Francesc Riverola,
Some Interesting additional information about the controversial proposal of the CFTC to reduce leverage in the United States from 100:1 to 10:1
POLL
FXstreet.com is running a poll about this issue: Do you agree with the CFTC proposal to limit leverage 10 to 1?
From Saturday to Tuesday, the poll got 320 participants. 88% say NO to agree with CFTC proposal, while 11% say YES.
To participate in the poll, just look for it in the left hand side of this blog
THE COMPLIANCE VIEW
CFTC Forex Proposal; US Retail Market to Disappear?
By Turnkey Trading Partners
On January 13th, 2010 the Commodity Futures Trading Commission (“CFTC”) issued a press release regarding its highly anticipated rule proposal for the regulation of retail forex transactions. The proposal seeks to adopt a new regulatory scheme to implement the CFTC Reauthorization Act of 2008. In particular it strives to address the way the federal agency will deal with off-exchange transactions in foreign currency with the retail public. Currently the CFTC’s proposal is open for public comment for sixty days (60) and was published in the Federal Register on January 7th, 2010. Before anyone can comment though, they’ll have to fully understand what the proposal says.
THE RETAIL FOREX BROKER VIEW
PFGBEST Media Advisory Concerning Forex Regulations
… One key component of the proposed rules that PFGBEST will comment about concerns a likely unintended negative consequence. A leverage structure change in retail forex margining from 100 to 1 to 10 to 1 will force a great majority of forex business to be done offshore and thousands of U.S. jobs would be lost in the derivatives industry to European and other foreign competitors. Worse, U.S. forex customers would not be protected by the CFTC. PFGBEST feels that U.S. forex customers deserve the best protection available.
Read also:
CFTC Proposes Unpopular Regulations on Retail FOREX Transactions by Ryan O’Keefe
Sequential attack on Fx traders by enforcing more and more tightening regulations by Dr. Sivaraman
Goodbye US Forex industry: Part 2 by Michael Greenberg
1:10 Leverage Limit? Keep Up the Fight by Forex Crunch
Francesc
[...] it will make them less competitive with their (lightly regulated) foreign counterparts. Based on an online poll, it seems the majority of forex traders are as well. On forums, many have promised to shift their [...]
As a Forex systems trader, what I find astonishing is that retail Forex traders (or any traders for that matter) would actually WANT to use leverage greater than 10:1. A 100:1 a 1% movment against your position is the account wiped out, yet to be effective a stop loss has to be bigger than this.
CFTC Proposal - Jeff Langin Letter To FXDC
February 4, 2010
Foreign Exchange Dealers Coalition (FXDC)
Re: CFTC Proposed Retail Forex Regulatory Changes
To Whom It May Concern.
My letter to you addresses both your concerns as well as the concerns of the CFTC.
I have read the complete script of the CFTF proposal and find a distinct lack of positive direction within its contents.
Clearly, investor protection and integrity in the Forex Industry is of utmost concern to all of us.
The CFTC has stated the need to protect Forex investors and has complained of the numerous occasions in which fraudulent actions by unscrupulous/unregulated brokers have caused massive losses by retail traders.
We all favor of a cleaner industry but as it stands the good intentions of the CFTC proposal, rather than making the Forex less hazardous, would likely cause irreparable harm.
As you aware, the first rule of risk in the Forex market is that a trader should never trade with any more capital than he/she can afford to lose. Contrary to its objectives, the principle flaw of the CFTC 1:10 leverage proposal is that of seeking to ward off risk by blatantly disregarding the industry’s first rule of risk.
I live in Canada. I’m a Canadian by birth and as such I have little to gain or lose as a trader by the CFTC proposal. However, I also have many friend and colleague traders who are Americans. Many of them look to me for leadership regardless of their citizenship or mine.
What is the answer to the CFTC proposal? Where is the solution that will help the CFTC, Brokers/Dealers and Investors alike?
I respectfully suggest the answer may be closer than you think. In fact the answer may be right next door to you, in Canada. Please consider in your thinking that Canada has an organization called IIROC (Investment Industry Regulatory Organization of Canada. IIROC is a model which you can use to counter the CFTC proposal and stave off what could be a catastrophe in the making!
I urge you to read about IIROC and Forex regulations in Canada and/or Contact Mr. Bob Wong, Vice President of MF Global Canada at 1-800-268-9294.
Sincerely,
Jeff Langin
Forex Trader and Educator
In spite what everyone seems to be claiming it’s not easy to generate income on-line with currency exchange, particularly without correct education and strong will to learn and act each day, it is just impossible. http://www.onlineforexfuturestrading.com/