plus500: The unilateral practice of trading 

1. Company history and mode of operation

1.1 What is plus500

Plus500 Ltd is a fintech company headquartered in Haifa, Israel. It is the parent company of an international operation, governs a dozen subsidiaries in several territories, and owns the Plus500 brand, which operates the www.plus500.com trading platform. 

The primary business of the www.plus500.com platform is to offer CFD (“contracts for difference”) trading. As defined by the AMF, CFD trading is the buying and selling of the speculative value of a financial asset/product without actually holding it. It is generally reserved for experienced traders as it involves risk, especially due to leverage and margin calls. Plus500 also offers trading in Forex, Crypto, commodities, currencies, stocks and other options and indexes. It is therefore a complete platform, which also offers training in risk management and the use of the platform from its trading academy. 

Plus500 boasts of being regulated by numerous financial bodies, which would justify the platform’s advantageous position within the Forex market. Indeed, this regulatory framework is meant to be a guarantee of respectability, and is intended to reassure traders who choose the Plus500 platform. In addition, the company is listed on the LSE – London Stock Exchange, one of the leading stock exchanges in the world. All these elements give plus500 credibility and a respectable and serious status. 

1.2 A unique business model 

Many brokers and trading platforms are based on the No Dealing Desk (NDD) model, which means that a third party is financially responsible for the trades that traders make on the platforms. This has the effect of limiting the conflicts of interest that can arise between a broker and a trader. 

Due to the order execution policy of its various entities, plus500 is what is known as a “dealing desk”. This means that plus500 does not use an intermediary such as a bank to execute orders; the platform is effectively responsible for the trades made. This implies that plus500 owns the financial products it offers, in addition to setting the buy and sell prices available to traders. 

Therefore, plus500 is responsible for its solvency as well as its liquidity. As a result, one might ask whether, in order to maintain its liquidity, plus500’s model is based on the exploitation of losing trades by the platform’s users? That is to say, plus500 has a particular interest in favouring losing trades for its users: it avoids paying its clients and therefore drawing on its capital. This is the type of conflict of interest that NDD brokers protect themselves from.

2. A tendency to interpret the terms and conditions to their advantage?

2.1 “Manifest Error”: Discretionary and Unilateral Wiping of Winnings by plus500 

Law firm Mikov & Attorneys, a member of the Financial Fraud Lawyers network, is currently representing the interests of individual traders against plus500 CY Ltd, which operates for and in Europe. As a result of the information provided in the course of the preparation of the various cases, we have noticed a tendency towards ‘discretionary’ practices. Clearly, plus500 is showing signs of acting in its favor.

For example, the reason given by plus500 for erasing one of our client’s winning positions is a “manifest error”. As defined by the plus500 terms and conditions, a manifest error is

 “any error that we reasonably believe to be obvious or palpable, including 

without limitation, offers to execute transactions for exaggerated volumes of 

Instrument” (p.51)

In other words, the concept of manifest error is used by plus500 when a problem with the platform or volatility to the disadvantage of plus500 causes users to be unable to enjoy their profits. The term would therefore justify a chronic deletion of profits, which by any measure remains to the advantage of plus500. 

2.2 Technical errors in the platform that cannot be compensated by plus500

There is also a tendency for plus500 to use ‘discretionary’ clauses to justify the termination of customer accounts. This means that the company relies on clauses in their terms and conditions of use to terminate their users. As stated in their user agreement:

• 22.6.  We may immediately terminate the User Agreement, close and suspend your Trading Account by providing written Notice, in any of the following Events of Default:
  • 22.6.1.  you breach any representation under the User Agreement or any other agreement between the parties, or any representation proves to have been false or misleading in any material respect at the time it was made or given; or 
  • 22.6.2.  you are in material breach of any term of the User Agreement; or 
  • 22.6.3.  you have made any material misrepresentation to the Company; or 
  • 22.6.4.  you fail to provide information requested in relation to any verification process undertaken by the Company; or 
  • 22.6.5.  the Company has reasonable grounds to believe that you have filed a false or fraudulent chargeback and/or dispute request to your card issuer or any other payment method used, where, for example, but not limited to, situation where you claim that you were not the one who performed the disputed payment(s) to the Company whilst in fact the payments were performed from your own IP address(es) and/or device(s). 

There are quite specific examples in this clause, but also general concepts whose application depends on the interpretation and/or the unilateral will of the company. It seems to us that plus500 has a rather restrictive posture when it comes to determining an acceptable-inacceptable spectrum.

In other words, plus500 disclaims any liability in the event that a user experiences a situation that results in losses to him/her.

2.3 Interpretation of the terms and conditions in the interest of plus500

To summarize and simplify, it would appear that in the event that a trader generates profits from his trades on the plus500 platform, the platform reserves the right to invoke manifest error to terminate the trade. In the event that a user experiences substantial losses outside of their trading strategy, plus500 does not take responsibility and therefore does not undertake to compensate its clients.

When researching the experiences of plus500 users, there are similarities between the feelings shared online and the material in our files. There is a group on Facebook with victims of the platform: “plus500 is a scam“. This group contains many testimonies that are consistent with the experiences of our clients: technical incidents, market manipulation, potential non-compliance with regulations in place… 

According to the members of the group, the plus500 trading platform was regularly unusable by its clients, which generated significant financial losses due to the impossibility of managing their positions and trades. However, based on the terms and conditions of use, we now know that these types of technical errors are not the responsibility of plus500.

Are we dealing with a double standard on the part of Plus500 in the interpretation of the terms of use that systematically favors Plus500 to the detriment of its customers?

According to our expertise in trader’s rights, plus500 tends to interpret their terms and conditions in a discretionary way and to their benefit. We associate this with bad practice as it always puts the trader in a weak position against the broker. 

Indeed, in this context, plus500 has control over the rights and duties of its clients. Often, clients realize too late that the contract they have signed leaves them no room for maneuver and that their trading freedom is in the hands of plus500.

As part of our legal practice, we see the apparent lack of protection for financial consumers, especially in Europe. We consider the actions of plus500 to be contrary to MiFID and ESMA rules. If you are experiencing difficulties with the www.plus500.com platform, please do not hesitate to contact us so that we can conduct an analysis of your rights and chances of success in recovering your funds.

Disclaimer:

The Financial Fraud Lawyers network aims to inform private investors (traders) of potential malpractices by Forex and CFD brokers. Our mission is to assist and protect traders when they encounter brokerage practices that go against their interests. 

Our articles are intended to warn, share and inform the public about the legal risks of Forex and its players. Trading financial products and CFDs as well as investing on online platforms carry legal risks. 

The article was written in good faith, based on public information and client testimonials valid at the time of publication. Our articles concern the protection of the interests of individuals on online investment platforms and are published in accordance with our right to inform the public about our activity. This article is not to be considered legal advice.