Thanks go to Pharaoh over at forexpeacearmy.com for the information that allowed me to write this post.
I think most of us will agree that the CFTC and the NFA can be pretty annoying. With the new regulations they have forced on the Forex market, leverage for Americans has dropped to 50:1 on the majors.
However the NFA also does some good. Have you ever heard of Virtual Dealer Plug-Ins? If you haven’t, a virtual deal plug-in is a little piece of software that allows brokers to manipulate price slippages. It makes the slippage almost always fall on the traders side as opposed to the brokers side. As you can imagine over the course of the year getting 2-3 pips slippage on every few trades adds up. Not only can the software manipulate real slippage, it can also create fake slippage in calm markets. In other words, they will delay the opening of a trade for a few seconds and give traders the worst price possible.
Now it is important to note that slippage in the Forex is completely natural. Just because you get some slippage it does not mean your broker is cheating you. However, there are some brokers who use slippage to their advantage with Virtual Dealer Plug-Ins. The good thing is that we traders have someone on our side. The NFA has recently busted two major brokers who have been using Virtual dealer plug-ins. The brokers are Ikon Royal and the Forex.com (Gain Capital).
Forex.com and Ikon are two of the biggest brokers in the Forex industry. You would probably expect something like this with brokers in small poorly regulated nations. However, you would not expect this from two of the biggest and most used brokers in the world. Nonetheless these brokers have cheated their customers and the NFA has caught them out! These brokers have both been fined and have agreed to refund their customers for all the false slippage. Below are excerpts from the NFA press releases detailing these incidents.
Press Release For Forex.com:
For Immediate Release
October 28, 2010NFA orders $459,000 monetary sanction against New Jersey forex firm Gain Capital Group LLC
October 28, Chicago – National Futures Association (NFA) has ordered Gain Capital Group LLC (Gain), a forex dealer member located in Bedminster, New Jersey, to pay a $459,000 fine as a result of an NFA Complaint issued and a settlement offer submitted by Gain and its chief executive officer, Glenn H. Stevens.
NFA’s Business Conduct Committee alleged that Gain engaged in abusive margin, liquidation and price slippage practices that benefited Gain to the detriment of its customers. The Committee also alleged that Gain failed to maintain records for certain unfilled orders, failed to adequately review the activities and promotional material of the firm’s unregistered solicitors, and failed to supervise the firm’s operations.
Press Release For Ikon:
For Immediate Release
October 28, 2010For more information contact:
Karen Wuertz (312) 781-1335, kwuertz@nfa.futures.org
Larry Dyekman (312) 781-1372, ldyekman@nfa.futures.orgNFA orders monetary sanction of $320,000 against New York forex firm IKON Global Markets
October 28, Chicago – National Futures Association (NFA) has ordered IKON Global Markets, Inc. (IKON), a forex dealer member to pay a fine of $320,000 as a result of an NFA Complaint issued and a settlement offer submitted by IKON and its principal, Diwakar Jagannath.
The Complaint alleged that IKON engaged in certain price slippage practices on the MetaTrader platform that were favorable to IKON and caused disadvantageous trading conditions for certain customers. The Complaint also charged that IKON failed to supervise the MetaTrader platform used for their forex business, and failed to supervise the firm’s operations.
In addition to the fine amount, IKON must provide appropriate refunds to its customers as a result of these asymmetrical slippage practices.
Below are links to the case summaries from the NFA website.
NFA – Case summary for Forex.com
NFA – Case summary for Ikon.
What do you think about all this? Have your say in comment below!
Justin
Thanks a lot for the valuable information.
pipranger
Interesting post Nick. Thanks for the info.
stephane
I have an account with forex.com. Anybody know How I may check whether they should refund me something ?
Fetor
Finally, one for the trader, the good guys. I’m sure the phones for Ikon Royal and Forex.com are being flooded with people wanting to close their accounts. I know I would be calling to get my money if GFT ever did something like this. I hope they go out of business as a result. It will be a warning to others who are thinking about doing this or doing it presently. There just something about walking by a person being crucified that makes you think twice.
Fetor
Stephane,
In Nick’s blog post there are phone numbers for more information under each press release. I’m sure that would be a good start to getting money that may be owed to you. After you do that I’d close my account and move on to another broker.
stephane
ok, thanks Fetor
andi
hi Nick
Just to say i am so glad to hear of this happening as it has been a long time coming!! On some of the other bb’s i seem to remember discussions concerning these plug ins and that varios brokers could be using them, and Gain was mentioned more than once concerning shady practises in other area too!
So one up to us retail traders out there!!
Good pips to all.
andi
Roberto
Great information !! ….. THANKS .
Jude
Wow! Maybe built a fire under some other brokers now who maintain ‘questionable’ practices.
AmirA
Gain Capital have always been the scummiest piece of crap broker around. Finally their crap has caught up to them good on the NFA and good on you Nick for spreading the word about these pricks.
