Proposed NFA Capital Requirement - page 6
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You heard it here first!
In true tabloid fashion I'm going to give you a preview of an upcoming post by forexsavior:
It's a fair question. And the fair answer is that because FXDD is unregulated and because the average forex trader knows absolutely nothing about their financial status FXDD deserves to be judged on the closest data available. Forex traders conducting their due diligance are truly groping in the dark when trying to evaluate FXDD since they are not licensed by the NFA and do not directly report any financial data to the CFTC. That means that no one is checking in on FXDD to look at their books and make sure they are solvent. No one is checking in on their sales and marketing practices (notice that FXDD is one of the only major forex brokers that states on its website that they offer "Commission Free Trading" with no disclaimer about how they make their money on the spread.) Got a complaint about FXDD and want to file a claim or go to arbitration? Good luck. The NFA or CFTC won't hear your case because they have no jurisdiction so you'll pretty much have to rely on Judge Wapner. In the age of forex fraud I can't see how anyone would allow themselves to roll the dice and take a risk by opening an account with a firm that is completely unaccountable to any government regulators. Doesn't anyone remember RefcoFX? RefcoFX was the unregulated arm of Refco and when Refco went under and Refco's creditors looted RefcoFX's customer accounts the NFA and CFTC sat on their hands and stated they could do nothing because RefcoFX was unregulated.
But in the interest of fairness I'm going to relocate FXDD off the Dead Forex Firms walking list and onto a new list. Call it the "Unknown Unknowns" list becaue no one has any idea when or if FXDD might explode. Now I'm not saying FXDD is a bucketshop or that they are in immediate danger of collapse. In all likelihood the NFA capital requirement increase will have no effect on them (although it remains to be seen how it will effect Tradition.) But since they are unregulated and answer to no one how the hell is anyone to know exactly who or what they are?As you can see, this is genuine National Enquirer material... Note how the author establishes a link between RefcoFX and FXDD... Mind you, this is not a factual relationship and it doesn't matter that the NFA does not protect the accounts of Forex traders against bankruptcy claims endured by Forex brokers, regulated or not... It helps builds the suspense... Knowing about RefcoFX, how could you even consider FXDD... The best part is the repeated use of "fair" and "fairness"; tabloids and FOX News do that all the time... Great stuff!
I think the NFA has gone crazy. They are now demanding a percentage of all trades, requiring everyone in the industry to be regulated by them, and drastically increasing their fees. If I were a broker, I would not want to become NFA regulated.
National Futures Association | News Center
(click the proposed rules)
Linuxuser, I'm going to look over the list of brokers again soon. Have you looked into tax requirements for US account holders in Canadian accounts? Do they get protection too? Are they required to pay any Canadian taxes in addition to US taxes? I'm interested in these answers because it would save me time looking them up myself.
Tradition Group is no longer majority shareholder of FXDD. FXDD and Tradition Group have separate bank accounts. FXDD != Tradition Group. If FXDD wanted to be regulated, I'm sure they could come up with the money. If the amount listed for Tradition Group was all of the money they had, I doubt they could have afforded giving so much money up as prize capital for joining the contest.
IBFX does not have spreads similar to ECN. Never claim that without data please! Even the lowest rung ECN (MBTrading) has decent spreads:
USDJPY 1 pip
EURUSD 1 pip
USDCHF 1 pip
AUDUSD 1 pip
EURJPY 1 pip
GBPUSD 1 pip
USDCAD 1 pip
EURGBP 1pip
GBPJPY 3 pip (yellow alert)
CHFJPY 1 pip
GBPCHF 3 pip (yellow alert)
EURAUD 2 pip (yellow alert)
EURCHF 1 pip
AUDJPY 1 pip
I see the yellow alert currencies flash green sometimes, red sometimes. Red is over 3 pips, yellow is over 1 pip. It is also possible to trade inside the spread.
FIX protocol work is underway, and the connections are close. I'm not going to bother with a broker, I don't like the idea of trading with a broker. I don't see any point at all in using a broker aside from having MT4.
I have the software manual to the Administration panel for MT4. I think I could set up an MT4 broker in 2-3 hours. Pretty simple stuff, only delay might be getting the feed configured if you have a nonstandard one.
In true tabloid fashion I'm going to give you a preview of an upcoming post by forexsavior: As you can see, this is genuine National Enquirer material... Note how the author establishes a link between RefcoFX and FXDD... Mind you, this is not a factual relationship and it doesn't matter that the NFA does not protect the accounts of Forex traders against bankruptcy claims endured by Forex brokers, regulated or not... It helps builds the suspense... Knowing about RefcoFX, how could you even consider FXDD... The best part is the repeated use of "fair" and "fairness"; tabloids and FOX News do that all the time... Great stuff!
