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Emergency Meeting Regarding the New CFTC Proposal‏

Discussion in 'General Forex Talk' started by Forexwatchman, Jan 20, 2010.

  1. Forexwatchman

    Forexwatchman Sergeant

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    In response to the CFTC's new proposed regulations which would limit spot forex leverage to 10:1, FXStreet.com are organizing an emergency online town hall meeting so that everyone can learn about the details of the proposed rules, how they will affect you and your broker (and forex in general), as well as what we can do as a community in order to organize a united resistance. The meeting will take place at 14:00 GMT tomorrow, Janurary 21st.

    I am very proud to announce that both FXStreet.com and FXCM have now joined in taking bold, public stances by letting their opposition to the proposed rules be widely known, and by mobilizing all their users and clients to fight against this absurdity. Considering the potential risk they are taking by standing against their own regulator (a first for a company so large), I commend their actions.

    Please keep in mind that this is not a US-only issue. The NFA also intends to try their hand at enforcing US regulations on offshore brokers and their clients beginning April 1st. Their argument is that brokers (and their IBs) who have so much as one US-based client need to be registered members (great way to increase funding). This is why you see companies such as FxPro dumping all their US accounts. Do you like the idea of America playing "world police"?

    Please visit Francesc’s Weblog » Live Coverage: Open Discussion about the CFTC 10:1 Leverage Proposal for more information.
     
  2. Black Knight

    Black Knight Private, 1st Class

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    Thanks for posting this, Watchman.

    Some other links of interest....

    Information on how to submit your formal complaint to the CFTC:
    http://fx-knight.com/smForum/index.php?topic=1027.msg5068#msg5068

    The full text of the CFTC proposal (much more in there than just 10:1):
    http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/forexrulesproposal.pdf

    Public comments received so far:
    http://www.cftc.gov/lawandregulation/federalregister/federalregistercomments/2010/10-001.html

    On-going updates & discussion:
    http://blogs.fxstreet.com/francesc/...kers-to-be-behind-cftc-101-leverage-proposal/
     
  3. clem699

    clem699 Sergeant

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    Tanx watchman for the info,i have actually visited the weblog although the meeting is over but the issues discussed are their for everybody to read.we hope that this war is won at the end of the day.
     
    #3 clem699, Jan 21, 2010
    Last edited: Jan 21, 2010
  4. PipStar

    PipStar Sergeant

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    There is no chance of this happening since NFA or even U.S government have no jurisdiction on other countries operations.
     
  5. Black Knight

    Black Knight Private, 1st Class

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    Leslating Across Borders

    Their argument is that if you have US clients, you fall under their jurisdiction. Offshore brokers will soon have to decide whether to dump US clients or adopt US rules.

    FxPro is already dumping US accounts. FXCM UK has already issued notice that foreign IBs will lose commissions from their US clients unless they register with the NFA by March 31st.

    NFA themselves have no jurisdiction outside US borders, yes - except upon their broker members, who will then in turn enforce for them (not doing so is violating their compliance requirements).

    Far from "can't happen"... it IS happening.

    Have a peek at this article:
    CFTC Forex Proposal; US Retail Market to Disappear?

    There are far worse things in this proposal than just 10:1, but at least 10:1 got everyone's attention enough get off their butts and start taking action.
     
  6. Forexwatchman

    Forexwatchman Sergeant

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    We'll be back at it again tomorrow! Please join me at:
    Francesc’s Weblog » CFTC to limit leverage; The debate with Andrei Pehar and Dirk du Toit
    This time Dirk du Toit - CEO and Chief Trader at DayForex and author of "Bird Watching in Lion Country" and James Bibbings - President and CEO of Turnkey Trading Partners and former Supervising Auditor for the National Futures Association will be the lead discussion experts. Do not let this issue fade into the background! Stay informed, and stay aware of what the next step is in fighting this enemy to retail forex!
     
