Understanding slippage and the consequences of unfair execution – Guest editorial

Jon Grah

“Perhaps for some brokers, STP has another meaning: Straight To Pocket.” – Jon Grah, CEO, AwarenessForex

Brokers can unfairly insert execution delays on several order requests, creating massive slippage.

Clients (mainly traders and asset managers of derivatives brokerages) invest significant time to develop and deploy strategies that will hopefully generate profit. A derivatives broker is expected to execute client trades in the best interest of their clients, which includes not trading against their clients.

Not only is this professional behavior, but it is also a legal requirement of MiFID 1/2 and equivalent laws that outline how brokers should handle their fiduciary responsibility to their clients.

A client expects that their chosen forex Straight Through Processing broker will act in the best interest of their clients first when handling their orders. This would include executing a client’s order as fast as possible without trading against their client. This includes:

1.Frontrunning their order

2.Giving asymmetric slippage

3.Providing false or misleading prices

4.Not safeguarding client funds (mainly via segregation)

5.Causing asymmetric or artificial order delays between different clients or different accounts without a specific reason (technically bait and switch, but also related to asymmetric slippage).

Lets watch and see what happens when an offending broker intentionally delays orders:

When a broker trades against their client’s instructions, it does more than cause a client to potentially generate [greater than usual] losses. The losses can then have a domino effect in causing either clients and/or other stakeholders (hedge fund, private equity, pension funds, allocators, etc) to lose confidence in the trader/asset manager. The trader could be blamed or the track record that took months or years to build is irrevocably tarnished.

Perhaps for some brokers, STP has another meaning: Straight To Pocket. AwarenessForex research team keeps a private list of who’s who for brokers, taking into account the likelihood that a broker will abuse their position. And it goes well beyond a simple regulation check.

How fast should orders be executed? Do you think a 3 minute delay to execute an order is too long? Have you experienced broker order delays or other forms of negative order manipulation?

Jon Grah is  the CEO of AwarenessForex, and is a highly experienced developer of fully automated trading signals which are designed for managed accounts, hedge funds and proprietary trading firms. He has extensive experience over several years in developing automated strategies and working with brokers and high net worth individuals globally, and has been an active research and development professional in several MT4/MT5 price action move indicator projects.

Read this next

Retail FX

ThinkMarkets expands CFDs lineup to over 4000 ETFs and shares

ThinkMarkets has expanded its service offering by incorporating 2500 new CFDs on shares and ETFs on its ThinkTrader platform.

Retail FX

France regulator warns investors of Omega Pro, Businessempire.fr

France’s financial markets regulator alerted investors that scams related to Omega Pro Ltd are beginning to circulate, with the blacklisted firm capitalizing on the situation to run a range of “unrealistic” offers.

Digital Assets

Web3 platform Grand Time paid $2 million in token earnings to date

Community-driven Web3 platform Grand Time said its offering – which includes a multifaceted platforms and its native token – has been gaining significant traction highlighted by impressive operational metrics.

Institutional FX

FX volumes at MOEX halved in April as ruble gains gorund

Currency trading at Moscow Exchange (MOEX) halted its upward route in April as monthly volumes nearly halved from a month earlier.

Digital Assets

FTX US adds stock trading, fractional shares to crypto platform

FTX US, the American subsidiary of crypto exchange FTX has kicked off stock trading feature to its customers in an effort to compete with popular platforms such as Robinhood and eToro.

Industry News

UK FCA empowered to remove brokers’ permissions in 28 days

Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed.

Industry News

CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange

The CFTC alleged that defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.


Saxo Bank deploys Adenza to address Basel and EBA requirements

The integration of ControllerView will enhance Basel-driven capital calculations and reporting at Saxo Bank in support of the bank’s multijurisdictional capital and liquidity reporting requirements throughout Denmark, Switzerland and UK, with plans to expand into the Netherlands.

Executive Moves

ComplySci appoints CTO, CPO, and CLO to further regtech’s product expansion

ComplySci offers compliance software used by more than 1400 global institutions to identify risk and address regulatory compliance challenges.