Japan’s Financial Services Agency has issued a one-month business suspension to retail broker Gaitame.com Co. starting 1 October for providing erroneous exchange rates.
The move marks the first time that a broker of foreign exchange margin trades has been hit with a business suspension order because of system glitches.
In July and September, system errors at Gaitame.com led the firm to supply customers with yen-euro and yen-dollar rates that deviated sharply from actual market levels, according to local media reports.
The FSA issued a business improvement order to Gaitame.com on 10 September but the system malfunctioned again on Wednesday 15 September, resulting in the shutdown of a server handling customer transactions, according to Japanese news service, Nikkei.com.
Many customers were impacted by the latest glitch, which led to the forced execution of trades to square positions, the news service says.
All transactions, except those entailing position closures by customers, will be subject to the suspension. The FSA has established a two-week window to enable customers to move transactions to other companies.
During the business suspension, Gaitame.com will have to investigate the errors and set up a system oversight structure.
Accounts at Gaitame.com, Japan’s largest currency margin company, totalled 500,000 as of June 30, while total assets under its custody reached nearly 100 billion yen as of the end of July, according to the brokerage.
The suspension will most likely lead to a big financial loss for Gaitame.com. Being out of business for a month will tarnish its reputation and mean a loss of a month’s volume while accounts move to other brokers.
The company uses a global FX liquidity aggregation platform provided by Integral Development Corp. However the vendor tells Squawkbox that the glitches were unrelated to its technology.
In an emailed statement, a spokesperson for Integral says: “Actions taken by the Financial Services Agency related to the performance of Gaitame’s systems are unrelated to Integral’s technology. Integral has been supplying feeds to hundreds of institutions around the world during this time frame with no issues. Our customers can be assured that they have been receiving and will continue to receive excellent liquidity and prices.”