The IG client group fighting fills in EURCHF over the SNB cap removal says the broker prioritised its own positions
Reuters report that a member of the IG client group have a letter from IG's compliance department which says that they prioritised their own risk in the minutes after the cap was lifted, and that it took 7 minutes to do so before it started on customer positions
According to the letter seen by Reuters the letter stated that;
"A result of the automatic filling of client Orders is that IG is left with exposure that it needs to manage and hedge within the underlying market. This took place between 09:32:41 and 09:39:44, therefore before the aggregate client Order was executed." It also said the client trades subsequently received worse prices than its hedging trades."
In an initial statement after the event, IG denied that they had done no such hedging, something this letter contradicts. The FCA's rules are pretty clear on the matter;
"A firm which has aggregated transactions for (its) own account with one or more client orders must not allocate the related trades in a way which is detrimental to a client."
If it is proved that IG acted in this manner it's going to mean trouble for the broker. FXCM was fined last year for failing to pass on better fills and this could be a worse matter entirely.
If it is true that they dealt their exposure and then gave worse fills to clients, it's outrageous and they should be hit to the full extent of the FCA's powers. For the clients it could mean that trades some 5 months after the event might yet be altered again but in traders favour. It could also mean IG reimbursing any accounts that settled negative balances up front.
The FCA have obviously refused to comment on the matter while the groups case is being dealt with.
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