Fast Market Policy
The spot foreign exchange market, at times, exhibits extreme price volatility, a condition known as a "fast market." Fast market conditions may be caused by various factors including, but not limited to, news releases such as non-farm payroll numbers, order imbalances-significantly greater orders of one type ,"buys" than another type, "sells."
During the extreme price volatility in fast markets, currency pair prices will "gap" and spreads widen. A price gap occurs when the price of a currency pair either jumps or plummets from its last bid/offer quote to a new quote, without ever trading at prices in between those quotes. As an example, the Euro/US Dollar currency pair may move from a bid/offer of 1.1891 – 1.1894 and begin trading at 1.1941 – 1.1944, without ever trading at the prices between those quotes. In these instances both stop-loss and entry stop orders will either be executed at their requested rate , if the market has traded there, or at the next recorded price in the market, regardless of order size. These orders will be automatically executed and will not require dealer intervention. This policy creates uniformity and transparency of trade execution and does not discriminate based on the size of the order.
Prior to major economic news releases, our FCM may decide to restrict the placing of Entry Orders to, for example, a minimum of 10 pips away from the current market price instead of the normal 1 pip. The decision to widen this spread will be based on the prevailing market liquidity and volatility. Each data release will be evaluated separately. This change will only affect Entry Orders and does not prevent the placing of Market Orders during these times. Our actions are designed to reflect current market conditions and to protect our clients from the possibility of extreme gap fills during periods of increased volatility.
The standard industry practice for currency dealers, including dealers on the interbank market, during fast market conditions and price gaps, is to set market levels and execute orders manually without the use of automated systems or services. The process during fast markets is typically:
- Initially, major money center banks and other online price providers halt all direct dealing and their pricing engines are suspended,
- Currency dealers analyze event and determine the correct price,
- Prices enter market 20-30 pips wide or more,
- Spreads in market narrow as more currency dealers enter the market.
In such an event, there may be a delay in trade execution, which may be significant, while rates are cross-referenced to ensure valid execution. Further, stops placed close to a market that has traded through the stop price are re-priced on the next best tradable price. Thereby, a specified rate order does not provide a fixed-price guarantee to the counterparty.
Our FCM, FX Solutions, like all currency dealers, is a "request for quote" dealer, and follows industry standards for fast market conditions. FX Solutions’ clients that elect to trade during fast market conditions are responsible for losses incurred by their account because of such trading, as clients are responsible during normal trading conditions. FX Solutions will not be held liable for any losses due to fast or volatile markets, electronic disruption in service, service delays, incorrect information received from service vendors (i.e., quotations, news services) and/or customers (i.e., client profile data, updated data).
Placing Orders in a Fast Market
Forex Systems recommends that you be aware of price actions during important data releases and determine your personal levels of comfort and risk. During volatile market periods that can be caused by important data releases, the following information serves as a guideline for placing orders.
Sufficient cash or buying power is required before you place any trade. Check your account to be sure that you have adequate funds before you do any trading.
Market order executions may differ significantly from the price you were quoted during fast markets. Limit orders may offer a level of protection from these market fluctuations.
If you have yet to receive confirmation on a trade placed earlier in the day, do not place the same order again. A delay in receiving word on a confirmation does not necessarily mean that the order has not been executed. This applies to all types of orders. You can call the trading desk and request a "status check" and Forex Systems will look into the status (i.e., open, executed, cancelled, etc.) of your order.
If you have a discrepancy about an order you placed or an execution you received, please have the all the necessary information ready before you call: Account Number, Ticket ID #, Buy/Sell, Currency Pair, Lot Size, Price, Time, Online or Telephone Order. The more information you give FX Solutions, the better FX Solutions can expedite your query during fast market conditions.
Forex Systems will not be held liable for customer losses due to fast or volatile foreign exchange markets, electronic disruption in service, service delays, incorrect information received from service vendors (i.e. quotations, new services) and/or customers (i.e. client profile data, updated data).