In their 2013 third quarter report, FXCM announced a loss due to the fact the firm had put aside a total of $15 million dollars in relation in an ongoing FCA investigation regarding asymmetric slippage. Today, it was announced that FXCM had reached an agreement which sees the brokerage paying out a total of 16.9 million dollars.
Asymmetric slippage occurs when a brokerage only passes on negative slippage, not passing any price improvements to their clients. This can see clients losing out quite significantly and is something that a number of brokerages have… The investigation into FXCM related to the firms treatment of client orders prior to August 2010, before the brokerage made changes to its trading conditions which ensured that clients were on the receiving end of any price improvements.
The settlement sees FXCM pay restitution totalling $10 million US dollars to traders who lost out due to the firms trading conditions at the time, with the brokerage being required to pay a further $6.9 million dollars in fines to the FCA. According to the brokerage clients who are eligible for restitution will be notified with the next 60 days. They did go onto to add that the average FXCM customer was only due around a total of $3.70 in restitution, however those who have subsequently closed their accounts with the brokerage will be required to sign a new trading agreement with the firm in order to get access to their restitution.
In a clever PR move, FXCM released figures from an internal review of execution with the brokerage. The review looked at trades executed between August 2013 and January 2014, with the brokerage finding that clients had benefited from price improvement on about 15% of all executed orders.
FXCM is the first Forex brokerage to be taken to task by the FCA in regards to asymmetric slippage, but according to some industry experts we should expect the British financial regulator to look into a number of other firms. It is understood that the FCA is currently undertaking a thematic review of brokerage executions, with some expecting that other firms may end up having to pay fines for similar breaches of regulation.