Hong Kong SFC Levies HK$4 Million Penalty on HK FXCM for Asymmetric Slippage on Clients' Forex Trades

The Hong Kong Securities and Futures Commission (SFC) has fined FXCM Asia Limited (HK FXCM) HK$4 million for asymmetric slippage of customers' FX orders between December 2006 and December 2010.

An investigation by the SFC found that HK FXCM netted US$1.4 million in profits over a four-year period from unfairly executing customers’ forex trades.
“During the Relevant Period, a total of US$1,452,926.69 Positive Slippage was retained by the FXCM Group including HK FXCM.“
According to the Statement of Disciplinary Action, HK FXCM operated a no dealing desk (NDD) model, however, when the firm executed FX trades on behalf of clients with external liquidity providers, “FXCM Group including HK FXCM kept the Positive Slippage which is the difference between the original requested price and the better price,” says the SFC.

But in the cases where orders had a worse price when executed with an external liquidity provider, HK FXCM passed the losses directly to their clients:
“The Negative Slippage which is the difference between the worse price and the original requested price was bore by the client.”
While the SFC acknowledged that HK FXCM co-operated with the investigation, the firm also admitted that asymmetric slippage was taking place and agreed to reimburse all affected clients.

The SFC press release states that 3,739 accounts were affected and that victims will be receiving a credit within 30 days.

This isn’t the first time FXCM has been hit with penalties relating to unfair order execution. In February of 2014, FXCM UK had to cough up US$16.9 million - $6.9 million in fines and $10 million in restitution to clients - when it was fined by the UK Financial Conduct Authority for the exact same asymmetric slippage practice.

And in August of 2011, the National Futures Association in the United States levied a $2 million penalty on FXCM for asymmetric slippage, among other violations.

HK FXCM was sold to Rakuten Securities Inc., a Japanese financial services company, in September of 2015 and HK FXCM was re-branded to Rakuten Securities Hong Kong Limited in April, 2016.