Francesc Riverola,
Hi everyone
Recently I had a nice talk with a top executive of the U.S. Retail Forex Industry. We were talking about the impact that the latest ruling is having on the Forex business.
Under his view, 4 new rules have vast potential to change things in the United States:
1. NFA rule on limiting leverage to 100 to 1 will be enacted very soon
2. NFA rule that mandates that customers receive price improvements on limit orders. It potentially has very wide implications for all firms as it may mean best execution standards. If the NFA reads a typical order in FX which is “hitting a price” as a limit order as well it will mean best execution applies to all orders and that will be very problematic for market makers.
Time isn’t certain on this, but its this year.
3. NFA rule mandating that if firms re-quote negatively they must re-quote positively continuing the theme above of giving customers the absolute best price available at the time. Same time line as above.
4. CFTC is months away from passing IB registration requirements. Although this is one year over due they did just get their new chairman so now he will need to “prove” himself as a tough policeman in the financial arena. The new rules will mandate that all IBs and money managers for US clients have to register with CFTC/NFA.
The specifics of what exact capital requirements and fees will be is unsure but its likely to mirror the futures industry’s.
What’s your opinion about this?
Francesc
Note: Follow this theme at FXstreet’s Forum:
Hi Francesc.
I’m really worried about it.
If things really should happen to go the way you said (especially concerning about NFA new rule limitating leverage from 100 to 1), well I think that maybe I’d better get a job and quit the forex trading forever (I am a full time trader).
Are you a full time trader too ?
What’s your view about it ?
I welcome these steps to regulate the market. Leverage over 100 is disastrous and mainly used by small traders and in the process they are wiped out.
I could not understand “price improvements on limit orders”. Sorry.
Greetings Francesc!
I, too, welcome the tighter Regulatory Issues, as the more Clarity we have within The Framework will increasingly help to eliminate suspect and unscrupulous Entities.
The consistent Increases in Capitalization is Sound for the entire Industry, as is the lower Leverage Aspects.
While all of this is highly Debateable, as long as The Regulations are Sound and rather Objective, Traders surely can work within their Structure through Implementation and Adaptation.
Sincerely,
- Tim -
In the equity markets regulators require a $25,000 account to day trade. Do you see a similar minimum account size to be set by regulators in the near future?
Hi guys
No, I’m not a full-time trader, in fact I’ve not placed a real trade in my life, only in demo accounts and I blow it in a matter of a few hours in an intensive 2-days training we had in the office. I could say I am a guy for everything that knows a little about everything, advertisement, web positioning, forex trading, management…. Chico para todo we call it here
Having said that, I’m quite concerned that with the new decisions about leverage, hedging, etc… NFA will only get in exchange a fly out of the States of those willing to remain in business. We have already seen a big pick up in the number of contacts we receive from traders asking for moving their accounts from the US to Australia or UK.
What do you guys think?
See the email recently received from FXCM: “The primary regulatory authority for forex in the United States, National Futures Association (NFA), has implemented new requirements that will have dramatic consequences for your MT4 account.
Hedging functionality has already been removed, and after July 31, 2009, First In, First Out execution will be required, which mandates that the first order in must also be the first order closed. Regulatory requirements in the United States will also likely restrict Forex Dealer Members from offering more than 100:1 leverage on major currency pairs and will be limited to 25:1 leverage on non-majors”
“What does this mean for your MT4 account?
To date, we have received no indication from MetaQuotes that they will be able to comply with First In, First Out execution by July 31, 2009. As such, the combined changes brought about by NFA Compliance Rule 2-43 will mean that traders will no longer be able to trade MT4 with U.S. regulated brokers. Assuming that MetaQuotes is able to comply, there will still be major implications:
Traders will have fewer order choices
Traders will have drastic limitations to their risk management options.
The vast majority of Expert Advisors will no longer be functioning
This is crazy, it can’t be real. You are right it will change FX trading forever. To move an account in USA to UK, isn’t it likely the FSA will make these same changes? We need protection from these regulators. The only people this will affect are retailers. The big players will be able to trade from accounts anywhere in the world easily. The bankers have stolen billions from us around the world and now they want to be sure we can’t make our funds back by trading FX.
The NFA non-hedging rule had destroyed the ability of my EA to function, forcing me to take my investment to a non-NFA broker outside the USA- I had been able to make progress until this happened, am still trying to recover. Now, this new ruling is more ‘help’ that I certainly did not ask for- I do have the observation that these new actions will make USA NFA brokers even more uncompetitive with the rest of the world that isn’t being interfered with in this manner. Forex is the largest market in the world, and I can see that the little guy is going to be kept little by these bullies. I can now imagine that we will be prevented in the future from effectively trading forex altogether, the way we are with other instruments such as crude oil etc. I am being damaged by this ‘help’.
I think the limit of 100:1 is BS.
Thre is no better way for a noob to learn how to trade live than to throw a few hundred into an account and trade with $1 pips.
They won’t make much,but they won’t lose much either
I just entered forex,
and the FIFO rule hurts me so much
e.g
1. I open multipositions in a single currency
2. I use 1:500 leverage
I have lost several times, and now I finally come up with my strategy on how to not lose
here comes the nfa…
hi i am a new trader i want to know a broker that is realiable to deposit with and the sametime to withdrawal okay
Does anyone really think the NFA is looking out for ‘the little guy’? Come’on everyone the US government is concerned that they don’t have enough control of Forex; I can almost guarantee you the US government will impose a ‘trading fee’ in the future to generate income for the failing US government. They will do it in the stock market, futures and then the Forex market; why? because that is where the money is at!
Socialism is our future, the US government does not look kindly on entrepreneurs like capitalist pig traders.