Any trader wants to cooperate with a 100% reliable broker. Slippage, quotation delays, software breakdowns, unstable connection, non-payments of profit… this is not the full list of pitfalls awaiting both beginning and professional Forex traders.
Obviously, not all Forex brokers are scammers. There are reliable and trusted brokers regulated by major financial watchdogs (NFA, CFTC, FSA etc). When a regulated broker violates the regulation, it may be fined heavily for minor faults.
NFA Fines Alpari
The National Futures Association (NFA), a major US financial watchdog, has recently raided Alpari US’s office. As a result, the broker was fined $200 000.
The broker is said to have canceled winning trades opened by 5 clients after considering them (the trades) illicit due to non-market quotation.
Therefore, Alpari US is now obliged to pay $9000 to each trader whose winning trades were canceled, apart from the $200 000 fine. The raid was initiated after a client of Alpari’s complained about the incident.
More specifically, Alpari US reported that a certain system malfunction had allowed 5 clients to place new option orders (26 000 contracts) 24 hours before the expiration date - October 20, 2011. Alpari US executed them as the counterparty. However, for some reason, the broker didn’t report to NFA about the malfunction.
As a result, 5 clients earned over $230 000. $220 000 was earned by one of them. Later he filed an arbitration claim with NFA alleging that Alpari US had cancelled his winning trades because the broker claimed that his options trades were based on “wrong price quotes” (or non-market quotes) resulting from certain technical issues with the trading platform.
Consequences
According to Eugene Olkhovsky, ’s leading expert in financial market, the incident with Alpari shows the difference between major regulated brokers and simple unregulated brokers and dealing centers (some of them are scammers).
When you are a client of a regulated broker, you can always file a complaint to let the watchdog investigate into the matter to find out who is right. The broker knows “who is the boss” and therefore strives to avoid such issues (as they may undermine its image). A regulated broker won’t play any dirty tricks on its clients intentionally because the managers know that the company can be fined heavily.
That is why a license issued by a major financial regulator is one of the key factors ’s rating of Forex brokers is based on. Every single broker regulated by a major watchdog (NFA, CFTC or FSA) is credited with 70 rating points. These are Alpari, FOREX.com, HY Capital Markets, Forex club, FXDD, BMFN, FIBO Group, Saxo Bank, FXCM, OANDA, GFT and some others. All of them belong to the premier league of ’s rating of Forex brokers (350 rating points or more).
We recommend choosing regulated brokers as watchdogs (like those mentioned above) strive to be unbiased. In particular, according to the NFA, Alpari was fined not for canceling trades but for those hardware and software imperfections that later resulted in a lawsuit.
Obviously, this incident will be a valuable lesson for other Forex brokers and their clients. It shows how high the NFA’s standards are and how reliable its licensees should be. This is obviously a good sign for the entire Forex industry and its participants.
