Brokers, news trading and the NFA

It seems that brokers are becoming increasingly aggressive about protecting against news traders. It used to be just spread widening. Now, consider this:

- I have 2 friends trading with a particular broker who had their profits taken away on news trades later in the day. The first reason they were given was that they didn't hold the trade long enough. So, the next time they traded, they held the trade for an hour. The trade was still taken away.

- I know of others with a broker that is now changing their policy. If you enter just prior to the spike, then they will go back later in the day and adjust your entry to the next available tick after the spike.

- A trader hear at ForexFactory was slipped 250 pips on the Currenex platform and their broker refused to check into it.

I'm doubtful that anyone's trading agreement allows for a broker to take back any of these trades or institute the policies they are doing now. My question is whether or not this is becoming a big enough problem, with enough people being affected, that the NFA would do something about it.

Anyone have any ideas or thoughts?

I'm still not sure I understand the problem. news trade or not, you still pay the spread, and then some during news time! the broker is still making their money. what difference does it make if the trade is 2 min or 2 days?

Hello Stockwet,
Those are truly criminal activities by the brokers. For the benefit of others on this forum, if you could tell us the broker(s) names it would help us to avoid those brokers. Thanks

Well, I'm looking for a broker to go live, 20 days past...
I'm researching in forum to find one that fits me.
Seem's like there is no broker to trust...
Some of them could be bad tradings and then blame the broker..
Or both...
I don't know, simple don't know...
How to find a reliable broker?
Well, this is a jungle of a capital society... All can win, but who its on top, are the ones who have more afraid, afraid of some to get their sits of, afraid of falling from the chair.

scams that don't make sense to me, spreads and comissions aren't enough??

Regarding points 1 and 2 above, I suspect this is happening with swiss brokers. Is it the broker Forex Swiss (forex.ch or GFX group)? I have heard plenty of unfair practices regarding swiss brokers and that's why I'll never open an account with a swiss broker. There are no rules over there and they do whatever they please and you have no way back.

I dont know of any U.S based brokers that cancel trades the way you describe in points 1 and 2. If there are, may be you should name them so that we all know.

No, they're US brokers. At least number 1 is. I'm not sure about number 2.

Care to spell some names?

Hi Stockwet. I think if your friends don't lie and what their brokers do (about taking away trades) is legal, I think you can tell us what these brokers are, so we can know what could happen if we open an account whit them.
Just my thought.

This nothing new and will always be the case when it comes to trying to catch the news spike.

Retail brokers w/ fixed spread are just not mechanically set up for this and have no way to offer a price cause for those few seconds there isn't one at a fixed spread. (There is not unlimited liquidity at ever price)

For this same reason of not having unlimited liquidity ECN go up that ladder filling prices as the liquidity is available. Even if its 250pip away depending on how you ask to be filled. (Market orders mean fill me at the next best price)

In the case above there was a market order placed for 2mil (20 lots) 12 of those lots i believe where filled at 1.5435 once there where no more offers it then moved up to fill the remaining at 8 lots and the next best price which happed to be 1.5661.

Some have brought up this didn't happen at EBS but then again it also take 1mil to trade on EBS.

So what are we really talking about? LIQUIDITY

One World Trading was the first one. I'll ask about the second.

Sorry, turbo, I just don't agree. The issue isn't liquidity. It's a tort question. There's nothing in our broker's agreement that permits a broker to revoke valid trades. The broker is expected, in good faith, to fill or match orders as stated per terms of the agreement. I realize that you have a rationalization as to why this happens. But, that isn't the primary directive of the thread. Having a reason that something happens is a far cry from whether or not it should happen and even further from whether or not it is legally permitted to happen.

I'm interested to know if others who have experienced this have contacted the NFA. I seriously wouldn't mind seeing a class action suit put together to answer the question once and for all. Incidentally, my friend contacted the NFA and they were very interested that this was happening. I'm not sure whether that means anything will happen, but, I thought it was interesting.

I think this is what your looking for

But I think what will happen is on retial platform no matter how small the news is they will just have a lock out time of 5 to 10min and the ECN will remain the same.

National Futures Association
Notice to Members I-07-19
April 16, 2007

Effective Date of New Interpretive Notice Governing Electronic Trading Systems Used for Forex Transactions

NFA has received notice that the Commodity Futures Trading Commission has approved a new Interpretive Notice to NFA Compliance Rule 2-36(e) entitled "Supervision of the Use of Electronic Trading Systems." The Interpretive Notice, which applies only to systems used for forex trading, was approved by the Commission on March 28 and will become effective July 1, 2007.

