Trading Pitfalls: Risks with the Liquidity Providers of FXFLATThe world of online trading is often presented as a gateway to financial independence, but a recent controversy involving FXFlat Bank GmbH (“FXFLAT”), acting under the brand Trading212 since its acquisition by Trading 212 Group Limited in August 2024, has raised serious concerns about transparency, investor protection, and accountability in the industry.
It came to the attention of our network Financial-Fraud.Lawyer that profits from trading were voided by FXFLAT’s liquidity provider, Amana Capital Ltd. (“Amana”), due to alleged technological errors.
The Complaint: Profits Erased Without Justification
The issue stems from trading activity on a major index on FXFLAT’s trading platform. Initially, it appeared that the pricing of the financial instrument was accurate, and the profits could be withdrawn. Nonetheless, it was reported by the liquidity provider a technical issue that had affected the price feed and FXFLAT revoked a portion of the profitable transactions—leading to the removal of a significant share of the gains.
Neither FXFLAT nor Amana provided any substantive evidence on the reasons of such deletion and the specific technical issues. Instead, FXFLAT complied with Amana’s request without question.
A Web of Conflicting Interests
The case highlights a critical problem with FXFLAT’s business model. FXFLAT has taken the stance that it merely acts as an intermediary and does not have decision-making authority over trade reversals, placing the responsibility entirely on Amana. Meanwhile, Amana argues that it has no contractual obligation to FXFLAT’s clients, meaning affected clients are left without a direct avenue for legal action against the liquidity provider.
This lack of contractual clarity raises serious concerns about FXFLAT’s transparency with its clients. The trader contends that FXFLAT failed to disclose these conflicting interests before account onboarding. If traders were made aware that their profits could be arbitrarily canceled by an external liquidity provider without direct accountability, they may have reconsidered opening an account with FXFLAT.
Potential Regulatory Breaches and Ethical Concerns
The case also exposes potential violations of the Markets in Financial Instruments Directive (MiFID), a key European regulation designed to protect investors. Specifically:
- Failure to Act in Clients’ Best Interests: Under Article 24 of MiFID, financial institutions must act honestly, fairly, and professionally in the best interests of their clients. By erasing legitimate profits without adequate justification, FXFLAT may have breached this obligation.
- Lack of Transparency: Article 23 of MiFID requires firms to disclose conflicts of interest to their clients. FXFLAT may not have properly informed its clients that they would have no direct claim against liquidity providers in the event of a dispute.
- Denial of Client Rights: Because FXFLAT’s clients do not sign agreements with its liquidity providers, they may be prevented from seeking liability for execution issues—raising fundamental questions about fairness and investor protection.
A Warning to Traders
This case serves as a stark warning to traders who rely on FXFLAT and similar brokerage models. The inability to hold liquidity providers accountable, combined with FXFLAT’s unwillingness to challenge questionable trade reversals, creates a significant risk for investors.
Before opening accounts with FXFLAT or any broker, traders should carefully examine contractual agreements, seek clarity on counterparty relationships, and demand transparency regarding trade execution policies. Without such safeguards, they could find themselves in the same predicament—watching substantial profits disappear without explanation or recourse.
What’s Next?
The affected clients of FXFLAT may seek legal remedies, arguing that FXFLAT’s actions amount to contractual misrepresentation and unjust profit confiscation. If regulatory bodies take notice, FXFLAT may find itself under increased scrutiny. Meanwhile, traders worldwide should take this case as a reminder that not all brokers operate in good faith—and that due diligence is essential in the volatile world of online trading.
