Gaitame gets suspended for a month over forex rate spikes (updated)

The Financial Services Agency has issued to Gaitame.com Co. a one-month business suspension order starting Oct. 1 for repeatedly providing erroneous exchange rates.

This is going to be a huge financial loss for Gaitame, arguably the largest forex broker in the world, as being out of business for a month will immediately cause it to lose a month's volume - that's a few millions dollars right there, not to mention all the accounts that will surely be moved to other brokers during this suspension period and the immense damage to its reputation. Unless this is what the FSA wanted, it's better that they just place huge fines instead, otherwise they might kill the local industry.

It's not clear for now what exactly happened, however it seems that there was a spike in forex rates, much beyond actual levels, which obviously stopped out many traders. If this is the case then this is potentially very bad news for Integral who has become Gaitame's Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term aggregation provider only 3 months ago. The Liquidity Aggregation Liquidity Aggregation Aggregation or liquidity aggregation can be characterized as the process of gathering buy and sell orders from different sources and directing them to a given executing party. This is most commonly done from multiple sources to minimize the risks from using a single liquidity provider. By aggregating liquidity from multiple sources, the broker is able to increase the depth of market it offers to its clients and therefore deliver better fills on the order flow when compared to when it uses a sing Aggregation or liquidity aggregation can be characterized as the process of gathering buy and sell orders from different sources and directing them to a given executing party. This is most commonly done from multiple sources to minimize the risks from using a single liquidity provider. By aggregating liquidity from multiple sources, the broker is able to increase the depth of market it offers to its clients and therefore deliver better fills on the order flow when compared to when it uses a sing Read this Term should have smoothed out or even completely eliminated the spikes, however it hasn't - it would be interesting to know whether the settings (assuming there are such settings) were recalibrated by Gaitame itself which eventually led to these uncontrolled spikes.

As a side, the report also mentions that Gaitame has 500,000 accounts and about $1.65 billion in client assets. Which is now certainly making it the biggest forex broker in the world.

"This marks the first time that a broker of foreign exchange margin trades is being hit with a business suspension order because of system glitches. In July and September, system errors at Gaitame.com led the firm to supply customers with yen-euro and yen-dollar rates that deviated sharply from actual market levels.

The FSA issued a business improvement order to Gaitame.com on Sept. 10. But the system malfunctioned again this past Wednesday, resulting in the shutdown of a server handling customer transactions. Many customers were impacted by the latest glitch, which led to the forced execution of trades to square positions.

All transactions, except those entailing position closures by customers, will be subject to the suspension. The FSA has established a two-week window before then to enable customers to move transactions to other companies.

During the business suspension, Gaitame.com will have to investigate the repeated errors and set up a system oversight structure. Accounts at Gaitame.com totaled 500,000 as of June 30, while total assets under its custody reached nearly 100 billion yen as of July's end, according to the brokerage."

Update:

Integral's official response: "Actions taken by the Financial Services Agency (FSA) related to the performance of Gaitame’s systems are unrelated to Integral’s technology. Integral has been supplying feeds to 100s of institutions around the world during this time frame with no issues. Our customers can be assured that they have been receiving and will continue to receive excellent liquidity and prices."

If that's the case I guess it only leaves one possible culprit - Gaitame itself.