The U.S. Commodity Futures Trading Commission (CFTC) issued a $1.1 million fine and a $1.8 million restitution order against FXDD, a New York-based FX company. FXDirectDealer, LLC is registered with CFTC as a Futures Commission Merchant.
The charges state that from Dec. 10, 2009, until June 2011, FXDD violated its supervisory obligations by employing a trading system that gave FXDD pricing advantages over thousands of its retail customers. The CFTC requires FXDD to make full restitution of $1,828,261 to FXDD's current and former customers that were harmed by its violation and imposed a $914,131 civil monetary penalty against FXDD.
According to the CFTC, FXDD solicited customers to open trading accounts and to buy or sell foreign currency with FXDD taking the other side of the transaction.
FXDD was streaming Forex price quotes for particular currency pairs to its customers through its electronic trading platforms. These prices, measured in pips, often change or "?slip" between the time the customer clicks on a price shown online and the time FXDD fills the customer's order. FXDD's system employed slippage parameters that determined whether FXDD filled or rejected a customer order at the original price clicked by the customer. This ‘slippage' favored FXDD over its customers.
More Charges
The CFTC further found that had FXDD employed an adequate supervisory system and diligently supervised its personnel, FXDD would have discovered these problems with the integrity of trades on the platform and would have had the opportunity to correct them before more than 24,900 customer accounts were deprived of $1,828,261.
FXDD has also been charged for failing to implement an adequate anti-money laundering (AML) program, and neglecting to develop and implement adequate screening procedures for determining whether persons and entities with which FXDD did business were required to be registered with the Commodity Futures Trading Commission (CFTC) and Members or Associates of NFA.
The June 29th complaint went on to charge FXDD with making improper price adjustments in clients' accounts, willfully reporting misleading information to NFA, converting customer funds and failing to treat all customers equally when giving price adjustments.
In a separate charge, FXDD has been fined a penalty of $914,131 to be paid to the National Futures Association (NFA) to settle the NFA's charges arising from the company's various acts of misconduct. The CFTC order also requires FXDD to cooperate with the NFA in connection with the NFA's review of FXDD's compliance with its restitution obligation.
The charges against FXDD follow at the heels of the announcement that FXCM will be taking over the clientele of another FX company, Alpari US. With FXDD facing its legal woes in the US, it didn't stand a chance as to assume the takeover of Alpari's traders.