CFTC Forex Rules In Effect October 18, 2010

[georgezorro]

reduce leverage

Thanks for the info. I've checked the CFTC ruling.

The good news - 50:1 on "majors" - this I can live with. The bad news - 20:1 on "other currencies".

The really bad news is twofold. First, the commission gets to review these leverage periodically, so this could easily be changed. Even worse, the NFA can change these when they think it's necessary, and can also designate and change what currencies they classify as "major".




So, if the NFA thinks the EURUSD is either too volatile or not volatile enough, they can reduce the leverage requirements or decide that it's not a "major" currency.

There are already rumors circulating that some part of this or another ruling will end the ability of US Citizens to open or keep accounts with offshore brokers. Maybe this is just being circulated by US brokers trying to keep business from moving offshore, and maybe it's real. If you have any good info on it, post it here.

You can read the full text of the ruling here - http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/forexfinalrule_qa.pdf

so it's mean US broker that regulate CFTC will reduce their spread for the max is 1 : 50 major currency???

 

[MikeDnC]

Re: What's the practical difference?

Is there a practical difference between trading 1 mini lot at 100:1 versus 1 standard lot at 10:1, other than the margin requirement? It's the same return per pip move, right? You are just limited by your (now higher) collateral requirements. Yes?

Correct, the return per pip will remain the same.

Leverage and Margin just mean that you have some max position-size for your current account equity. So you can only multiply your "buying-power" by 20 or 50 at most.

This ceiling can really start to be felt when you put on a trade with a smallish stop-loss, of say 15-30 pips: If you want to be risking a fixed % of your equity on the trade (say 2% or 5%), then you're going to need a largish position-size on the trade. So you may only be able to risk 1%, for example.
For swing traders (i.e., using larger stop-losses), it should not be such an issue.

What authority do these people have?

The proper place of government to regulate or leave-alone is a matter of continual debate and controversy in the US, but the trend over at least the past century has been a steady and gradual increase in Federal Gov't size, and powers.
IMO, Unfortunately with the current systems in place, the best people for the job don't go into government.



Be alll that as it may, I for one will not let some pesky limitations in my environment keep me from reaching financial freedom. Adapt or go around.

 

[summer7]

:unhappy::unhappy:whos standing up for the people.We all sent in letters that amounted to a no vote, so whos's our spokesman?

 

[MikeDnC]

So basically the pip value on a mini lot of eurusd is the same, but instead of needing 10 dollars us to leverage it you'll now need 20 dollars? am I understanding that correctly?

A "mini-lot" is usually 10,000 currency-pair units, so instead of needing 100 dollars, you'll need 200 dollars.
Note that this is only for USDxxx pairs (assuming your account is denominated in USD). For non-USD xxx pairs such as EURUSD, the margin requirement has gone from about 130 dollars (100x1.3000) to 260 dollars.

If that is correct then the fat cats and banks will just pony up the extra cash and not worry about it, but that will pretty much put an end to " I started with a 250 dollar mini " stories, this is going to affect the smaller bankrolled traders, its gonna discourage people that are new to forex, I just can't get behind this new legislation, it seems the target is the ppl who don't have a lot of money, nope, not a fan of it at all.

As Gerald Celente says lately, "It's squeeeze the little guy."



Thanks yall for the nice document links.

 

[MikeDnC]

:unhappy::unhappy:whos standing up for the people.We all sent in letters that amounted to a no vote, so whos's our spokesman?

Maybe our feedback was the reason it didn't become 10:1

 

[Carlo Colombo]

Hello guys, I live in Italy so all these stupid CFTC stuffs don't apply here.
But I receive mails from Collective FX, seems that these rules are only for market maker brokers, for pure STP broker that don't gain on client losses these rules don't apply.
So, why US brokers don't change their status and become all STP or ECN?

 

[MLT]

Once again our wishes were ignored!

Well Guys,
I see once again the people who serve in our government completely ignored the wishes and desires of the people. This has become so prevalent that's it's no wonder most of us have disdain for the government and believe that will continue to escalate. I think a few forget that they are the "servants" for the common good. But it's apparent this has been lost for way too long. Instead it's largely been replaced with self-serving, arrogant people of little experience and little wisdom.

