I have been reading the many documents issued by FXCM regarding the implementation of the NFA’s new FIFO rules.
Those of us who trade through FXCM have some decisions to make, and not a lot of time in which to make them.
In order to maintain the current functionality of the FXCM Trading Station II, US-based customers will have to move their accounts to the UK. This will allow trades made on either the Trading Station platform, or FXCM’s MT4 platform, to side-step the NFA FIFO mess. More on MT4 in a moment.
FXCM seems to be encouraging their [B]FXCM LLC (US)[/B] customers to consider transferring their accounts to [B]FXCM LTD (UK)[/B], and they emphasize that to do this “seamlessly” — i.e., without having to close the US account and then open a UK account from scratch — a transfer request must be filed with FXCM no later that July 21, 2009.
Now, about MT4: For traders who (1) trade through the MT4 platform, and (2) have their account with a U.S. broker, there is a separate and very serious consideration, which apparently will affect [B]all[/B] MT4 users, regardless of the U.S. broker they trade through.
Here is a copy-and-paste from an Administrator sticky on the DailyFX Forum:
DailyFX Forum Administrator
DailyFX Moderator
[B]FAQs for NFA FIFO Rules [/B]
[B]MetaTrader4 (MT4)[/B]
MetaTrader4 (MT4) clients who wish to maintain their current platform functionality (with hedging enabled) may transfer to FXCM UK.
[B]Q.[/B] I am an MT4 user and wish to keep my account with FXCM LLC. How will my account be affected?
[B]A.[/B] To date, we have received no indication from MetaQuotes that they will be able to comply with First In First Out execution by July 31st, 2009. As such, the combined changes brought about by NFA Compliance Rule 2-43(b) will mean that traders will no longer be able to trade MT4 with US regulated brokers. Assuming that MetaQuotes is able to comply, there will still be major implications: traders will have fewer order choices, traders will have drastic limitations to their risk management options, the vast majority of Expert Advisors will no longer be functional
[B]Q.[/B] I am an MT4 user that applies Expert Advisers, how will they be affected?
[B]A.[/B] It depends. Some expert advisers use only market order to both open and close positions. These EAs will comply with FIFO execution. Other EAs do assign stop-loss and limit orders to specific ticket numbers, if MetaQuotes puts through a FIFO patch these orders will get rejected by the platform.
Also on this forum post, this item on the subject of proposed reduced leverage in U.S. retail forex accounts:
Notice of Leverage Reduction Proposal:
The NFA has recently requested that the Commodity Futures Trading Commission (CFTC) approve another rule proposal that would place additional restrictions on the margin (leverage) levels that FDMs can offer to forex customers. If the CFTC approves this proposed rule, FDMs will be restricted from offering more than 100:1 leverage on major currency pairs and will be limited to 25:1 leverage on non-majors. NFA has proposed this rule because it is �concerned that higher leverage amounts can deplete a customer�s account balance�and result in forced liquidation�much faster than retail customers realize.� Again, CFTC has not yet approved this rule proposal, and there is not yet a specific date for when it would take effect. For more information, please visit:
NFA - National Futures Association
Here is a link to the page from which the above was copied:
1) FAQs for NFA FIFO Rules - DailyFX Forum
FXCM is too politically-correct to say publicly that the NFA’s persistent meddling in the forex market is a giant load of crap —
But, I’m not!
Clint