I am crushed that you have linked me with the national enquirer! Mind you that is not a factual relationship and it doesn't matter that the NFA does not protect customer accounts when the issue is of capitalization and transparency. In any case couldn't you have come up with a better tabloid rag than the national enquirer? Everyone beats up the Enquirer (after reading it cover to cover of course as you do my posts Zuijlen
) I have always preferred the Weekly World News and try to model my writing style on their witty commentary...
Nations Blows Up
So what happened at Nations? Why was the NFA forced to take an "emergency Action" and shut them down? Well, because it was basically one of the industry's worst nightmares come true. An undercapitalized firm suffered massive losses and was forced to cover them with customer funds. Here is what the emergency action states:
"On Saturday, July 21, 2007, Nations sent to NFA, via e-mail, notice that it had fallen under the minimum required adjusted net capital."
On Monday, July 23, 2007, NFA sent a letter to Nations notifying the firm that as it was unable to demonstrate compliance with the minimum requirements Nations was to cease doing business. That same day, NFA received another notice from Nations representing that the firm had fallen under the required minimum "due to losses in the forex markets." This letter also indicated that Nations was attempting to raise $5 million "to make customers whole." (YIKES! "make customers whole?!" Who on Earth is going to give Nations $5 million?! While nations has been successful at making a fool of their customers they certainly won't be making them whole.)
Nations also provided NFA with a Form 1-FR as of July 20, 2007, which indicates that Nations owes customers trading in on-exchange futures more than $3 million and customers trading Forex more than $5 million. (Wow. What an implosion. They are $8 million in the hole? What the hell were they doing over there going to Vegas and playing craps with customer funds?)
This looks like another messy court case. With financials like this I expect the creditors will be coming out of the woodwork laying claim to what's left of Nations. If they're lucky they might be able to seize a fax machine or two, but as for customer funds, well, looks like some stripper in Vegas got her hands on that money first...
I am crushed that you have linked me with the national enquirer! Mind you that is not a factual relationship and it doesn't matter that the NFA does not protect customer accounts when the issue is of capitalization and transparency. In any case couldn't you have come up with a better tabloid rag than the national enquirer? Everyone beats up the Enquirer (after reading it cover to cover of course as you do my posts Zuijlen
I had posted a response but it mysteriously disappeared... Ah, well, it doesn't matter...
Refco
What about Refco? This is a common refrain I have been hearing from critics of the NFA Forex Dealer Dead Pool. Refco was massive and they went under in record time which proves that being adequately capitalized doesn't matter right? Wrong. While citing Refco is a good sound byte it in no way helps the case of the undercapitalized. Here's why:
First of all Refco was a gigantic octopus of a company that had various affiliates and subsidiaries that were both regulated and unregulated. The two main players in the Refco saga were Refco Capital Markets (the unregulated outfit in Bermuda that was doing all those shady off-exchange trades) and Refco LLC (which was the licensed futures brokerage most traders knew about.) Refco Capital Markets was where the scandal erupted. For years executives at RCM covered up huge trading losses with creative bookkeeping. But when the scandal became public it caused a bank run everywhere at Refco. The bank run occurred even though Refco had adequate capital to handle the huge trading loss RCM had incurred. But that didn't matter because Refco was a publically traded company. As the stock price tanked talk of lawsuits by shareholders accelerated the bank run and that's when Refco's creditors stepped in and pushed the firm into bankruptcy knowing the only assets the firm had were the customer funds on deposit.
Had Refco not been a public company the scandal would have been a one day hiccup and it would have been business as usual precisely because it had a lot of capital reserves. That is a huge distinction that needs to be made. But when undercapitalized firms such as Nations Investments take huge trading losses there is no room for error. It's one and done because they have no capital in reserve. Again, this is why the NFA has issued this proposal. Undercapitalized firms do not have the luxury of taking the kinds of hits that large firms can take. This is also why there hasn't been a single case of a registered forex dealer member with over $10 million ever going bankrupt. So to the critics I say cite Refco all you want but it has no place in this debate unless you want to discuss the perils of being unregulated.
If we do the math another way: Since 1999 there have been 3 failures they paid money on. The combined payout was $15.5 million. Average payout was $5.2 million. If 20 firms go down, that is $104 million. Keep in mind 2 of those "average payouts" were during the stock market boom and not a depression or "market correction".
"12 minutes ago - Associated Press" Stocks skid on lending worries - Yahoo! News
"NEW YORK - Wall Street suffered one of its worst losses of 2007 Thursday, leading a global stock market plunge as investors succumbed to months of worry about the mortgage and corporate lending markets. The Dow Jones industrials closed down more than 310 points after earlier skidding nearly 450."
Once how bad the story actually is on subprime loans comes out, it won't look good. Foreclosure rates are at an incredible high, and that affects subprime loans. All of that subprime loan money failing will take down a large chunk of hedge funds, bond market, etc. Story isn't fully unveiled yet.