The software we develop is to detect the presence and possible the setting being used by the plug-in, the reason is to find out if your trades performance is been affected by it, so you can take the appropriated action, you should file a complain with the appropriated authorities and closed you account with the offending broker. Because is a fact this is a real problem here are some of the finding of the NFA, I have added the case number in case you like to read the whole document in there web site.
NFA Case 10-BCC-029 - IKON
In November 2007, IKON purchased an add-on to the MetaTrader platform called the “Virtual Dealer Plug-|n,” which it began using in December 2007. The slippage settings that IKON established for the Virtual Dealer Plug-ln were asymmetrical for maximum losing slippage (slippage unfavorable to the customer and favorable to IKON) and maximum zprofitable slippage (slippage favorable to the customer and unfavorable to IKON), which caused disadvantageous trading conditions for customers and, in some instances, provided an automatic favorable advantage to IKON.
ln order to determine how the slippage settings affected customer orders, NFA analyzed all trades executed on MetaTrader platform on four “non-farm payroll” dates - December 4, 2009, January 4,2010, February 5,2010 and March 5, 2010. On those days, NFA’s analysis confirmed that IKON’s slippage parameters did not allow for any profitable slippage (slippage favorable to the customer)
NFA Case 10-BCC-015 - Gain Capital (FOREX.COM)
NFA’s 2009 audit of Gain found that the firm engaged in leverage and margin practices that were harmful to its customers. For example, Gain adopted a policy whereby, every Friday, it lowered the leverage for all of its accounts that were allowed to trade at 200:1 leverage - which included the micro accounts - to a 100:1 leverage. The effect of this weekly adjustment was to increase the margin requirement on these accounts from 0.5% to 1%. As a result of Gain’s practice of adjusting leverage/margin levels on Fridays, the
accounts of many of its customers became under margined - even though they were adequately margined prior to the leverage adjustment. In order to bring the under margined accounts back into compliance with the higher margin requirement, Gain would liquidate the largest losing position in these accounts.
However, sometimes the losing position that Gain liquidated contained multiple 416. contracts and the liquidation of only a portion of the losing position would have been sufficient to satisfy the new margin requirement. Nevertheless, Gain would arbitrarily liquidate the whole position which would not only result in the account being over margined but preclude the customer from possibly realizing a potential gain on that portion of the position the forced liquidation of which was unnecessary to satisfy the higher margin requirement.
Most of the positions that Gain liquidated on the aforementioned three dates - in anticipation of adverse market moves over the weekend - would have experienced minimal gains or losses if they had remained open over the weekend instead of being liquidated. However, because of the liquidations that occurred on these dates, affected customers realized overall losses totaling nearly $425,000.
- Gain used an add-on tool to the MetaTrader trading platform - called the Virtual Dealer Plug-ln - for both its retail and institutional servers. The Virtual Dealer Plug-ln allowed slippage tolerance to facilitate the execution of orders. 28. Gain established the following slippage parameters for the Virtual Dealer Plug-ln
used for its retail server:
Delay: 1 sec
Maximum Volume: 1 second
Maximum Losing Slippage: 50 contracts
Maximum Profit Slippage: 2 pips
Maximum Profit Slippage Volume: 5 contracts
Gain established the following slippage parameters for the Virtual Dealer Plug-ln
used for its institutional server:
Delay: 1 sec
Maximum Volume: 1 00 contracts
Maximum Losing Slippage: 20 pips
Maximum Profit Slippage: 3 pips
Maximum Profit Slippage Volume: 5 contracts
- The above delay setting allowed for a one-second delay before a customer’s order on the retail server was filled and the maximum volume setting blocked an30. order from being filled if it exceeded 50 standard contracts (five million in notional value). The maximum losing slippage setting represented the maximum
permissible slippage of the market price to the client’s detriment and the maximum profit slippage represented the maximum permissible slippage of the market price in the client’s favor. The setting for “maximum profit slippage volume” dictated that if the volume of a customer’s order exceeded five standard contracts and the market moved in favor of the customer after Dlacement but before execution of the order, then the customer’s order would be requoted. The Virtual Dealer Plug-ln did not have a maximum losing slippage volume setting and, therefore, if the market moved against a customer and in favor of Gain two pips or less (the maximum losing slippage setting), the customer’s order would be executed up to 50 contracts (the maximum volume setting). Gain’s slippage parameters dictated whether, and at what price, a customer’s
“market order” would be filled depending on the size of the market move that occurred after placement but before execution of the order. (“Market orders” on certain forex trading platforms, including the MetaTrader platform used by Gain, are not market orders in the traditional sense of that term but more akin to limit
orders and must be executed immediately or cancelled.) With Gain’s slippage parameters, if a customer placed an order at X price and before the order was filled the market price moved within two pips of X, then the customer’s market order would get filled at X, not the prevailing market price. On the other hand, if the market moved greater than two pips, then the customer’s orderwould be rejected.
NFA Case 11-BCC-016- FXCM
12.In the event that FXCM is able to offset a customer’s order at a better price than the “tagged price”, it was FCXM’s pratice not to give the better price to the customer but instead give the customer the “tagged price” and retain for itself the difference between the tagged price, which the customer received, and the better price that FXCM recieved in the offsetting trade.
13. On the other hand, if FXCM offset the customer’s order at a worse price ( negative, unfavorable to the customer), FXCM gave the customer the worse price rather that the better price that was tagged when the customer submitted his/her order.
15. From January to September 2010, FXCM derived approximately $520.000 from positive slippage, none of which it passed on to its customers.
18. During January trough September 2010, there were over 40,000 margin liquidation order that experience positive slippage, resulting in a gain of aproximately $130.000 to FXCM on these orders.