Forex Arbitration Claim: How Trader Can Prove His Right


As you may know, Forex trading not only opens alluring prospects of financial gain but also involves substantial risks. Conflicts over order execution occur between the parties involved in a transaction (the broker and the trader) all too often. In most jurisdictions, local regulatory authorities oblige Forex brokers to take part in independent dispute resolution systems to protect the interests of traders in situations when a conflict cannot be resolved through negotiations between the broker and the client. The best-known dispute resolution systems include, for example, the Financial Ombudsman Service of the United Kingdom of Great Britain and Northern Ireland, the Financial Dispute Resolution Scheme of New Zealand, the Financial Ombudsman Service Limited or the Credit and Investments Ombudsman in Australia, and so on.

What are the dispute resolution schemes?

Independent dispute resolution systems are organizations that act as intermediaries between brokers and their clients. Dispute resolution systems can be organized by the state or by traders themselves for the benefit of other traders. An example of the latter is the Financial Commission.

Conflict resolution through independent arbitrage has a few differences as compared to legal proceedings in the country of the broker’s incorporation.

Firstly, it is free. When filing a lawsuit in court, a trader will have to pay an official fee, but lodging a complaint with an independent dispute resolution system does not cost anything to the trader. In fact, the financial costs of dispute processing are carried by the broker. Being part of an independent dispute resolution system is mandatory for maintaining a brokerage license, and brokers pay annual membership fees for it.

Secondly, the arbitration decision is binding for the broker, but not for the trader. Therefore, if the trader is not satisfied with the decision taken by the dispute resolution system, he can utilize other ways of finding a solution to the problem, including taking legal action.

What you should know when lodging a complaint?

Arbitration is an independent and objective process. The broker and the trader are equal in presenting their cases to an independent dispute resolution system. It means that the broker cannot influence the outcome of the arbitration. The appointed mediators, who are neither employed by nor affiliated to the broker, will make a decision on a case.

While investigating a case, the mediators will take into consideration all the evidence provided by the parties, including account opening agreements and other regulatory documents. That is why we recommend making a careful study of these documents before filing your complaint to arbitration.

As a rule, arbitration accepts your complaint only if the means of dispute resolution through the broker’s internal policies have been exhausted. The mediators will check which steps have already been taken by the parties to settle the conflict.

You should also keep in mind that the financial compensation that can be offered by arbitration is limited. Some independent dispute resolution schemes set a maximum amount to be awarded to the trader if a claim is settled. In addition, some independent dispute resolution schemes have a minimum compensation limit. It means that they will not investigate the disputes of less than the minimum limit amount.

Most dispute resolution systems publish case reports and decisions on their websites. Each case report includes a brief overview of the trader’s complaint, the broker’s viewpoint and the decision taken by arbitration. As most disputes appear to be quite similar, we assume that anyone who takes interest in Forex will find this article useful.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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