International CFD Scam Busted and Australia Changing the Rules

International CFD Scam Busted and Australia Changing the Rules

Some of the best stories on Finance Magnates over the past week included the expansion of services by companies such as OANDA, Tradency and FX Trade Financial. Unfortunately we also saw a number of international companies drawn into an American criminal investigation relating to insider trading using CFDs.

OANDA Doubles Leverage

On Monday, it was reported that OANDA decided to increase maximum leverage from 50:1 to 100:1. The firm historically discouraged higher leverage, stating: “Some companies may offer 100:1 leverage, or even 200:1, but OANDA believes these levels are far too risky and could cause clients to lose all their funds very quickly.”

The question that arose therefore, is why has OANDA decided to up the ante? In the notification it sent out to clients, it cited client feedback as the main driver but competition is a another reasonable explanation. In the lively debate that developed in the comments, traders expressed various doubts.

ASIC Pulls the Rug Under Acquiring Licenced Firms

On Tuesday, the Australian watchdog has suspended the financial services (AFS) licence of retail broker Australian Capital Markets Advisory Services Pty Ltd (ACMAS) following its sale to Formax International in June 2015.

It is a common practice in the industry to take over a company that holds a license in a specific jurisdiction that the acquiring company wants to expand to, as it saves the long legal process of obtaining a new license. This move by the watchdog calls into question the advantage of taking over an Australian firm if ASIC will not honor the license.

First Japanese Broker to Launch Hedge Fund Algos

Also on Tuesday, it was revealed that FX Trade Financial, the Japanese broker will begin to offer Tradency’s hedge fund trading algos as part of their overall solution of Mirror Trader strategies to retail customers.

For Tradency, the extension of services with FX Trade continues their involvement in the Japanese market. Within the country, their Mirror Trader platform has received a welcome audience from traders seeking a copy trading solution that also involves aspects of client involvement to handle risk management.

CFD Spoofers Fined

On Wednesday,  a UK court ruled that the Financial Conduct Authority (FCA) is entitled to permanent injunctions and penalties totalling £7,570,000 against three Hungarian traders and a Swiss investment firm for unfair trading practices.

The traders’s illegal technique consisted of entering CFD orders in relation to shares traded on the LSE in such a way as to create a false or misleading impression as to the supply and demand for those shares, enabling them to trade those shares at an artificial price.

Brokers Involved in Hacking?

On Thursday, a much bigger case of trading abuse via CFDs has been revealed. Two firms from the industry were among thirty people and entities that American authorities have accused of insider trading using information illegally obtained by Ukrainian hackers.

According to the charges, Maltese prime broker, EXANTE, holds proprietary trading accounts at Interactive Brokers and at Lek Securities, which were used in connection with the scheme to make trades resulting in approximately $24.5 million in ill-gotten gains.

One of Ukraine’s largest brokers, Concorde, was also implicated by the US SEC, alleging it holds proprietary trading accounts at Interactive Brokers which were used in connection with the fraudulent scheme, resulting in approximately $3.6 million in ill-gotten gains.

Both firms denied the allegations they had responsibility for the insider trading. While the SEC refers to both firms as hedge funds and says they hold “proprietary” accounts, implying that they trade on client funds, the companies say that it’s their clients trading as they are market access providers.