Shurbanova v Forex Capital Markets Ltd

A contractual power to revoke trades for abusive trading is distinct from a contractual mechanism for determining whether the broker made a manifest pricing error. Under the relevant terms, abusive trading was an objective question for the court. If abuse was established, the broker had an unfettered contractual power to revoke the trades, without a Braganza duty governing the exercise of that power. Price-latency trading may constitute abuse where software uses rapidly received news to exploit slower platform prices, particularly where trades are executed almost immediately, at off-market prices and in numerous small orders. A deliberately throttled retail platform does not authorise risk-free trading based on knowledge of an announcement rather than prediction. The claim was therefore dismissed.

The claimant, a retail customer of an online foreign exchange and commodities broker, claimed damages for profits lost after the defendant revoked gold and dollar trades made immediately after a favourable economic announcement. The defendant relied principally on contractual provisions concerning manifest error and gaming or abusive strategies. It also alleged misrepresentations in the account-opening form and contended that the claimant was acting for other members of her family. The central issues were whether the trades were made at manifestly erroneous prices, whether they constituted abusive trading under the contractual terms, and whether the defendant’s revocation was contractually effective.

1. Manifest error. The manifest-error clause gave the defendant the initial responsibility to determine whether a manifest error had occurred, but required it to act fairly. That obligation incorporated the limited controls described in Braganza v BP Shipping [2015] 1 WLR 1661: proper process, consideration of relevant matters, exclusion of irrelevant matters, and an outcome within the range open to a reasonable decision-maker. The trades were not, however, manifest errors. The defendant had deliberately designed the dealing desk to respond slowly, so the quoted price was not a misquote merely because it was later out of line with market indicators.
2. Abusive trading. Clause 27 concerned the nature of the customer’s trading, not an error in the defendant’s quoted price. Whether trading was abusive was an objective question. The defendant therefore had a pure contractual power to revoke an abusive transaction, rather than a Braganza-type discretion. If the trading was not abusive, revocation would have no effect. The clause’s reference to disputes being resolved in the defendant’s discretion concerned quoting or execution errors, and did not confer a broad discretion to determine whether abusive trading had occurred.
3. The trades were classic price-latency abuse. Software connected to a rapid news feed triggered orders only after favourable employment data had been released. The trades exploited the delay before the dealing-desk prices adjusted. They were executed within seconds, at materially off-market prices, and through many small orders designed to obtain favourable pricing while producing a substantial aggregate position. The absence of a separate fast price feed, the claimant’s alleged lack of personal knowledge, and the existence of smaller trades by another customer did not alter the conclusion.
4. The revocation was therefore justified under Clause 27 and the claim was dismissed. It was unnecessary to decide the alternative issues. The judge nevertheless observed that the claimant had made false contractual representations concerning her trading experience, finances and role, and that a claim under section 2(1) of the Misrepresentation Act 1967 would also have succeeded.