In my haste to open up a live Forex.com trading account for this blog, I forgot to check the NFA website beforehand. I was quite alarmed at what I found. (see HERE)
It appears that the NFA have charged Forex.com (Gain Capital Group LLC) with a number of serious offenses.
Below is a summary of the complaint from the NFA website:
On June 30, 2010, NFA issued a Complaint charging Gain with failing to uphold high standards of commercial honor and just and equitable principles of trade by engaging in deceptive margin and liquidation practices; engaging in manipulative acts or practices regarding prices received by customers on the MetaTrader trading platform; failing to supervise the trade integrity of the MetaTrader platform to ensure that all customer orders experienced slippage when prices moved in their favor just as often as when prices moved against them; failing to maintain records for all unfilled orders placed prior to May 2009 on the “Institutional Server” of the MetaTrader platform; failing to adequately review the activities of unregistered solicitors; and failing to respond promptly and fully to inquiries and requests made during NFA’s audit. The Complaint also charged Gain and Stevens with failing to supervise the firm’s operations.
Not good. Details of the NFA findings against Forex.com/Gain Capital Group can be found HERE.
For those who aren’t aware, the developer of the MT4 platform (Metaquotes) offer brokers an additional application called a “Virtual Dealer Plug-In”. It’s basically a software tool that allows the broker to skew trades to their advantage by using a configurable algorithm to manipulate customers trades e.g. preset slippage, delaying orders, limiting order size etc. The ethics and legality of this practice is debatable. This NFA ruling alleges Forex.com are actually using the Virtual Dealer Plug-In and even described the settings they were using!
Here’s an extract from the detailed NFA findings mentioning the Virtual Dealer Plug-In:
My concern is the “1 second delay” setting. This means that any Forex Megadroid trade order will be delayed for 1 second after it has been received at the Forex.com trade server. If the EUR/USD price moves while the order is being delayed, the trade will be rejected (“requote” or “invalid price”). So the Forex Megadroid trade count will be lower than it should be.
Will I continue trading Megadroid at Forex.com?
I think I will as an educational exercise. But I’ll only trade small lots and keep the account balance low. It will be interesting to see how these trade manipulations affect the Megadroid performance on this account over the next few months. I’ve only started trading Megadroid at Forex.com, and I’ve already noticed the trade count is low compared to the other brokers.