Talos
very good info.
DaMagician
Muhahahahaha broker owned!
Me
Useless brokers anyway.
LadyPips
Great work.
Jit
I never hear about this one Nick. Thank much for posting.
MikeS
Yep Fetor I have a account with Ikon and I am closing it now.
Charlie Pip
Me too but I am with forex.com they are saying by to my $9,000 account.
DaDa
Looks as if these bucket shops will have a mass exodus.
Duncs
Unscrupulous vermin hope they disappear up there own rat hole, one up for the good guys !!
Indi
Good to see the big boys finally getting caught.
dave
Maybe we should ask brokers to state whether they are using VDPs and state this in their T&C and whether the NFA are aware of this practice and how is it being regulated.
Indi
I hope this scares other brokers straight.
IkonSucks
I have been with Ikon for three years. Shutting my account tonight when I get back from work.
UL
Wonder how many customers they will lose?
ColorPurple
@UL – If the comments to this post are anything to go by I would think a lot.
Johnny
Thanks Nick for the information.
I just wonder how many other brokers out there cheating us…
Jon
They lost me I am bailing with my account. Can you share some recommendations on a new broker Nick?
Rotodyne
Good post Nick. I had a micro account with CMS part of Gain Capital was getting bad fills and times when I could not close out a trade until a profit turned into a loss.
Last month my CMS acount was transfered to Forex.com I tried it then closed my account. Still have not my money back.
Tony
Harald
I once tried to open an account with Gain Capital which does business as forex.com. They made life so miserable just to OPEN an account that I requested our money be returned. It took almost six months to get the initial deposit back. I retained all the emails with those “crooks”. and my suggestion has always been that while there may be small issues with some brokers, that this firm is one to “run like hell from”!
bruce
I used to get all kinds of weird messages when trying to close out a profitable trade at forex.com like when the market was humming along with good volume and I try to close the trade on mt4 platform it would say trade context busy or prices no longer available at this price or itwould just freeze up or another currency pair would come up…like say I was trying to close eurusd and when I clicked on my order, the trade box would pop up and it would be for gbpchf or some other unrelated pair than the ONLY one I was trading! I knew the OBVIOUSLY didn’t want my to close and take a profit! Other times even though I had the lot size pre-set, it would change it 10 fold! If I didn’t notice, I found myself in a trade too big for my account! So yeah, it’s good they got caught but they probably scammed millions so a $500,000 fine really doesn’t scare them!
Jess
my broker is liteforex I think they doing the same
Tony
$400,000 is the average fine BIG DEAL these brokers make millions per day. It is like giving a heart doctor a $5 parking ticket.
Markie
Never would have suspected.
Alan
Is this only in metatrader?
PipMax
Alan I doubt it is only in MT4 I am sure all brokers with their own platforms have the ability to do this.
dallia
I have a real problem with these fines. They are a drop in the bucket for these firms. In the U.S. a swindle of this size would get an individual 20-30 years in prison with no chance of parole. Why the CEOs of these companies are not brought up on criminal charges is beyond me. What will cut this nonsense out will happen when FOREX is traded on a central exchange.
Bernie
I agree with other similar comments – the fines are too small for such large companies. They need to be large enough to hurt otherwise the companies may think that the risk of a fine is worth taking and they will just try some other tactic.
Max Spencer
The fines seem small.
Ark
I’ve heard Questrade whitelabels its forex services from Gain Capital. Can anyone confirm this, and if there will be any impact on Questradefx traders?
TTT
I agree these guys should be shut down.
Kyle
Scum!
profit
Not happy with the millions they steal from beginner traders they need to take more.
Twinkle
Who made the plugin? Is it the MT4 company that makes it and sells it to brokers?
Rick
Closing my gain capital account.
CaptinKirk
How do I find out when I get my money back? (forex.com)
zillotrader
CaptinKirk I called forex.com today and asked them. The customer service person pretended not to know what I was talking about.
dogpod
I have asked but no luck. Will call NFA and update.
Jim
Awesome!
Gain Capital (forex.com) totally screwed a managed account trader out of millions in 2006! They didn’t allow the trader to continue to trade without a stop loss as he was killing their dumb asses on the dealing desk. Even all of their sales literature at the time said they were straight to the market with pricing if you traded over $50M a month in leverage, he was at around $400M on an average month.
There was never any indication from them, zero letter, nothing, just a, hey you can’t get out of the trade and bang, perfect storm and margin.
He was already making deals with an ECN out of Europe at the time to move the millions from GAIN to them, however, it was too late. A lot of good people lost most of their risk capital – I hope this scandal shows how greedy they are and they lose everything from the bad press!
