It’s been over two years since Polish regulators began investigating the matter of XTB’s ‘asymmetric Slippage .’ Many developments have been emerging with the latest coming from the so-called ‘Trading Jam Session Foundation,’ which staged a minor protest last week outside the listed FX broker’s offices in Warsaw.
Today, X-Trade Brokers (XTB) posted a two–pages long statement detailing the rebuttal of the TJS’ arguments. In the document, it also denies the core allegation that the company benefited from an Execution model that passes on execution losses in full to clients, while the broker books profits generated from favorable price movements.
XTB shot back at charges from Trading Jam, without explicitly stating their name, saying that “people involved in spreading such information are using a one-sided and distorted narrative by providing half-truths, and by provoking attacks not only against the Company, but also our long-term business partners and employees.”
“For this reason, XTB shall soon undertake all reasonable actions against people and entities responsible for those unacceptable practices,” XTB further warns.
According to the Polish Financial Supervision Authority (KNF), in a time period stretching from January 2014 to the end of May 2015, XTB applied a practice known as ‘asymmetric price slippage.’ In other words, XTB, as the counterparty to the transaction, executes client orders when the slippage was in its own favor, while customers were not receiving price improvement in the event that their orders were executed at a price better than anticipated.
Trading Jam not satisfied despite the heavy fine
XTB also challenged the initial ruling on the basis that the allegation of abusive price slippage took place more than one year after the KNF issued its guidelines on this issue, in May 2016. It also came almost a year after the company changed its execution system so that customers can benefit from a fairer pricing model.
“We wish to firmly and responsibly underline that the asymmetrical execution of orders did not cause damage to any clients, nor did it provide any profits for the Company, which has also been confirmed by numerous independent analyses,” it said in its latest filing
Despite the $2.5 million fine imposed by the Polish Financial Supervision Authority, Trading Jam has been demanding the regulators to disclose of a "secret report" about XTB and to take steps that assert claims filed by its clients. The foundation also demands the KNF to reveal how many people were affected and the actual extent of the damage. Trading Jam claims that, over time, the asymmetric slippage eroded the trading performance of the XTB’s traders.
Trading Jam goes a step further, accusing the Polish watchdog with limiting the clients’ ability to sue the broker by keeping its report secret when it should help them with the compensations they are entitled to.
KNF just got in the line
As the case evolves, the Polish financial markets regulator had to play its part. The KNF’s PR director, Jacek Barszczewski, today defended his agency’s practices with regard to XTB and Trading Jam’s claims.
Barszczewski stressed that the KNF, in principle, operates only on the basis and within the limits of legal provisions. Secondly, the regulator fulfilled its supervisory obligations once it identified, probed, and fined XTB. Other demands suggested by Trading Jam, however, are not permitted by law and fall outside the scope of the KNF's authority.
“Therefore, in its speeches, the Trading Jam foundation should not mislead those interested in the possibility of the Commission and the PFSA Office acting in their individual cases. This may endanger the legal interests of these persons by failing to resort to appropriate legal means,” Barszczewski said.
More specifically, the KNF official explains that making the details of their probe into XTB activities public should be only made by “the competent authorities of the state,” but without specifying those authorities.
He further states that current rules do not allow for full disclosure of the exact facts of particular activities of supervised entities, “due to the obligation of professional secrecy, and disclosure of information protected by law contrary to legal provisions may result in criminal liability.”
“Therefore, the claims of the Trading Jam foundation have no legal basis and may, in effect, create the erroneous impression that the Commission, not wanting to disclose the data desired by the foundation, including controls on other investment companies, acts against individual investors,” he added.
