CFTC Leverage change to 10:1 in the US?...What do you think?

Got the same email from them - here it is:

Dear Client,

You may be aware of recent changes in US regulations regarding off-exchange retail foreign currency transactions. In response to the Dodd-Frank bill, the US Commodity Futures Trading Commission (CFTC) adopted a new comprehensive regulatory scheme, which goes into effect on October 18, 2010. The rules apply to retail Forex transactions that are offered or entered into by entities that are solely registered with the CFTC under the Commodity Exchange Act (CEA).

GO Markets is regulated under Australian Law and does not have any offices or operations based in the United States. This means that GO Markets is subject to the comprehensive licensing laws in Australia and not the US. However the recent changes adopted by the CFTC seek to ensure that retail Forex transactions offered to US residents can only be offered by entities registered through the CFTC and therefore subject to US regulations and laws. You may be aware that part of these new rules is the requirement to set minimum security deposits for transactions. The new rules require a minimum 2% security deposit for major currencies (i.e. leverage 50:1) and 5% (i.e. leverage 20:1) for all other currencies. This may place a restriction on your current trading activities.

Despite the fact that GO Markets is regulated under Australian law the regulatory regime of the CFTC seeks to impose its rules across all jurisdictions when it relates to Forex services being offered to US residents. The CFTC has a Memorandum of Understanding concerning consultation and cooperation in the administration and enforcement of futures laws and additionally the CFTC and ASIC are also party to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and Exchange of Information. GO Markets has satisfied clients from all over the world who are attracted by quality products and services that we offer. We value your business and the trust you have placed in us to provide a quality trading solution.

Unfortunately due to the restrictions placed by US laws GO Markets will be unable to accept any new trades from US residents after the 18th October 2010 unless you are eligible to meet one of the categories below:

* You are an individual or company with total assets in excess of $10,000,000
* You are a corporation, partnership, proprietorship, organization, trust, or other entity  that has total assets exceeding $10,000,000; that has total assets exceeding $1,000,000 and enter into an agreement, contract, or transaction in connection with the conduct of the entity’s business or to manage the risk associated with an asset or liability owned or incurred or reasonably likely to be owned or incurred by the entity in the conduct of the entity’s business.

We apologise for the inconvenience of this as the changes in US regulations are beyond our control. Please be advised that we will continually re-evaluate opportunities to offer services to US residents depending on changes to US laws etc. We may be in a position to advise you that we are able to accept US based residents in the future. You may also consider seeking your own legal advice as to how the regulations affect you or any company you operate through. Of course this is not a decision we wanted to make and we would have liked to continue to offer our services to US clients, but it is out of our hands due to the relationship between the CFTC and ASIC and is only brought about by the restrictive regulations recently put in place.

If you have any questions please do not hesitate to contact us and we will be only too willing to help.
Regards,
GO Markets Pty Ltd

what’s happening is just ridiculous.

What’s wrong with trading offshore, with a broker that offers 500:1 or 200:1??? Like: HotForex or AskOBid

nothing. fxopen is probably the best offshore, since they’re ECN.

FXOpen no longer accepts US customers after they got sued by the US CFTC for maintaining servers and telephone lines in the US while not being registered with the US CFTC.

I agree with someone who said that they want to shutdown this industry for good. And the reason for this is that, more and more people are making money from this industry, and clearly the rich are feeling threatened. They always find some excuse and they always tend to win. Capitalism, it’s either you or them. There is no ‘between’.

God I hate this game.

The leverage change in the US gives forex traders less flexibility.

Also, traders from both the US and abroad may look more to stocks and pair options, as these trading vehicles may provide investors with the opportunity to make large profits without the leverage factor.

I think that our margin should be zero as long as our average price is 100 pips in profit.

& I still want the 50:1 leverage TYVM :18:

Without wanting to offend anybody: Thank God I am not a US citizen.

Over the last 20 years US Governments, no matter whether Republican or Democrat, have shown a regrettable tendency to regulate (not to say supervise or control) every single tiny aspect of their citizens’ daily life. America just isn’t fun anymore; and (sorry to say it) America just isn’t FREE anymore.

