Fluctuation frustration

Greg bets on foreign currency fluctuations on the foreign exchange (forex) market. He does so using Company C’s forex trading service. Company C allows clients to use its platform on the terms outlined in disclosure documentation (which is the contract between Company C and its clients).

One of the fees that Company C charges for its services is a ‘margin’. Clients have to keep enough money in their margin account to keep their ‘account revaluation amount’ above ‘close-out level’. In Greg’s case, his close-out level was 50% of his available margin. If Greg’s account revaluation amount fell to less than 50% of his margin, Company C would liquidate his position (ie: sell the currency Greg had bought).

Company C calculates the account revaluation amount in real time. It uses a number of values to do this, including aggregates of prices quoted by its own liquidity providers (big investment banks).

One day in February, Greg opened a ‘long position’ on some foreign currency at a price of 112.931. Essentially, Greg was placing a bet that the price would rise. Unfortunately, Greg’s bet did not pay off. The price fell. Once the price hit 112.748, Company C liquidated (sold) Greg’s position. Company C said that Greg’s account revaluation amount had fallen to less than 50% of the required margin.


Greg’s view

Greg complained that Company C had unreasonably liquidated his position. He said that Company C’s platform did not hit 112.748. He also said that it shouldn’t have hit 112.748 anyway, because 112.748 was not the mean of the underlying prices from Company C’s liquidity providers.

Greg said that he would have made, not lost, money if Company C had not liquidated his position when it did.

When Company C declined to uphold his complaint, Greg complained to FSCL.



We reviewed the disclosure documentation. We could see that Company C had calculated Greg’s account revaluation amount by applying the formula in the disclosure documentation. We also looked at the real time prices on Company C’s platform at the time it liquidated Greg’s position. We could see that Company C’s platform price did fall to 112.748. Finally, we looked at the prices quoted by Company C’s liquidity providers. We formed the view that Company C’s prices did represent the underlying market, but we also noted from the disclosure documentation that Company C only had to ‘derive’ its prices from the market, not apply the mean of those prices.



We recommended that Greg’s complaint should be discontinued. Greg agreed to do so.


Key insight for consumers

Forex trading is complicated and risky. There is lots of jargon to get to grips with to understand how the market works. But ultimately, as in every case where parties put the terms of their contractual relationship in writing, reading and understanding what you have agreed to is key.