Visit any Forex forum and you’ll see a thread or two about stop hunting (stop fishing) but little or nothing ever gets done about it. Why? First, most traders wouldn’t recognize a stop hunt if they saw one. More importantly, when individual traders do recognize they’ve been stopped out they do little or nothing to call the broker to account for its actions beyond making a demand for personal restitution. Should it be any wonder, then, that the practice of stop hunting continues unabated. As I pointed out in a recent post to the blog, while the National Futures Association (NFA), the self-regulating arm of the retail forex industry, talks a good game, it has never taken a broker to task for failing to meet the organization’s stated guidelines regarding unfair trade practices which include a specific reference to stop fishing. If nothing else, this is certainly an indication that the chartered self-regulatory agency doesn’t take its responsibilities seriously at least when it comes to protecting traders from unscrupulous dealers.
The question, of course, is what can be done. Well, it’s really quite simple. Traders need to know that there’s a way to call not only the broker to task, but to force the NFA to do its job and that’s by getting involved. I know making reference to the following quote is trite but it’s all too poignant: “For evil to prevail, all that need happen is for good people to do nothing.”
So exactly what can you do to put an end to the practice? If you’re a trader who thinks he’s been burned, do the following:
1. Take screen shots whenever you see a pricing anomaly.
2. Post an accounting of your experience to The NDD Forum, and ask for answers. If nothing else, this will put brokers on notice that they're being watched.
3. Drop an email off to the broker with a hyperlink to the forum thread you think ripped you off and ask for an explanation.
4. Forward your observations and complaints to both the CFTC and NFA and ask them to look into the incident. Going one step further, I don’t think it would be unreasonable to demand that a) the broker account for the pricing aberration, b) account for the number of traders affected, c) make restitution to all those affected, d) pay a fine, and e) acknowledge that they did, indeed, spike rates, and f) agree to not do it again. (Sounds a little like the kind of discipline one might exact on a three-year-old doesn’t it?)
If you weren’t personally affected by the broker’s actions, all you have to do is take a few seconds to bring the post to the attention of the CFTC and NFA. Drop them an email, complete their online complaint forms, and demand answers and regulatory action.
An idealist, I don’t realistically expect either the NFA or CFTC to levy all of the aforementioned requirements, but I should think that this course of action will force brokers and regulatory agencies to deal with this issue on a global basis which, I would hope, will put an end to stop fishing once and for all. Maybe all brokers don’t steal money from their clients in this manner but those who do need to be called on the proverbial carpet.
Now you might be asking yourself how this course of action differs from the action traders when they think they’ve gotten the shaft. It’s simple. If every member of The NDD Forum dropped the CFTC and NFA an “I am concerned” email or completed their online complaint forms, regulatory agencies would have a difficult time ignoring the issue.
One trader, incidentally, has already stepped up to the plate. It’s up to you to help him (and, thereby, help every yourself and every other trader). Let's put an end to this practice once and for all. If you want to see the trader's original post at the top of the thread, under "Display Modes" click on "Hybrid".
Recommended Additional Reading
Think You've Been Trading the Forex? Think Again
Advantages and Disadvantages of Non-Dealing Desk Trading
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