These guys have been taking advantage of traders forever, its about time…
O'Connor
Same here no response from Gain about the issue on the live chat.
l0zer
I wasted 3 years of my trading career with forex.com. Same story as most slipped many times and would not be enterd for up to 10 seconds. Stops always ended up working better for them too. Steer clear.
Chris
Another one bites the dust.
hickh
This is very good to see. I’ve read about the possibility of this going on but awesome to see that they’re caught! What is not good is like you said; “major” brokers trying to get away with it.
Thanks
Johnny
Like Alpari UK and probaly also Alpari US. Wouldn’t be surprised.
Wishfull thinking – I wish we could start up our own broker company
MEA
Can something like this only happen to MT4 or also
TradeStation,
Nijnja and or eSignal?
Yep I saw it, this is another reason that we don’t like MT4 is because you can play games like this and why we do not support this platform, Gain utilized this in 2009 and I think Ikon used it much more recent than Gain. That is MT4 for you. Russians!! lol
noob4ever
Saw the report on FPA regarding IKON, didn’t know about Gain. Good on you for spreading the word and also have to agree with Fetor that it would be good for those with accounts at either to get their fair compensation and then GET OUT in favour of going elsewhere.
andi
I see that forex.com have also taken over the retail side of CMS so yet another one to add to the “Avoid” list!!
tommo
nick, im currently using gft forex, same as you.. im from aus so my base currency is aud. when taking large gbp/jpy trades and collecting the profit there seems to be unrealized profit and loss for a couple of days. why would this be the case if i have closed out my position fully. if its just the swap it should just take a day, do you have this issue?
thanks
Jason
Hi All,
I was thinking of creating an account with Forex.com but I don’t think that is a good idea now.
Is are there any suggestions/recommendations for a Forex broker?
Thanks
bruce
Wow. I have LOST A LOT OF MONEY AT fxcm in the past due to my own bad trading decisions. Those days are behind me now and I stay on the positive side, but am reduced to trading a micro account. I opened up a $200 account Oct 22 and I am up 15% which is more realistic if you are a conservative trader imho.
I trade the fxcm tradestation II platform and guess what? It freezes up now that I’m doing so good! I have to shut it down and restart it, I even have deleted and reinstalled it. I also trade it on 2 computers (one at work and one at home) and it still acts up so it’s not on my end. I guess they have their own “in house” F#@K the customer out of his money software plug-in. And on a “micro” account no less! How low can the go these days?
BUT it is like the banks, banks here in USA had free checking, but now they have software that holds a big check back your small “around town purchase” debits and rearanges the order so you get “NAILED” with overdraft fees at around $28-$35 a pop! When you confront the branch manager they act like it is your fault for not writing down your expenses. A debit should clear instantly if not a few days but they hold them for a week or more then slam you!
Well the banks are also who we trade with in the FX market, do you think they might be “on the level” at all times or do you they are all scum? If you were good enough to keep winning, then the banks and brokers see you as an adversary! After all in the end, you are trading with their money and in their minds “taking their profits”. Hell the banks probably pay off the regulators to keep the fines low. So to sum it all up, if you trade the fx markets, you are at the poker table with a den of theives and good luck to you all!
People are asking for a good broker out their but there are none! They all have their little tricks to maximise their profits! I’m sure if the broker were a good one, the banks that trade with them would “drop” them or F#@K with them. If a broker is an not ECN, they are required to screw you. If they are a go-between (ECN) between you and their banks, the banks will screw you. And if anyone on the web says they have a great broker and always can take out their profits with no problems, 9 times out of 10 that is a “shill” review so you really are better off making your money “teaching” other traders how to trade! HA HA! My rose colored glasses are jade now!!!
Charley Warady
All I can say is…it’s about time. Forex has enough problems with reputation and for some of the biggest to be ripping off traders is inexcusable. Glad to see it’s been taken care of, though.
IkeJack
Im almost for certain that FXPro should be mentioned with the likes of these two brokers as well for the same crime. Back in 2009 I experienced issues of not being able to close out of trades and major slippage and late stops being executed. I would agree with everyone stating that the fine these 2 brokers received was a slap on the wrist, its scum like this that give forex business a bad name.
Michael
FOREX….THINGS YOU REALLY NEED TO KNOW
> The company practices are regulated, yet Forex trading is not….I repeat is not!
> All major players use their own Liquidity…most orders aren’t even placed with the bank…
> Those that claim to only make money on the spread, are manipulating the spread
> Real Market feeds, are anything but…
> Brokers Hedge against all client trades that dont “match off”
> Read all product disclaimers…anything and everything is possible
> There is no such thing as True ECN in Forex!
Questions to ask:
> Who are the providers of your liquidity?
> Are you a market maker, or an executor of orders?
> Receipts for transactions
> Detailed overview of their dealing desk, specs etc. (IT)
> ISO (Quality Assurance) documentation
So far I have asked this of several large award winning brokers, the answers may shock you…..