Forex Spread Fine Upheld: Council of State 2024/5786
It is 11:14:37. In an investor's leveraged USD/TRY account, 28 positions close in the same second. On the screens of the other brokerages publishing prices at that moment, the picture is different: the buy price of the brokerage to which the investor's account is linked is the lowest in the market, and its sell price is the highest. The Capital Markets Board looked at this picture and imposed an administrative fine on the brokerage; the administrative court and the regional administrative court cancelled the fine, saying "there is no concrete measure for the spread in the legislation". The Council of State had the last word.
In its decision of 23.12.2024, Docket No. E.2021/4235, Decision No. K.2024/5786, the 13th Chamber of the Council of State held that the obligation to keep the difference between a brokerage's buy and sell prices in leveraged transactions consistent with general market conditions is not vague, and that where a second-by-second comparison with other institutions shows prices that were clearly against the client, the administrative fine is lawful; it unanimously reversed the regional administrative court decision that had upheld the cancellation of the fine.
- 28 positions closed in the same second
- Findings of the TSPB Arbitration Board
- The lower courts: "no measure for the spread"
- Why did the Council of State reverse?
- Spread and conflict of interest in leveraged trading
- 🆕 The current penalty system in Article 103 of the Capital Markets Law
- Common questions
⏱️ 28 positions closed in the same second
On 11.01.2014 the claimant brokerage and its client signed a Leveraged Trading Transactions Framework Agreement and a Risk Disclosure Form. The investor was holding leveraged positions in the US dollar/Turkish lira pair. At 11:14:37 on 09.11.2016, the 28 positions in his account were terminated at the same time (stop-out), and the investor claimed that a loss of USD 16,949.60 arose as a result.
The investor's objection concerns not only the market movement but the prices the brokerage was offering at that moment. According to the findings reported in the decision, the brokerage's spread ratio had been changed before the stop-out, and when the prices given in the second the account closed were compared with those of other institutions, they were clearly against the investor.
🧾 Findings of the TSPB Arbitration Board
The dispute first came before Client Disputes Arbitration Board No. (4) within the TSPB. The Board's assessments as reflected in the text of the decision are as follows:
- The investor is right in his claim; factors originating from the brokerage had an effect on the closing of the positions.
- However, the whole USD 16,969.40 cannot be awarded, because most of the amount deposited had already turned into loss before the account closed.
- For an equitable calculation, the average price of 19 brokerages at the moment the account closed was taken; the USD/TRY buy rate was accepted as 3.17630 and the sell rate as 3.17727.
- In the account rebuilt at these prices, the loss is USD 14,028.72, or USD 12,606.44 once swap income is added; against the investor's assets of USD 13,340.29, a balance of USD 733.85 remains in the account.
The Board considered it appropriate to pay the investor USD 733.85, and the brokerage paid this amount. The investor found the payment insufficient and filed a separate action before the consumer court. Beyond this, the Board stated that there were suspicions that the brokerage could be the counterparty to the transactions (B-Book) but that this could not be understood from the case file; it considered it appropriate to notify the SPK regarding the possibility of a conflict of interest and a breach of the principle of honesty.
Following the notification, the SPK, also taking into account that no administrative fine had been imposed on the institution before, found that the buy-sell price differences offered in the USD/TRY pair on 09.11.2016 were not in line with market data, in breach of Articles 24/1-(b) and 30/A-(2) of Communiqué No. III-37.1, and imposed an administrative fine of TRY 26,049.00 under Article 103 of Law No. 6362.
⚖️ The lower courts: "no measure for the spread"
The brokerage brought an action for cancellation of the fine, and the administrative court upheld the action. The main lines of its reasoning are as follows:
- It is clear that the prices of the claimant and of the other 19 brokerages differ; but the real question is whether the difference is in line with "general market conditions".
- The SPK has not set a concrete criterion for determining general market conditions; there is no regulation on the rate by which the spread may deviate from other institutions.
- There is no rule that every brokerage must apply the same spread; the spread is determined by the investment firms.
- The investor's loss is a dispute arising from the contract, to be resolved in the ordinary courts.
- If a sanction is to be applied, the limits of the difference must be clearly regulated under the principle of certainty.
The regional administrative court also found this decision consistent with procedure and law and rejected the SPK's appeal. In its appeal petition, the SPK argued that the nature of forex transactions had not been properly understood, that setting a fixed rate for the spread would run against the functioning of the market, and that the existing regulation did not breach the principle of certainty.
🏛️ Why did the Council of State reverse?
The Chamber first set out the relevant legislation. Under Article 24/1-(b) of Communiqué No. III-37.1, the prices at which transactions are carried out must be determined objectively, in line with general market conditions and fair values. Article 30/A states that the investment firm determines the buy-sell price differences, but that it is mandatory to keep these differences consistent and in line with general market conditions. Article 24/1-(b) of Communiqué No. III-39.1 also requires investment firms to act as a prudent merchant and to show professional care.
