Last year Rosenthal Collins bought MG Forex just as the first capital requirement was set to kick in. RCG then announced that MG Forex was a subsidiary of Rosenthal Collins Securities, which is regulated by FINRA, not the NFA. Thus MG Forex was able to avoid the $20 million capital requirement since FINRA members need only $250,000 in capital.
That was then.
Last week FINRA released a proposal capping the margin level that forex brokers can offer at 1.5 to 1. Essentially, FINRA is saying you can’t trade forex on margin.
FINRA - Regulatory Notice 09-06
The rule will not effect NFA registered forex brokers. But for those forex brokers with FINRA licenses the party appears to be over. Why is FINRA doing this?
Quote:
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FINRA has observed a potential migration of retail forex activity from the FCM channel to Broker Dealers…
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Hmmm, couldn’t be that forex dealers who didn’t have the capital to keep their NFA licenses were suddenly showing up to get a broker dealer license on the cheap? Well, if that was the case consider that escape hatch to be boarded up.
What will MG Forex do now?