If the CFTC does this, say goodbye to retail forex in the USA

[YellowCab]

Great article

Thanks for keeping us informed.... Was upset reading the comments further down and seeing Seargeant and his picture showing a baby smoking... Now thats sick and vulgar showing very bad taste and should be removed.

 

[Focused]

George Washington

This all reminds me of something that George Washington said. These aren't his exact words, but the gist was this: There should always be as little government as possible, because government is basically FORCE.

 

[ManuelAsmar]

how can i pass this article around

i wanted to thank you for this article. i live in Italy and was getting ready to open an account with a US firm. Now i am thinking otherwise.
I wanted to pass your article around to some of my trader friends but i see no Retweet or Facebook comment buttons to make this article go viral. do you think you could add those in or am i not looking in the right place.
will definitely write to the address you gave us.
Good work.

 

[378kris]

CFTC real purpose

It must be obvious that the CFTC does want the retail forex market out of the U.S.. Apparently they don't want the hassle of oversight of the numerous scams and unscrupulous companies engaged in the industry. By implementing the 10:1 leverage they have got to know the entire industry will go offshore where the CFTC has no control. So the position of the individual traders, especially noobs, will be much worse than it is now due to the lack of control by the CFTC--- go figure. Are these guys elected (no), so who appoints them and are they elected ???

 

[P Jordan]

UK bound to follow?

Hello all, first post! I am from England
Firstly thanks to Sir Pips , Felix and company for excellent insights and news trading tips.

With regard to new proposed laws in the USA, the UK is bound to follow if this is passed in the USA.

"If America eats something bad, the UK gets the runs!"

Health and Safety has become a major issue in the UK.
To the point where most people beleive we live in a police state.

Fight this with all your might, and good luck.

all the best
Trish

 

[Martian Cioana]

American government sux sux sux ... glad i`m an european member.
Nice words Ricex.

 

[Pharaoh]

Not sure if this is correct or not, but in the 193 page document I couldn't find anything about a 10:1 leverage. what I did find regarding this matter:

Paragraph (a) of the proposed rule change states that no member shall permit a customer to initiate a forex position (as defined below) with a leverage ratio greater than 1.5 to 1. Thus, at the time a customer initiates a forex position, the customer must deposit at least 2/3 of the notional value of the contract. Using the example in supplementary material .01, a customer entering into a forex contract representing $750,000 of a foreign currency must have an initial deposit of at least $500,000. The proposed rule change differs from the leverage limits in the FCM channel, where depending on the foreign currency selected, a customer at 400 to 1 leverage would need only an initial deposit of $1,875.

Top of page 5:

"engaging in retail forex transactions to collect security deposits in a minimum amount in order to prudentially limit the leverage available to their retail customers on such transactions at 10 to 1."

It looks like the 1.5 to 1 was a FINRA proposal that got amended to 4 to 1. FINRA is a rarely used (by retail forex brokers) alternative to the NFA in the USA. See footnote #87 on the bottom of page 37 for more info on FINRA's rules on leverage.

10:1 at least lets you do some very limited trading. At 4:1 or below, I think I'd rather just go to the bank, exchange some currency, and let it sit in my safe.

 

[sanlorenzo]

Over-regulation

I live in the UK though my brother-in-law lives in the US, so we often compare notes. I think all traders would be well advised to relocate (account/s) to a well regulated offshore location regardless of the current fashion for domestic over-regulation (aka 'big govt.'), as this not only sends a signal to govt. but keeps some more revenue out of govt. coffers. This is important because as govt. gets bigger, it increases taxes so it can pay the otherwise redundant employees it keeps adding to the nanny-payroll.

As every govt policy is directly or indirectly dependent upon tax revenues - either make tax the centre-piece of the next election by voting (and encouraging others to vote) for the most favorable tax regime, and / or make your own tax-regime by going offshore. Broker regulation in places like Switzerland is just as reliable (maybe even more so) than the US or UK (remember many locations have dual taxation treaties), so pick the most favorable for your location/domicile.

Bottom line - if trading is your main source of income, save yourself some money & hassle and get an expert opinion.

 

[Music Man]

Music Man, who is "CFX" that you're referring to here?

The Collective FX. They are not "broker/dealers", as the law describes. And if the CTFC does try to muscle in, I am pretty sure the operation will simply move offshore. If that doesn't work, then I'll move offshore as well.

However, wouldn't the biggest risk to Forex trading ultimately come in the form of bank regulation? There is a big anti-capital political constituency worldwide. If liquidity providers are somehow prohibited from servicing leveraged contracts, then it wouldn't matter where you try to trade.

Of course, in the media, there is no voice for the individual Forex trader. So, the voters cheer restrictive regulations on, believing it only affects the Bernie Madoff's of the world. They do not understand that one of the few remaining avenues for the common citizen to lift themselves up out of wage slavery is being removed. And if the media does decide to report on these matters, they will likely portray it as the equivalent of gambling -- a vice to be stamped out.

The Forex industry has only recently come to the attention of the public, mainly through TV ads from brokers. In the current political environment, it may be time for the Forex industry to start doing a little PR for itself. If voters perceive Forex as something that they can benefit from, then they may demand that politicians protect Forex traders' interests, wishing to be Forex traders themselves. Otherwise, only the interests of those who don't want all these pesky retail Forex traders underfoot will be served.

MM

 

[MereChase]

Connect the dots

I hate to be the bearer of even more gloom & doom, but what everyone needs to understand, in addition to 10-1 leverage, is they're going to prevent us from moving money offshore by enacting legislation elsewhere; therefore this won't be something easily gotten around by opening a foreign account.

Furthermore, I'll gladly write a letter which includes multiple convincing arguments against enacting this absurd rule, including the hundreds of thousands I have invested in this business, and I'm also in the process of contacting my congressman which I recommend everyone else follow suit with; however, the fact of the matter is neither of these will do any good. This is because our opinions & welfare is MEANINGLESS to the CFTC & Gov't. They're going to do whatever the heck they want, and the mere fact that this is proposed means it will soon be, as occurred with the NFA's proposed leverage reduction exactly one year ago. How many times have we seen public comments/opinions change a proposed rule?

The Constitution was tossed out along time ago.

It's way past time for a revolution folks!