Retail forex almost illegal in US
Thanks Daraknor for these usefull infos. Very much appreciated.
FerruFx
I believe this is no bad at all, maybe the commissions would be a problem but Banks and prime brokers knows how much money retailers are moving. They don't want to lose that piece of the market.
Sooner (I hope) we are going to assist to a new class of products, mini lots will be there but maybe not microlots because the cost/revenue.
Same happened with futures and CME recognizes that Minis are the best product launched in the past 14 years.
About *each trader* needs to be registered with the NFA I forget to write in my other post about some case a couple of months ago in my country.
A trader managing accounts from US citizens was be requested by a US court under menace of send Interpol if he doesn't by their own desire. And this trader is not registered with NFA or any US federal agency.
Registration could be done as by a simple agreement included into the Brokers agreement, same as W5.
MBTrading/EFXGroup might be the place for retail traders to go but the commissions are somewhat high. They do support mini lots as well. Since MBTrading is NFA registered for many years to trade stocks and commodities they will likely be fine under the new system. Their client supports mini trades right now. They also have high leverage, but this is essentially the line of credit that they are able to offer.
Now say someone heavily modifies MT4 server or MT5 supports straight through processing with no net trading (100% of trades made are lots in volume). Let's also assume this someone manages to convert MBTrading to work as the order filler for MT4mod. Every trade placed as a Buy goes on account A, and every trade placed as a Sell goes on account B. To close the trades on account A, the sell is entered in. This is STP without net trading.
What is the revenue model for this broker? As far as I can tell the only way they can make money at all is to increase the commissions that they must pay to MBTrading. Because they can't net trade, the leverage options they are able to offer are the same as MBTrading. They must also pay $20 million into an account for the right to do this.
I know this problem well, because I am that "someone" who is modifying MT4 server to trade ECN. The broker that hired me is doing Net Trading because only 1 account with Currenex is used. The main reason to do retail accounts with the broker is not commission (almost nothing) but to increase their leverage on their traded money up from about 15:1. The main reason to use MT4 is the EA support. It is *very* difficult to run MT4 Server without a dealing desk, the main issue being threading.
We agree that the Prime Brokers don't want to lose volume to Retail Brokers trading net. I also agree that people can register with the Broker to be an "associated person" but based on my reading it appears you need to pay an annual fee to the NFA, take several tests, have a clean background and a few other requirements. It is not a simple agreement between Broker and Trader, but Trader and NFA validated to Broker. It does not surprise me that Interpol was used as a threat, the US Govt will definitely enforce their laws on the world.
I believe this is no bad at all, maybe the commissions would be a problem but Banks and prime brokers knows how much money retailers are moving. They don't want to lose that piece of the market.
Sooner (I hope) we are going to assist to a new class of products, mini lots will be there but maybe not microlots because the cost/revenue.
Same happened with futures and CME recognizes that Minis are the best product launched in the past 14 years.
About *each trader* needs to be registered with the NFA I forget to write in my other post about some case a couple of months ago in my country.
A trader managing accounts from US citizens was be requested by a US court under menace of send Interpol if he doesn't by their own desire. And this trader is not registered with NFA or any US federal agency.
Registration could be done as by a simple agreement included into the Brokers agreement, same as W5.Anyone actually bother to read the text of the bill? LOL.
First thing this does is just amend an old set of rules to include forex. But it doesn't include forex in all rules, so it's questionable as to whether most of this even applies. The 2 biggest changes will be the 20m cash minimum broker requirement (it phases in tho) and the requirement that a fund operator, account manager or trade advisor be registered. That's not an overly restrictive requirement set, altho the 20m cash requirement is arguably useless (yay special interest legislation... sigh) for consumer protection.
Individual traders need not be registered or fall under "eligible parties." Only 1 of the parties need be eligible, which means either you or your broker. It does not say that you must be eligible in order to purchase contracts, but rather that you cannot accept orders or funds unless you qualify.
As for the "no bucketing" rules listed. It doesn't say you can't bucket trades or pair trades, it says you can't do it IF you claim the trades "are to be executed" ... read that carefully.
of any other person, or willfully and knowingly and with-
out the prior consent of the other person to become the
buyer in respect to any selling order of the other person, or
become the seller in respect to any buying order of the other
person, if the order is either represented by the person as
an order to be executed, or is required to be executed, on or
subject to the rules of a designated contract market unless
the order is executed in accordance with the rules of the
designated contract market.You cannot fill an order by offset or by being the buyer/seller IF you represent that the order is "an order to be executed" or is required to be executed by the rules of the exchange/market. Since retail forex is OTC there is no exchange or market rules, which means that as long as the broker declares in writing "not all orders may be executed to the open market, some orders may be filled in-house or paired" I'd think they should be fine.
The sky is not falling.
Thanks for the insight and welcome to the forum.
It certainly doesn't seem as clear-cut as it was made out to be.
As for 'the wild-west days' being over - about time! Few would dispute that almost every Metatrader broker that has ever existed has abused its position, hugely aided by the platform itself which is specifically designed to aid in fleecing its customers...
btw, go to any forum that caters more to the prime-broker markets and you will find that threads b*tching about brokers stop-hunting, spiking, trading-against - in other words, all the stuff that is a daily occurrence with Metatrader brokers - in general, do not exist! The reason being, that this type of chicanery doesn't occur with 'real' brokers, or certainly nowhere near the extent suffered by retail-forex, which seems to attracts scum-bags in droves.
So if this bill facilitates in removing this vermin, and the 'steal-your-money' features from Metatrader - I'm all for it! It will also be interesting to see how this effects Metaquotes' business plan...
"to fill an order by offset against the order or orders
of any other person, or willfully and knowingly and with-
out the prior consent of the other person "
I see two parts there, and I don't know what they mean. The first part activates as fraud when "fill an order by offset against the order or orders" happens. I don't know what that means in legal terms. There is a separate fraud after the comma: "or willfully and knowingly and without the prior consent."
IMO as written, permission cannot be given to allow "offset" trades. Permission can be given for net trades. Other opinions?
I had about 70% bad fill rate from Deutsch Bank's dealer desk. The statistics are on another machine but I could still dig them up. Requote slippage was 3-4 pips if memory serves.
What forums do you know of for Prime Brokers? I have 2 different Prime Broker relationships, one through a fellow programmer.
This bill definitely aids in fighting stop loss hunting, those people have very clear penalties.
It certainly doesn't seem as clear-cut as it was made out to be.
As for 'the wild-west days' being over - about time! Few would dispute that almost every Metatrader broker that has ever existed has abused its position, hugely aided by the platform itself which is specifically designed to aid in fleecing its customers...
btw, go to any forum that caters more to the prime-broker markets and you will find that threads b*tching about brokers stop-hunting, spiking, trading-against - in other words, all the stuff that is a daily occurrence with Metatrader brokers - in general, do not exist! The reason being, that this type of chicanery doesn't occur with 'real' brokers, or certainly nowhere near the extent suffered by retail-forex, which seems to attracts scum-bags in droves.
So if this bill facilitates in removing this vermin, and the 'steal-your-money' features from Metatrader - I'm all for it! It will also be interesting to see how this effects Metaquotes' business plan...I had about 70% bad fill rate from Deutsch Bank's dealer desk.
You mean FXCM DD 
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