Dear Traders,

Where pricing of excessive risks and volatility are above normal levels, which is considered an "Anomaly" by the market, some products suffer from quotation problems caused by the price provider.

We recently encounter such problems on specific days (for the product pairs whose market or exchange is closed, or cross product pairs or exotic product pairs). We would like to mention some of the risks with reference to the security of traders and the organization.

What Is a "BAD TICK"?

Prices may deviate more than reasonably expected especially because of the differences between the spread rates of the unorganized, over-the-counter FX markets and price providers. For instance, while a deviation of 0.2 to 2.0 pips for the EURUSD spread may be considered normal, a deviation of 2.00 to 5.00 pips is not a normal deviation. This may even reach 10.0 to 50.0. For instance, assume that most of the brokers trade at 1.0850 to 1.0860 on average. Brokers reflect the prices provided by the liquidity provider to their platforms without organizing. Let's think that there is a bridge link with 70 to 100 quotes per second and a market depth where milliseconds matter. If the platform you are trading on offers a totally different parity such as 1.0880 - 1.0910 in comparison with the average parity of 1.0850 - 1.0860, this is called a "BAD TICK". This may be caused by several factors. If such sudden fluctuations occur on the entire market, then that is not a deviation. However, such rates creating a sudden gap with almost all other organizations may cause traders to incur losses and even activate sudden collect profit/stop loss orders. On the other hand, liquidity providers detect such movements and make corrections, rectifying or terminating such orders.

Even though several factors may be at play, the top reason is the failure to have the desired price due to the spread rates and volume, or systemic, i.e. technological issues. Sometimes such cases may be prolonged, lasting for hours due to the difference in spread rates. Any price gap is vulnerable to systemic transactions performed by the systems detecting such gaps on the the manipulated prices. This is called "Guaranteed Profit". Such transactions are terminated or corrected by the entities providing liquidity, which are responsible for pricing.

Rapid changes of liquidity particularly after the coronavirus pandemic resulted in such errors.

We would like to illustrate these problems with some graphs.

As can be seen in the M1 time format on the graph, price volatility varies between 0.01672 and 0.02078. Under leveraged market conditions, TRY 0.016, i.e. 1.6 kuruş for 1 lot corresponds to approximately USD 231. This change occurred in as short as 1 minute. It occurred because the spread reported to our customers was 300, i.e. 0.3 kuruş while the average spread was 3000, i.e. 3 kuruş. This means that the anomaly was caused by reporting the spread 10 times smaller. 

Trading 1 lot of EURTRY can earn a treader about USD 200 per minute regardless of the direction of the transaction. In this case of "BAD TICK", this process lasted for hours, and no action was taken for the price since it was not caused by our company. Since traders with an ongoing transaction continue with a narrow spread, widening the spread mechanism 10 times means 3 kuruş of appreciation for the traders with open positions, which means a loss or depreciation of USD 433 per lot. Therefore, taking this action is against our policy to protect traders and the company.

Let's see another example illustrating a similar case we have had many times.

We recently had a similar case with a commodity. The most critical factor was the widening spread, which means up to USD 50 of difference between the physical market and futures market. When the physical demand surged and problems arose due to the pandemic, the surges in pricing also affected the depth of liquidity providers. Similar bad quotations (about USD 8) also occurred in key investment instruments such as gold.

In response, traders wanted to perform "Arbitrage" and systematic actions were canceled or corrected by liquidity providers. Almost all transactions with a very small duration made by systematic limit orders or market orders in that time frame were canceled.

We would like to let our valuable traders know that we take every measure against the grievances caused by the actions similar to those illustrated above as part of our transparency policy, or any illegitimate attempt, and that we will announce those measures on our official website. We emphasize once more that such actions are expected in unorganized markets, and the necessary corrections will be made as required by our agreements with the price provider. We would like to thank our traders for their understanding and wish our traders a day full of success.

Best regards