ASIC highlights MT4 Virtual Dealer risks in canceling Australia licence of retail forex broker Enfinium
By LeapRate Staff on Monday, 02.16.15
Enfinium license cancelled
Australia financial regulator ASIC has continued its tough recent stance on the retail forex sector, with the cancellation of the Australian Financial Services (AFS) license of retail forex broker Enfinium Pty Ltd following a detailed investigation.
ASIC’s main concern surrounded Enfinium’s use of the Virtual Dealer plugin for MT4. Virtual Dealer gives a broker the ability to add a trade execution delay of between 1 to 10 seconds to a client’s trade. An execution delay added by the Virtual Dealer could disadvantage clients to the benefit of the broker, if markets moved against the client during any delay.
ASIC’s investigation found that during the 2010-2013 period Enfinium’s Virtual Dealer settings had been changed on 271 occasions, but Enfinium kept no records of those changes. Due to a lack of adequate record keeping ASIC was unable to determine whether a trade execution delays were actually used or not.
Enfinium actually had already entered administration in October 2014, and was wound up by creditors on November 6, 2014.
Monday 16 February 2015
15-026MR ASIC cancels licence of margin foreign exchange provider
ASIC's continued focus on margin foreign exchange businesses operating in Australia has led to the cancellation of the Australian financial services (AFS) licence of Enfinium Pty Ltd ACN 129 298 442 (in liquidation) (Enfinium). The action follows an ASIC investigation into Enfinium.
ASIC was concerned Enfinium failed to have adequate risk management systems, in particular, controls on its Meta Trader 4 (MT4) trading platform and a plug in device known as the 'Virtual Dealer.'
A function of the Virtual Dealer is ability to add a trade execution delay of between 1 to 10 seconds. An execution delay added by the Virtual Dealer could disadvantage clients to the benefit of the broker, if markets moved against the client during any period of delay.
ASIC's investigation found that during 2010-2013 (Relevant Period), the Virtual Dealer had been changed on 271 occasions; however Enfinium kept no records of those changes.
Certain Enfinium employees had 'Manager' access with special rights for administering MT4 including editing and deleting clients' open positions which, according to the MT4 Administrator User Guide was potentially dangerous.
ASIC was concerned Enfinium's risk management system was inadequate because:
Enfinium did not maintain records which recorded the configuration of the Virtual Dealer
Enfinium did not monitor the use of the Virtual Dealer, or persons who had access to the Virtual Dealer
there was no training for persons who had the ability to modify the Virtual Dealer
employees of Enfinium had access to enter, modify, close and delete orders on MT4 without secondary authorisation
there was no monitoring of trades placed through 'Manager', and
the Virtual Dealer and 'Manager' access were not identified as risks in Enfinium's risk register.
The Enfinium AFS licence was cancelled due to Enfinium ceasing to carry on a financial services business, after it appointed administrators on 1 October 2014, and was wound up by creditors on 6 November 2014.
Due to a lack of adequate records concerning the changes to the Virtual Dealer, ASIC was unable to identify whether a trade execution delay had a negative impact on any client.
ASIC Commissioner Greg Tanzer said: 'Margin foreign exchange businesses that utilise the Meta Trader trading platform and use the Virtual Dealer plug in, need to ensure they have robust risk management systems. These systems must ensure the client is not disadvantaged to the benefit of the broker. Any tool that has the potential to advantage a broker needs to be carefully managed.'