Proposed NFA Capital Requirement - page 61

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Linuxser:
Well,

Before write just because "somebody told me" or "I hear about this".

I strongly suggest to take a read to the full document.

I do not agree with leverage limitation. Specially because futures allows 20:1 leverage.

Forex could allow 50:1 as maximum. Which a "common sense" leverage.

However, we need to understand the full picture and not only broker's words.

Forex: Still an non centralized market. So, Brokers should made and arragement and provided equal quotes before regulations fall over them.

$576 million in civil monetary penalties. An overwhelming majority of these cases have involved solicitation fraud.

Plus. the Justice system overload (lawyers will be happy)

Anyway, if this new regulation is approved you can still trade currencies on CME.

The latest worldwide slowdown had origin on leveraged products.

The latest worldwide big bankruptcies had origin on bad management and overexposed risk with leveraged products.

However, the paper have several mistakes and brokers does not say anything about.

First, there is no mention about micro lots. Which fortunately will die with new regulation.

Second, there is no mention to the "infamous" fifth digit. Another broker's smart creation.

This "Alliance" could easy make an arrangement with the authorities and set leverage to 50:1 and restrict other practices.

Last.

This "Alliance" says people will move accounts outside US looking for higher leverage. Maybe yes.

However, the main problem, that this regulation or any other can't prevent is people attitude.

People will keep looking for 400:1 just for cry a couple of hours later.

People will keep jumping into trading without the homework just for cry a couple of hours later.

People will keep thinking with the shoes just for cry a couple of hours later.

Maybe, litigation due to unfair practices or scam can be prevented, yes. But will increment the work for the State Department and collapse embassies

Regards.

Hi Linuxser,

You make very valid points in your post.

The forex brokers do not oppose regulations meant to create a safer trading environment for traders and cut down on fraud. The requirement for referring brokers and money managers to become registered will help protect against forex fraud and ponzi schemes which hurt investors and traders.

The requirement for Forex Dealer Members to maintain a minimum capital of $20 million was enacted last year by the NFA and FDM's currently meet those standards. And the forex brokers in the US are currently required to register with the CFTC.

These steps, new and reiterated, are positive towards creating the safer trading environment.

Where we disagree is with the proposals limitation on leverage to 10:1 and the effect it will have on traders decisions where to open their account. We believe the restriction will cause many traders to go overseas potentially to unregulated brokers offering more flexible leverage where there are no capital requirements, no registration requirements, and no oversight by the CFTC and NFA.

Here is how the reduction in leverage to 10:1 would affect the amount of margin in USD you are required to set aside for a 10k mini lot position in one of the 4 major currency pairs:

Current Margin Requirement in USD:

EUR/USD: $160

USD/JPY: $100

GBP/USD: $180

USD/CHF: $100

Margin Requirement at 10:1 leverage

EUR/USD: $1,600

USD/JPY: $1,000

GBP/USD: $1,800

USD/CHF: $1,000

Traders will be faced with the choice of either depositing additional funds to trade the same amounts they have been trading, or move their account to a non-US broker offering 100:1 leverage.

-Jason (FXCM)

 
 

I went ahead and sent an email to CFTC. I hope everyone here take the time to send letters or contact their local rep about this. It is very important.

 

I just did too.

Now, does anyone know WHEN they plan to implement this? May? June?

 

I also sent a mail...

Do you realise that proposed regulation will increase our transaction costs? To achieve the same profit with 10:1 leverage, we will have to trade 10x larger positions...

Isn't regulation supposed to protect the retail investors? Or is the regulator of the opinion that retail investors are taking advantage of the brokers?

 
 

The CFTC has started adding comments received by traders to their website:

http://www.cftc.gov/lawandregulation/federalregister/federalregistercomments/2010/10-001.html

The Forex Dealers Coalition has launched its website, and you can also send an email directly to the CFTC from the website if you want to send comments: FX DC | Foreign Exchange DC

 

Good to hear.

 

yes. I made comments. Never seen so many people online united before.

I have non-usa accts but am concerned because a lot of usa-based brokers like mbtrading and ibfx i was seriously considering opening new accts with.

 

I sent my negative opinion to CFTC.

But there are some points I can't understand.

How it mentioned above brokers can make micro- and nano-lots

and by this way keep their clients with small deposits from run away.

What can prevent this?

The people in CFTC are not fool. I 'm sure they know brokers can

easy evade proposed 10:1 leverage. But they propose it. Why ?

What is the covered sense in it?

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