myself since 2008. Even though I haven't experienced any slippage issues. This incident has convinced me to remove my funds from them. I don't wanna sponsor a broker that cheats.

    I'm really glad the FPA exists to tell people about cases like this. Thank you!!
     
  10. MasterTech

    MasterTech Recruit

    Joined:
    Jan 22, 2009
    Messages:
    4
    Likes Received:
    0

Share This Page