All of NFA's active Forex Dealer Members ("FDMs") use electronic trading platforms, but the reliability of those platforms and the records they generate vary widely. NFA's existing Interpretive Notice to Compliance Rule 2-9 entitled "Supervision of the Use of Automated Order-Routing Systems" ("the AORS Interpretation") provides guidance to NFA Members on how they can fulfill their supervisory responsibilities over the security, capacity, and credit and risk-management controls provided by electronic systems that route orders to an exchange, but it does not address retail forex systems.

The Board determined that similar guidance will help FDMs comply with their supervisory responsibilities under NFA Compliance Rule 2-36(e). Parts of the Notice also apply to Members who are subject to Compliance Rule 2-39.
The new Interpretive Notice is modeled after the AORS Interpretation, modified as necessary based on the differences between exchange-traded agency markets and off-exchange dealer markets. It also contains two additional sections relevant to forex systems.

The section on security tracks the AORS Interpretation. The general standard states that Members who handle forex orders must adopt and enforce written procedures to protect the reliability and confidentiality of customer orders and account information, and the procedures must assign responsibility for overseeing the process to one or more individuals who understand how it works and who are capable of evaluating whether the process complies with the firm's procedures. This section goes on to discuss user authentication, encryption, firewalls, user authorization, periodic testing, and administration.

As in the AORS Interpretation, the section on capacity sets a general standard that requires Members who handle forex orders to adopt and enforce written procedures to maintain adequate personnel and facilities for the timely and efficient delivery of customer orders and reporting of executions. The general standard also requires Members who operate trading platforms to adopt and enforce written procedures to maintain adequate personnel and facilities for the timely and efficient execution of customer orders. In addition, the procedures must be designed to handle customer complaints about order delivery, execution, and reporting and to handle those complaints in a timely manner.

The third section also comes from the AORS Interpretation and requires Members who handle forex orders to adopt and enforce written procedures reasonably designed to prevent customers from entering into trades that create undue financial risks for the Member or the Member's other customers. Although this general standard is the same as in the AORS Interpretation, the discussion of account controls is not. Many FDM trading platforms automatically liquidate positions before an account goes into a deficit, and some FDMs use this as a selling point for their platforms. Therefore, the Interpretive Notice requires firms that use this function to set the automatic liquidation levels high enough so that positions will be closed out at prices that will prevent the account from going into a deficit position under all but the most extraordinary market conditions.

The added section on recordkeeping spells out the information the system must record and maintain. As a general standard, it states that Members who handle forex orders must adopt and enforce written procedures reasonably designed to record and maintain essential information regarding customer orders and account activity. It then addresses the specific information that the electronic system should record and maintain in three categories:

1. Transaction records for orders (which must include the types of information contained on orders for exchange-traded commodities) and rollovers;

1. Account records showing the financial status of each account; and

1. Time and price records similar to those maintained by the futures exchanges.

The section on trade integrity sets a general standard requiring FDMs to adopt and enforce written procedures reasonably designed to ensure the integrity of trades placed on their trading platforms. It then discusses three specific areas of concern: pricing, slippage, and rollovers.

1. Pricing. Trading platforms must be designed to provide bids and offers that are reasonably related to current market prices and conditions.

1. Slippage. Electronic trading platforms should be designed to ensure that any slippage is based on real market conditions. Furthermore, if an FDM advertises "no slippage," the platform should be designed to execute a market order at the price displayed when the order is entered and to execute a stop order at the stop price.1

1. Rollovers. The platform should be designed to ensure that automatic rollovers comply with the terms disclosed in the customer agreement.

Finally, the Interpretive Notice requires a principal of the Member to certify that the firm has met the relevant standards in the Notice. This principal must be a registered AP.


NFA's November 21, 2006 submission letter to the CFTC includes a copy of the Notice. ALL FOREX DEALER MEMBERS AND ALL MEMBERS SUBJECT TO COMPLIANCE RULE 2-39 SHOULD READ THE ENTIRE NOTICE. You can access an electronic copy of the submission letter at National Futures Association | News Center.

Questions concerning these requirements should be directed to Sharon Pendleton, Director, Compliance, at [color=#0000ff][email protected][/color] or (312) 658-6540, or to John Brodersen, Associate Director, Compliance, at [color=#0000ff][email protected][/color] or (312) 781-2226.
1 FDMs may not advertise "no slippage" unless they also meet the requirements described in the Interpretive Notice on Forex Transactions (NFA Manual, Para. 9053).

Thanks Stockwet for your answer.

here i go again in another rant for interbankfx
they widened their spreads to 30+ pips or more the other day
i traded gbp/usd and entered quietly
they immediately requoted me
and the entry point i placed was replaced with another price, 40 pips more, so i had -20 pips after i clicked ok