I can understand the Government’s desire to protect its citizens from harm … that is a Government’s ‘job’, after all.
But there is a difference between taking measures to ensure a fair and secure environment for everybody and regulating every single thing.
The CFTC seems to think that the average US citizen is too dumb to make sound financial decisions.
Granted, many laymen have lost their money trading forex; but instead of educating them how to go about it properly, rules which are harming the whole retail industry are being introduced. And a weakened or wiped-out retail industry means less revenue for the Government as well.
In conclusion, the measures already taken and those proposed hurt everybody, without achieving anything positive.

My suggestion would be:
Let the CFTC create a simple webpage where people interested in trading forex retail have to pass a test, making sure they fully understand the concepts of leverage, margin and whatever the regulators feel is vital for safe and fair trading.
This would help traders (they can trade properly), brokers (they can earn money) and the Treasury (they increase tax revenue).
I think a ‘Retail Trader’s License’ would be simple to introduce and beneficial to all sides involved.

Cheers,
O.

Glad I’m in LA. Will move to San Diego and apply for Mexican residency (Tijuana, Tecate or Ensenada). Have many addresses where I can register a utility bill (required to obtain an offshore forex account). I’ll ‘commute’ between both my residencies.

In Texas you couldn’t get ‘an equity’ loan on your house, -Texas protecting it’s IGNORANT citizens? -It was THE ONLY state in the nation with such IDIOTIC ‘rules.’

Of course THE IDIOTS saw the light and now you can borrow on your ‘homestead.’

I don’t like this ‘FIFO,’ no hedging IDIOCITY and stupid LOW leverages!

Those freaking ‘fat asses’ (law makers?) don’t have anything to do but raise hell for the rest of us.

Still beating the dead horse years later? Move forward and adapt, find loopholes, be creative…or maybe pick up some different investment activities [B]like a real investor and not some bum FX speculator/gambler[/B].

THIS.

If you can’t even figure out what leverage you are effectively using knowing your stop loss and entry price, why the hell do you think you need to even open a live account?! Lack of education is what makes people loose! Make everyone take a test and let them have whatever leverage they want after that. Then it’ll really be the traders own faults! I’d do it.

Thank goodness we are still 50:1…

Guys I very much doubt this will happen, look at whats going on in the rest of the work, how can CFTC force more brokers offshore, the answer is they wont. Why would you when the Obama Admin makes so much from taxes.

I just was stung by the demise of PFG Best. Would you mind sharing what broker you use and if they are an ECN broker?

Thanks for your time.

actually that is incorrect. short term = ok to use high leverage. the longer the expected trade duration, the lower the leverage you should use.

now, while i disagree with someone REGULATING how much leverage a trade should use, i agree that most traders SHOULD only use 10:1 anyways. 100:1 gets to be quite dangerous if/when you have a 5-figure or larger account balance. think: 10k balance, at 10x leverage, means 100k position, means $10USD per pip of movement - up OR down. same account with 100x leverage is a 1M position, which is a $100USD per pip movement. won’t take a lot of pips going the wrong way to blow half of your 10k account at that rate!

unless all of you like to fund your accounts with no more than $1000 and trade as if you actually had $10k in there (because you’ve got the other $9k in your neighbourhood bank account anyways).

my take is - SHOULD NOT be regulated, but traders SHOULD limit their behaviour to that level anyways.

Im all about the US government keeping their hands out of my pockets. They already are in them deep enough as is.

If I want to blow my account in one trade with 500:1 leverage on 2 standard lots, no SL, held by some obsure unregulated broker, I should be able to do just that.

Its just depressing to know that the greediest financiers and politicians have to swindle the people through the hidden tax of inflation.

First, I live in Canada, but I use a US based broker ~ Capital Gains ~ or forex.com.

They should limit it to 5:1 and they should make anyone that has never been profitable only trade with 1:1 It might make some people THINK instead of gamble, double up, and do all sorts of crazy stuff that just makes their account hit 0 faster.

if you need leverage then you probably dont have enough capital to trade full time to begin with.

This also serves to limit the gains of small investors that have learned to use leverage carefully and only when everything lines up for an individual trade. Leverage is a means making the most of your careful study and management. This makes it much much harder to start small (like I did) and increase the size of your account to the point at which you can make real money. Don’t be under the illusion that this will help small investors.