Francesc Riverola,
Good morning everyone
The National Futures Association (NFA) submitted on Monday December 9th 2008 to the Commodity Futures Trading Commission (CFTC) proposed Compliance Rule 2-43 regarding forex orders. This proposal was approved by NFA’s Board of Directors on November 20, 2008.
Now, the NFA is waiting for CFTC’s review and approval of the proposed amendments.
The two most important changes NFA’s proposal bring along are as follows:
1. Price Adjustments: ”A Forex Dealer Member may not cancel an executed customer order or adjust a customer account in a manner that would have the direct or indirect effect of changing the price of an executed order…”
These means that new compliance rule will permit FDMs to adjust executed customer orders in very limited circumstances.
2. Offsetting Transactions: ”Forex Dealer Members may not carry offsetting positions in a customer account but must offset them on a first-in, first-out basis…”
The NFA believes that new compliance rule will address FDMs strategy referred to as “hedging,” where customers take long and short positions in the same currency pair in the same account. NFA is concerned that customers employing this strategy do not understand either the lack of economic benefit or the financial costs involved.
Read full proposal here: http://www.nfa.futures.org/news/PDF/CFTC/CR2_43_ForexPriceAdj_112408.pdf
These seems to be a great step forward in setting up a professional FX market environment in the U.S.
So far, I like very much what NFA’s is proposing and moving forward
Francesc
It will be interesting to see whether FDMs use the same policy for clients outside of the US.
We will likely see a two tier policy.
Ed
What!!! No hedging. It’s good for FDM, yes. How could this be good for traders?
I do think that price adjustments regulation is going to be very good for traders…. hedging is another history