Thanks for the question and I'll share as many details as I'm able to.
If the leverage proposal is passed, we'll continue allowing US traders to move over to FXCM UK. I know the question has been asked whether the CFTC will prohibit US traders from opening with overseas brokers. Here's the response I received from our compliance department to try to get some clarification on it:
the CFTC has not placed any restriction on a US citizen’s FX trading outside of the US. FXCM Ltd has accepted, and will continue to accept US clients based on FXCM Ltd’s entitlement to do so as a financial institution under Section 2(c)(2)(B)(i)(aa) of the Commodity Exchange Act, and as a regulated entity by the Financial Services Authority.
So from our standpoint, there's nothing in place at the moment restricting traders from moving to FXCM UK. We did have a large number of traders move over to FXCM UK when the previous proposals went into effect for hedging and the FIFO rules, but those were seen by many traders as mere inconveniences. A change in leverage is going to be more substantial because it involves depositing 10 times more into the account to trade the same amount.
Are you considering leaving the US retail forex market altogether? Are you considering opening more offices abroad?
At the moment, no. But if 90% of traders go offshore, then it may come to a point where it's no longer makes business sense to run a US operation with higher regulatory costs and reduced trading volume. I think the number of brokers will reduce even further if 10:1 leverage goes into effect.
The answer to your second question is Yes! We've been very busy opening new branch offices and affiliates. In the past couple of months, we've opened offices and affiliates in Athens, Greece (FXCMHellas.com); Milan, Italy (FXCM.it); Beirut, Lebanon (FXCMMena.com); Santiago, Chile (FXCMChile.com), and more to be announced. This adds to our current presence in London, New York, Sydney, Dubai, Paris, San Francisco, Dallas, Hong Kong, and Tokyo.
I imagine that the customer base for retail forex in the US would shrink dramatically if 10:1 leverage was to be enforced.
If 10 to 1 leverage were enforced, it would certainly raise the barriers to entry for US traders into the forex market. Of course, this is assuming the traders will actually setup with a US broker. FXCM, and many of the brokers in the FXDC, are making the argument that if the proposal passes many forex traders will simply go overseas where the CFTC and NFA have no oversight. The proposal hasn't even passed yet, and we've seen an increase in the number of requests to move to FXCM UK.
Will the proposal pass? I think the number of comments submitted by traders (over 5,600 last time I counted!!) is creating pressure for the CFTC to re-think their position. The number of comments submitted is unprecedented if you compare to past years. And it's also brought the issue to the attention of Congress if you read this article in EasyBourse.com House Lawmakers Concerned On CFTC Retail Forex Leverage Proposal
I imagine I'm asking about business secrets, but I'm curious so I ask anyway.
Feel free to ask anything, and I'll share whatever information I'm able to. That's what I'm here for