CFTC to Impose 10:1 Leverage Limitation
CFTC is proposing new rules to limit the leverage on all retail forex transactions to a maximum of 10:1 at all US-based brokers.
Here are the main beefs I have with the proposed rules, hope it will shine a little light on the contents.
d. Regulation 1.46 – Application and closing out of offsetting long and short positions
Like FCMs engaging in on-exchange futures and option transactions under the existing regulation, RFEDs and FCMs engaging in off-exchange retail forex transactions would be required to close out offsetting long and short positions in an off-exchange retail forex customer’s account. But unlike existing Regulation 1.46, the requirement on RFEDs and FCMs engaging in off-exchange retail forex transactions to close out offsetting positions would apply regardless of whether the off-exchange retail forex customer has instructed otherwise.5
54 NFA’s experience supports the conclusion that keeping open long and short positions in a retail fore
customer’s account removes the opportunity for the customer to profit on the transactions, increases the fees paid by the customer and invites abuse.
WOW I should show those boneheads at NFA some client statements!
Regulation 5.7 An amount of minimum net capital in addition to the minimum $20 million is proposed to the extent that an FCM or RFED has a total retail forex obligation in excess of $10,000,000. After that threshold, as proposed the FCM or RFED must have net capital of no less than $20,000,000 plus five
percent of the total retail forex obligation in excess of $10,000,000. This proposal is intended to address concerns that, although the capital level contained in the CRA is believed to be high at $20,000,000, at particularly high levels of retail customer obligations there should be commensurate increases in an entity’s minimum required net capital. The NFA has enacted a similar requirement applicable to all its forex dealer members except those that only provide “straight through processing.” The Commission’s proposal has no exceptions for FCMs engaging in off-exchange retail forex or for RFE
If your broker does business the right way, passes trades on to banks and as a result doesn't have $22,000,000 needed they are out of business
8. Proposed Regulation 5.9 – Security Deposits for Retail Forex Transactions
Proposed Regulation 5.9(a) would require each RFED and each FCM that engages
in retail forex transactions, in advance of any such transaction, to collect from the retail forex customer a security deposit (in cash or in financial instruments that meet the requirements of Regulation 1.25) equal to ten percent of the notional value of the retail forex transaction, ten percent of the notional value of short retail forex options in addition to the premium received, or the full premium received for long options, as the case may be.
Here is the 10 to 1 leverage rule
19. Proposed Regulation 5.22 – Registered Futures Association Membership
In addition to registering with the Commission, the CRA provides that RFEDs and persons who provide retail forex trading advice, operate retail forex pools or solicit retail forex customers or accounts must also become members of a registered futures association.
the NFA says MO MONEY MO MONEY we are not talking
about futures here!
14. Proposed Regulation 5.17 – Authorization to Trade
Proposed Regulation 5.17 requires RFEDs, FCMs, IBs and their APs to have specific authorization by the customer before effecting a retail forex transaction. For the most part, proposed Regulation 5.17 follows existing Regulation 166.2 for on-exchange futures and commodity option transactions. The Commission believes that registrants acting as off-exchange retail forex counterparties should have to obtain authorization for each transaction like other registrants.
So much for managed accounts! Your trader must call you at 3 am to trade! Forget about using a remote controlled EA as well!
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (“RFA”)97 requires that agencies, in proposing rules, consider the impact of those rules on small businesses. They go through each classification and claim due to required deposits or that the fees for registration are not going to hurt small businessesHmm, I guess they didn't consider the businesses who couldn't make the deposits or the 10 to 1 leverage or the lack of being able to manage accounts properly as hurting small business.
B. Paperwork Reduction Act They want to increase the amount of paperwork... hundreds of thousands of hours of paperwork per year
To complain about any of these proposed rules or the others contained in the 193 page PDF ( mostly the proposed code)
DATES: Comments must be received on or before [insert date 60 days from publication in FR].
ADDRESSES: You may submit comments, identified by RIN 3038-AC61, by any of the following methods:
• Federal eRulemaking Portal:http://www.regulations.gov/search/index.jsp. Follow the instructions for submitting comments.
• E-mail: secretary@cftc.gov. Include “Regulation of Retail Forex” in the subject line of the messa
• Fax: (202) 418-5521
• Mail: Send to David Stawick, Secretary, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, DC 20581
• Courier: Same as Mail above
All comments received will be posted without change to U.S. Commodity Futures Trading Commission, including any personal information provided.
CFTC: Don't get mad... take ACTION!
Emergency online town hall meeting today at 14:00 GMT to plan organized resistance:
Information on how to submit your formal complaint to the CFTC:
/go?link=http://fx-knight.com/smForum/index.php?topic=1027.msg5068[hash]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:
Here's my personal take on the new proposal: Nothing is more retarded than that. Why would anyone with the right mind propose such absurd rules? I just don't see how any part of it benefiting the retail forex traders.
Retarded rules written by retards proposed by retards, period.
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CFTC is proposing new rules to limit the leverage on all retail forex transactions to a maximum of 10:1 at all US-based brokers. When passed, these new rules will effectively kill the US-based retail FOREX market.
If you believe this is going to affect you, you may submit your protest to CFTC before March 13, 2010.
Email: secretary@cftc. gov with "Regulation of Retail Forex" in the subject header and identification number RIN 3038-AC61 in the body.
FAX: (202) 418-5521
Mail:
David Stawick, Secretary
Commodity Futures Trading Commission
1155 21st Street, N.W.
Washington, DC 20581