New NFA rules about Price Slippage and Requoting
Starting from March 26, 2012 the new NFA rules about Price Slippage and Requotes come into effect.
The rules are aimed to set a level playing field for brokers and traders, so that when slippages or requotes occur, they will no longer be "one-sided, mainly favoring brokers" (e.g. executed at the best price when the slippage (requote) favors brokers, and at the worst price when it favors traders). Instead brokers will be required to set up their trading systems in such way that they offer equal opportunities for both sides in the market.
Straightening up this order handling process will provide additional clarity & honesty into the Broker-Client relationship.
The Official Document
More information on the new Interpretive Notice can be found in NFA's September 2, 2011 Submission Letter to the CFTC. Questions concerning the Interpretive Notice should be directed to Lauren Brinati, Director, Compliance at firstname.lastname@example.org or Carol Wooding, Associate General Counsel, at email@example.com.
Details: How Slippage & Re-quotes Work
• The FDM (Forex Dealer Member - a broker) set the maximum losing slippage
• The FDM set the limit on the number of contracts in an order that could be
• The FDM only passed negative slippage on to the customer. If the FDM was
In each of the above instances, the FDM’s asymmetrical slippage settings allowed it to
For NFA regulated brokers in the United States and their clients this will no longer be an issue.
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