NFA using clear bully tactics against FXDD.
The NFA has announced what it is calling "emergency enforcement action" against FXDD, forcing the retail Forex dealer (and U.S.-regulated NFA member) to place $3.3 million in escrow pending the outcome of NFA charges surrounding (mainly) price slippage.
Some background -- beginning last year, the NFA went after several leading U.S. retail FX firms, with claims that they had all engaged in asymmetrical price slippage practices, mainly on MT4-managed trading systems. The claims boiled down to charges that the firms programmed MT4 to change the quotes to clients if the market moved since the last quote was given but before a trade was made -- but only if the change in the market was going to harm the firm.
Several firms, such as FXCM and Gain Capital, decided to settle with the NFA, paying substantial fines, but without formally admitting guilt. FXDD, however, deemed it was indeed innocent and that is was not going to settle, and thus decided to fight the NFA. A courageous decision, but one that may cost FXDD dearly as the NFA is flexing its muscles by (attempting to) force FXDD to pony up $3.3 million -- just in case it is eventually found guilty and eventually forced to make restitution to clients. Seems like unfair tactics, but clearly NFA leadership is under a lot of pressure to show "wins", and is intent of making an example of a firm which decides not to settle quickly and quietly with it.
For the full NFA press release click here.
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