I could almost place a wager that of the thousands of letters and email the CFTC received, that not one was wanting the change. While 50:1 is not terrible, it's the fact that 100:1 was acceptible to most of us and was strongly expressed by many. So as I told them in my second email, that if they do change it because so many were against it, it will have nothing to do with "saving" the amateurs from themselves as a fool will find other ways to be foolish. Those of us who have paid our dues wanted things left alone. I guess once again the government cannot be trusted to serve the common good and interest of those who pay their checks.
I suspect there's no one on that commission who even trades forex otherwise this may not have passed.
Guys, I really wish we could trust the government to make good decisions, but we can't. Do I believe everyone working for government is corrupt or self serving? Absolutely not! But it appears there's an undercurrent running throughout that's "hell" bent on running this great country's free market trade into the ground. I do believe it's by design as surely we couldn't have this many arrogant and down right stupid decisions coming this fast. Concerning the offshore aspect, I have no infomation on this, but if they proceed to try and stop us from having offshore accounts, then their true motive will shine thorough load and clear. At that point, they will have to be stopped! For they would have certainly over stepped their bounds by a long shot.

I'm for a free market America! You start letting a few elitist take that away and you'll see how fast we become another up and coming third world environment. Guys you better stand up! Our financial freedoms are being erroded one restrictive law after another AND it's by design. So let's stay vigilant!

 

[abdegraff]

Q&A from CFTC

Hi guys,

I thought I'd link to the CFTC Q&A. This should bring about some clarity. it states clearly only United States financial institutions are permitted to act as counterparties:

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/forexfinalrule_qa.pdf

Hope this helps.

Some questions: First, there seems to be some confusion regarding whether US traders can continue to use "foreign" brokers (like FXCM UK or Dukascopy) to avoid the new regulations. Many people assume that this will still be OK, but at least one broker (IBFX) says otherwise:

Interbank FX Supports CFTC Final Rules Regarding Retail Forex Transactions

So does anyone know what the real story is? Does the new ruling have the power to prevent US traders from trading at FXCM UK and Dukascopy etc, or not?

I agree with Pharaoh. I can live with 50:1. What I can't live with is 20:1 for "other currencies". I would imagine that the usual currencies (EUR, USD, GBP, JPY, CHF) would certainly be included in the list of majors but if others like CAD, AUD and NZD are excluded them I'm screwed.

 

[duck]

Well Guys,
I see once again the people who serve in our government completely ignored the wishes and desires of the people. This has become so prevalent that's it's no wonder most of us have disdain for the government and believe that will continue to escalate. I think a few forget that they are the "servants" for the common good. But it's apparent this has been lost for way too long. Instead it's largely been replaced with self-serving, arrogant people of little experience and little wisdom.

I could almost place a wager that of the thousands of letters and email the CFTC received, that not one was wanting the change. While 50:1 is not terrible, it's the fact that 100:1 was acceptible to most of us and was strongly expressed by many. So as I told them in my second email, that if they do change it because so many were against it, it will have nothing to do with "saving" the amateurs from themselves as a fool will find other ways to be foolish. Those of us who have paid our dues wanted things left alone. I guess once again the government cannot be trusted to serve the common good and interest of those who pay their checks.
I suspect there's no one on that commission who even trades forex otherwise this may not have passed.
Guys, I really wish we could trust the government to make good decisions, but we can't. Do I believe everyone working for government is corrupt or self serving? Absolutely not! But it appears there's an undercurrent running throughout that's "hell" bent on running this great country's free market trade into the ground. I do believe it's by design as surely we couldn't have this many arrogant and down right stupid decisions coming this fast. Concerning the offshore aspect, I have no infomation on this, but if they proceed to try and stop us from having offshore accounts, then their true motive will shine thorough load and clear. At that point, they will have to be stopped! For they would have certainly over stepped their bounds by a long shot.

I'm for a free market America! You start letting a few elitist take that away and you'll see how fast we become another up and coming third world environment. Guys you better stand up! Our financial freedoms are being erroded one restrictive law after another AND it's by design. So let's stay vigilant!

Well said and worth repeating!!!

 

[Pharaoh]

Hello guys, I live in Italy so all these stupid CFTC stuffs don't apply here.
But I receive mails from Collective FX, seems that these rules are only for market maker brokers, for pure STP broker that don't gain on client losses these rules don't apply.
So, why US brokers don't change their status and become all STP or ECN?

Collective FX might have found a loophole. Some of the CTFC statements say "counterparties", which would exempt true STP/ECN brokers, and others refer to anyone offering retail forex. I hope that what Collective FX is doing works and is repeated by other brokers. At this point, it's too early to be 100% sure if being STP/ECN will escape all those rules or not.