“According to the CFTC Order, FXDD used asymmetrical slippage parameters on its principal trading platform, meaning that the system favored FXDD over its customers in slippage situations. Based on these parameters, FXDD rejected a customer’s order when the price slipped more than 2 pips in the customer’s favor (and instead re-quoted the customer the new, less favorable price), but filled a customer’s order at the original price if the price slipped in FXDD’s favor by more than 2 pips. As a result, FXDD benefited from slippage of more than 2 pips in its favor between order placement and order execution, but did not allow its customers to benefit from similar price changes in their favor.”
Never used FXDD, but I figured something like this was going on with a broker somewhere.
Slippage can be both a blessing and a curse for both broker/trader. I think if the market moves to a price different than when s/he clicked buy/sell, then it should just be a “no trade.”
The CFTC has fined FXDD again, this time for being under-capitalized during 18 separate monthly reporting periods between November 2010 and December 2012.
This time the penalty is only $275,000 — just one-tenth of the penalty levied against this broker earlier this month for “slippage” irregularities. Evidently, the relatively light fine takes account of the fact that there was an honest misunderstanding of the capitalization requirement on the part of FXDD, and also takes account of FXDD’s cooperation in correcting the deficiencies.