Polish regulator fines XTB $2.7M

Polish regulator fines XTB $2.7M for alleged “irregularities in the execution of client orders.” XTB has announced that it plans to appeal against a fine from the Polish regulator. The company has stated that it fully disagrees with the legal argument of the regulator. 

19 September, AtoZ Markets – One of the Polish Forex and CFDs brokers, XTB, received a fine from the Polish Financial Supervision Authority (KNF). The regulator reportedly moved to punish X-Trade Brokers with a PLN 9.9 million ($2.7 million) fine for “irregularities in the execution of client orders.”

Polish regulator fines XTB $2.7M

The regulatory body claims that XTB used a practice known as “asymmetric price slippage” in the time period between January 2014 and May 2015. This practice allows passing on execution losses in full to clients. On the other hand, the brokerage booked profits that were generated from favorable price movements. Speaking differently, the regulator stated that XTB executed client orders when the slippage was in its own favor. At the same time, customers were not receiving any price improvement in case their orders were executed at a better price. 

KNF has stated in its announcement:

“The company applied an asymmetrical setting of the “deviation” parameter in the execution of client orders in the instant model (where it was guaranteed that the order will be executed at the price included in the order). This resulted in the fact that the broker carried out client orders (in the case of a change in the price of a given financial instrument) in a way that was favorable to each other (as the other party to the transaction), and rejected the customer order parameter in the event of a price change in a customer-friendly manner.”

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XTB’s response

As a response to the fine, XTB has announced that it plans to appeal against a $2.7 million fine from the Polish regulator. The company has stated that it fully disagrees with the legal argument of the regulator. 

In addition, the brokerage claimed that its “asymmetric deviation mechanism” is not breaching any rules to provide the best possible deal to its customers. According to the company, this practice has never affected their clients’ transaction details. 

AtoZ Markets reached out to XTB for additional insights into the case. The representative of the company has shared the following information:

“With reference to the announcement from the 404th meeting of the Polish Financial Supervision Authority (KNF) on 18 September 2018, the Management Board of XTB fully maintains its previous position and finds no grounds for objections regarding the company's operations.

During the proceedings before the KNF, the Management Board provided the supervisor with extensive explanations as well as legal and quantitative expert opinions of independent entities that confirm that XTB's use of the asymmetric deviation mechanism did not violate the principle of acting in the best interests of the clients and did not affect the clients' transaction results. KNF's comments on the application of this mechanism pertain to operations from January 2014 to May 2015. The guideline regarding the need for symmetrical deviation was issued by the KNF in May 2016, almost a year after the company made voluntary amendments in its IT systems.

Acting in the interest of the company and its shareholders, as well as being guided by the wellbeing of its clients, the company intends to appeal against the decision of the supervisor.”

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