The Council of State placed at the centre of the decision the comparison in the inspection report dated 16.04.2019:
- At 11:14:37, when the account closed, the claimant's buy and sell prices, compared with the other 19 brokerages, were clearly against the client.
- The highest sell price and the lowest buy price belonged to the claimant institution.
- While the spread average of the 19 institutions was 0.00097, the claimant's spread ratio was 0.00800; the difference is more than eight times.
- Among 38 institutions with price data between 11:14:00 and 11:15:00, buy prices ranged from 3.17030 to 3.19560, and the lowest buy price (3.17030) belonged to the claimant.
- Among the 27 institutions with price data in the stop-out second, the lowest buy price (3.17280) again belonged to the claimant.
In view of these findings, the Chamber held that there was no unlawfulness in the SPK's fining decision, and that the regional administrative court decision rejecting the appeal against the administrative court decision cancelling the fine was legally incorrect. The case was sent to the regional administrative court for a new decision.
An important aspect of the decision is that it does not accept the approach of "no fine without a concrete threshold". According to the Council of State, it is not possible to set a price step or threshold in leveraged transactions as on a stock exchange; therefore compliance with general market conditions can be supervised through comparison with simultaneous price data.
For the decision addressing the private law side of the stop-out and spread objection, that is, the compensation action brought against the brokerage, the article Stop-Out and Spread in Forex – Court of Cassation 11th Civil Chamber 2025/4543TR can be consulted. For administrative regulations on the leverage ratio, there is also the assessment of Council of State Plenary Session of Administrative Chambers 2025/763TR.
📉 Spread and conflict of interest in leveraged trading
The legal assessment section of the decision describes in detail how the forex market works. According to the Chamber:
- Forex transactions take place not on a central exchange but as over-the-counter derivatives; the price is not formed by matching buyer and seller orders.
- The brokerage to which orders are sent acts as the "counterparty" to each investor, taking the seller's role against the buyer and the buyer's role against the seller.
- The spread ratio is set by the brokerage itself; for this reason, the formation of the spread may also involve a conflict of interest.
- Because prices change very fast, the comparison should be made not by the minute but by the second, and if possible by the millisecond.
These findings explain why the position of a brokerage in leveraged transactions, which can be at the same time the one setting the price and the counterparty to the trade, calls for special supervision. Article 32/4 of Communiqué No. III-37.1 also provides that prices and price differences in leveraged transactions are transmitted to the TSPB, and that the Association identifies, institution by institution, deviations exceeding a certain level and announces them to the public weekly.
🆕 The current penalty system in Article 103 of the Capital Markets Law
Article 103, as reported in the decision and applied on the date of the event, provides for an administrative fine of twenty thousand to two hundred and fifty thousand TRY in case of breach, and states that where a benefit was obtained through breach of the obligation, the fine cannot be less than twice that benefit. The article has been amended twice since the date of the event:
- Under the sentence added by Law No. 7222 (2020), legal entities may be fined up to the higher of 1% of the gross sales revenue and 20% of the pre-tax profit in their latest independently audited financial statements, taking into account the seriousness of the breach and the number of victims affected.
- Under the ninth paragraph added by Law No. 7518 (2024), costs such as commission, tax, loan interest and consultancy fees are not taken into account in calculating the benefit; nor is it examined whether the benefit was converted into cash.
Taken together with the approach the Council of State upheld for an act dating from 2016, these amendments show that in allegations of pricing against the client, the risk of administrative sanction today may carry much heavier consequences.
💬 Common questions
Can brokerages apply different spreads?
Does the lack of a numerical limit in the legislation make the fine unlawful?
Does the Arbitration Board's decision affect the SPK fine?
Where does the decision stand in the investor's compensation action?
For detailed information and legal support, you can contact Savun Law & Consultancy. Contact details are on the contact page, and other decision assessments are in the Precedent DecisionsTR archive.
This article is for general information; its content has been compiled from the reversal decision of the 13th Chamber of the Council of State published on Bedesten (mevzuat.adalet.gov.tr) and from the first-instance and appeal stages reported in the decision. The identities of the parties and investors are anonymised in the source and are not included in the article. The assessment is based on the legislation at the date of the event and on the price comparisons in the case file; different results may be reached in cases with different facts. Savun Law & Consultancy cannot be held responsible for applications, lawsuits and defences made on the basis of this article.
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Have a question? Attorney Veli Savun answersThis page is an English adaptation of our Turkish article Forex'te Bariz Spread Farkı – Danıştay 13. D 2024/5786.
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