Polish Court Upholds XTB’s $2.2m Fine over Differential Slippage from 2018

The Polish Supreme
Administrative Court (NSA) dismissed the cessation appeal filed by XTB (<a href=”https://www.financemagnates.com/tag/xtb/” target=”_blank” rel=”follow”>WSE:XTB</a>)
concerning the Polish Financial Supervision Authority (KNF) decision to impose a financial penalty of PLN 9.9 million (over $2.2 million) on the brokerage in
2018. Penalty Imposed on XTB UpheldAccording
to the KNF’s press release published on Wednesday, it was the second cessation
appeal by former X-Trade Brokers. <a href=”https://www.financemagnates.com/forex/brokers/polish-regulator-hits-xtb-with-2-7-million-fine/” target=”_blank” rel=”follow”>The Polish regulator fined the broker in
September 2018</a>, and the publicly-listed company appealed the decision. However,
the Voivodship Administrative Court in Warsaw rejected XTB’s rationale and
upheld the verdict. Now, a similar conclusion has been made by the NSA.The KNF
fined the company for violating the Polish Financial Instruments Trading Act concerning the provision of brokerage services without considering the
client’s best interests. From 1 January 2014 to 31 May 2015, the company used
an asymmetrical setting of the deviation parameter in the <a href=”https://www.financemagnates.com/terms/e/execution/” class=”terms__main-term” id=”60010adb-9e25-4bff-9822-c9210deec853″ target=”_blank”>execution</a> of client
orders in the instant model. XTB, as the
counterparty to the transaction, has enabled full transmission of execution
losses to clients through asymmetric price slippage. Conversely, the broker
reaped profits from advantageous price movements. This means that XTB executed
client orders when the <a href=”https://www.financemagnates.com/terms/s/slippage/” class=”terms__secondary-term” id=”8d4f28e5-352b-455a-a24f-8ce3d915c891″ target=”_blank”>slippage</a> benefits them, while clients did not receive
any price enhancement if their orders were executed at a better price than
expected.The
following is a translated excerpt from the KNF’s statement: “In addition,
XTB applied the delay parameter to a selected group of clients, subject to
observation by the Trading Department, as a tool for additional verification of
the price in the placed orders, causing the suspension of execution of the
orders of such clients for the time specified by this parameter expressed in
milliseconds.”Finance
Magnates has
contacted XTB for comment on the case. At the time of the publication of this
article, the broker did not reply.Interestingly,
in reaction to the Polish court’s decision, XTB shares grew dynamically. In
just 15 minutes, they recorded a jump of almost 5%, once again approaching the
historical highs at PLN 35.30 reached on 21 February 2023.XTB’s CEO Omar Arnaout on
2022 ResultsIn its
preliminary quarterly financials <a href=”https://www.financemagnates.com/forex/brokers/xtb-sees-dull-q3-profits-despite-solid-client-activities/” target=”_blank” rel=”follow”>published a month ago</a>, the Polish FX/CFDs
broker listed on the Warsaw Stock Exchange has disclosed a substantial decline
in profits for the fourth quarter of 2022. While the company’s revenue
increased yearly, it significantly decreased from the previous quarter.Official
figures revealed that XTB’s total operating income or revenue for October to
December came in at PLN 216.7 million (approximately $49 million), representing
a significant drop of nearly 45% from the PLN 391.3 million it generated in the preceding
quarter. This indicates that Q4 was the worst-performing quarter in 2022 for
XTB, which generated revenues of PLN 439.8 million and PLN 396.4 million in Q1
and Q2, respectively.Finance
Magnates recently sat down with the CEO of XTB, Omar Arnaout, who has been
heading the broker since March 2017, to discuss the financials results of 2022, rising
client metrics, and other developments in the company.”The
fourth quarter of 2022 was an excellent period for XTB from the operational
perspective. We managed the biggest marketing campaign in the history of the
company, onboarding over 50,000 new clients and generating the highest
quarterly volume in the history of XTB. On the other hand, market conditions
were not favorable for us, thus the lower net profit,” Arnaout commented.The entire
Finance Magnates interview with the XTB’s CEO <a href=”https://www.financemagnates.com/executives/interview/interview-xtb-ceo-omar-arnaout-on-2022-results-and-future-plans/” target=”_blank” rel=”follow”>can be found here</a>.