Shares of Warsaw based X Trade Brokers Dom Maklerski SA (WSE:XTB), which operates Retail Forex broker XTB.com as well as the X Open Hub trading platform, tumbled Monday by more than a third before being halted outright, after word broke in the Polish press that a lengthy regulator investigation had uncovered years of fraudulent treatment of customers in the form of asymmetric slippage practices.
Asymmetric slippage is the practice of treating market movements after orders are placed, but before they are executed, differently. What XTB is suspected of is executing client orders when the slippage was in its own favor, but cancelling (or repricing) client orders when the slippage was in the client’s favor.
According to Polish news sources, the fraud perpetrated by XTB was found to be between PLN 8 million and PLN 23.5 million (between USD $2-6 million). Apparently an outside expert brought in by the regulator pegged the fraud, or “unused opportunity” of clients, at more than three times that amount.
XTB shares fell by 38%, to PLN 3.27, before being halted for the day.
The news comes at a very bad time for XTB, which was just starting to recover from a fairly poor set of results reported after the company went public last year, and then underwent a change in management.
XTB went public on the Warsaw exchange last May at a valuation of about $350 million. However the company’s shares have drifted downward from their PLN 11.50 IPO price. Today’s activity clearly didn’t help.
We expect XTB to formally respond to the allegations in the coming days.