  7. Forexwatchman

    Forexwatchman Sergeant

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    My highlights from today's meeting:

    FXstreet.com:
    “But the market has existed JUST FINE without them. There are occasional problems, like Crown and FXQL…” Pehar continues, “but [these were nothing] compared to how many billions were lost in bank failures and sub-prime mortgages.” He concludes, “considering FX’s de-centralized nature… I think we have shown EXEMPLARY self-regulation!”

    “Cutting the US market out of FX entirely will significantly impact the rest of the world’s trading as a great deal of liquidity will be wiped out.” said James Bibbings, President and CEO of Turnkey Trading Partners he also comments that “Of course we cannot think for the CFTC; we can only anticipate the progression of what’s to come should this bill pass.”

    Incidentally, in case you do not have the time to read the entire 193-page proposal, James wrote an EXCELLENT article summing up the main points, as well as their implications: CFTC Forex Proposal; US Retail Market to Disappear?

    Andrei Pehar:
    When the CFTC was written into being by Congress in 1974, the US Treasury immediately complained that futures overseeing currency would lead to conflicts of interest.

    Andrei Pehar:
    In what later came to be known as the "Treasury Amendment", the line was clearly drawn between futures and forex... until it was challenged (by the National Mortgage Association of all things) in 1985. That is what started the cascade effect which led us eventually to where we are now.

    Andrei Pehar:
    The CFTC works closely with the CME and knows what is best for the futures market. While some oversight is certainly needed, the root of the question starts with whether the CFTC (and by extension the NFA - which is a trade organization of futures brokers and not part of the government at all) is the best-qualified or knowledgeable in the particulars of our market. Part of the problem stems form the fact that they believe it should be JUST LIKE the futures market, and do not consider its unique differences.

    Andrei Pehar:
    The Regulatory Flexibility Act ("RFA") of 1997 requires that agencies, in proposing new rules, consider the impact of those rules on small businesses. And I fele that the CFTC has not properly considered this issue - especially where crossing borders and enforcing US rules on non-US entities is concerned.

    Andrei Pehar:
    I think the regulators role - and this gets to the heart of my complaint about the proposal as written - is to protect traders from fraud and bankruptcy of their first due to mismanagement or under-capitalization. Where they CROSS the line, in my opinion, is when they start telling the traders HOW to trade.

    James-Turnkey Trading Partners:
    On this topic the major issue I see with the leverage requirement is not actually the reduction in leverage itself. Rather I see the problem being that experienced and reasonable traders will have to deposit additional funds into entities which are not protected under US bankruptcy law. Funds cannot be segregated at FDM's/RFED's so in my opinion changing to 10:1 actually increases client risks in this regard.

    Andrei Pehar:
    I am all for regulating marketing practices and materials. As a matter of fact, every newsletter, webpage, or flyer is already required to be approved by our broker partners' legal and compliance department. I think what the CFTC is proposing to di is double-regulation of IBs. Our marketing materials are already proofed. I'm not sure why an IB needs to be capitalized or audited (especially by a foreign body), since the bankruptcy of an IB would not effect their clients ONE BIT.

    Andrei Pehar:
    And the proposal that the broker "guarantee" their IBs means that IBs will simply cease to exist overnight - no broker in their right mind would take responsibility for someone else's business. That begs the question of who will be left standing between the broker and the trader to represent the TRADERS' interests.

    Andrei Pehar:
    As is, I can't help but conclude that the CFTC in reality has two motives beyond just "keeping traders safe": 1) help the futures industry regain the foot hold it lost when retail forex gained in popularity (due to superior trading conditions) and 2) increase their membership revenues (in one article last year, I remember reading how the CFTC was saying their computer upgrades were overdue due to a lack of funding).

    James-Turnkey Trading Partners:
    Be sure to read the CFTC's proposal and remember to thoughtfully express your opinions good or bad to the CFTC directly. Try to think of solutions that would work for you and include them in your response. Attacking the CFTC will get you no where, but a thoughtful presentation with possible solutions may be more fully considered. Also if you have any further questions or are looking to move forward with registration consider working with a firm such as mine.
     

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