I’ve already sent a few letters since IBFX sent me an email. If this goes through I’m going to go the UK to trade.
From a US economic benefit stand-point, the consequences could be harmful. The Forex Dealers Coalition (FXDC) has outlined this point amongst other things as a consequence of the 10 to 1 leverage proposal. I have attached a PDF of the FXDC’s position summary to this post.
The FXDC is a coalition of 9 US forex brokers: GFT, Oanda, IBFX, Gain Capital, FXCM, FX Solutions, FXDD, PFG Best and CMS Forex
FXDC competitiveness_summary.pdf (53 KB)
You cannot. The CFTC will require compliance from any broker that does business with U.S. clients.
BOLLOCKS
100:1 is great, but you can still be successful, if not more so with 10:1 leverage.
Trading for $1 pips, ie $10000 contract size, with a $1200-$1500 account is very visible and if your a competent trader you should be able to compound your account, even to millionare status from there.
Even with a $250-$500 account it would be quite reasonable to open up $1000 or $2000 position sizes - the deposit with the broker would only be $100 or $200 with 10:1 leverage, and your trade would have to go against you 1500pips for a margin call with $250 account a $1000 contract.
Show me a successful trader who uses more than 10:1 account leverage you will find most will use lower leverage than that on there account to reduce there risk.
I can show you plenty of people who use higher leverage - but they arent trading anymore.
Personally i am more worried about Obama’s proposal on Banks to limit proprietary trading which will greatly reduce liquidity and volatility making it harder to find pip earning opportunities IMO
The reduction in leverage is concerning our brokers cause it will greatly reduce there profits. It will further protect retail traders/especially novice traders from blowing there savings (look at the statistics and dont be fooled that it isnt the reality)
I think educating traders that 10:1 leverage is something that can be worked with and should be worked with, then you will find more traders will stay with the US fx brokers - in there own interests.
What other threads get posts from “broker representatives” - LOL, and what better place than at a forex beginner website - LOL!
these brokers arent stupid! - they know they can easily get these people who have been trading forex for two weeks to fire off letters - LOL
So. We little guys and our brokers have an area of common interest. We agree on some things. We have joined together on common ground, to fight a common threat. I think this is a good thing.
Why are you so threatened by it?
Sometime in the future, on some other issue, maybe we little guys will disagree with the brokerage industry. Maybe we’ll get into some serious fights. But, for now, we should welcome the support of our brokers, just as they welcome our support, in fighting a common enemy.
There is nothing immoral or unethical about tactical alliances. “The enemy of my enemy is my friend” is an old adage which conveys a timeless truth.
[B]We should work to strengthen our tactical alliance with the forex brokerage industry
on this issue of runaway, draconian regulation. [/B]
Clint
If this is or was the case, there is nothing to stop the educated trader working in this way already is there? So not sure I see the connection with this limit being imposed and the trader staying?
Considering the #1 complaint from the FXDC is that their clients will all move to the UK, I don’t think this is a concern.
The FXDC has issued another statement on fighting fraud in retail forex and the CFTC proposal’s impact. Here it is:
[U]Fighting Fraud in Retail Forex[/U]
Over the past decade the Commodity Futures Trading Commission (CFTC) has found itself engaged in a seemingly endless battle with con-men, ponzi schemers and hapless fund managers operating in the retail forex arena. The difficulty for the CFTC lay in the fact that 90% of the people engaged in this criminal activity were not registered or licensed with any regulatory body and in many cases were simply common criminals who never actually engaged in any trading but simply misappropriated customer funds for their own use. The CFTC’s answer to fighting this problem has been to propose dramatic new regulations that would require anyone soliciting customers to trade retail forex get a license and be registered with the CFTC. This new licensing regime would go a long way towards ending the problem of forex fraud in the
United States.
However, all of this potential progress will be wiped away due to another CFTC proposed rule which would require customers post a 10% margin deposit in place of the current 1% margin rule recently adopted by the primary regulator of retail forex over the past ten years, the National Futures Association (NFA). Here is why the 10% margin rule will make forex fraud worse than it has ever been:
[ul]
[li]The adoption of the 10% margin rule will make it impossible for U.S. based forex dealers to compete with competitors from the United Kingdom. UK dealers are regulated by the FSA, which has no leverage restrictions whatsoever. The U.S. retail forex industry simply won’t be able to compete and will be decimated, leaving no legitimate forex dealers left for customers to trade with. In this environment fraud will flourish.
[/li]
[li]With no widely recognized brand names left in the United States it will become harder for the trading public to screen out the con-men. Last year the major forex dealers of this industry spent over $100 million building up their brand names precisely to separate themselves from the rabble. When a customer clicks on the website of a brand name in the retail forex industry they can quickly find links directing them to the CFTC or NFA do conduct a background check. But when the brand names disappear it will then fall upon forex traders themselves to sort through the rabble and this will be much more difficult and leave traders much more vulnerable since fraudsters are highly unlikely to give customers an option to do background checks with regulators.
[/li]
[li]Adding to this vulnerability is a worrying trend of traders who are developing an “antiregulatory” attitude when it comes to forex regulation. Traders are going from valuing the consumer protection offered by regulators to being hostile towards regulation since they are starting to see regulation as something that smothers consumer choice in the name of nanny statism. This attitude will harden should the 10% margin rule pass thus turning the CFTC into the bad guys in the minds of many traders. Once again, in this environment fraud will flourish.
[/li]
[li]Furthermore, a lot forex fraud involves boiler rooms that peddle so called “foreign currency options,” which require customers to make a deposit in order to purchase an over-priced premium. By increasing margin requirements these con-men can make even bolder requests of their customers and charge even more ridiculous amounts for premiums before they run off with a client’s funds.
[/li]
[li]Perhaps most troubling of all is that unregulated dealers from around the world will be the biggest beneficiaries of the 10% margin rule. These unregulated forex dealers don’t have to worry about capital requirements, risk management models, marketing ethics, dealing practices or even returning a customer’s funds. These dealers will be out of the reach of the CFTC and they will thrive.
[/li]
[li]At the end of the day, fraud will become impossible to police. Background checks are impossible to do for unregulated offshore forex dealers. Some of these con-men simply setup a website, put up a phony address in a foreign locale and claim to be a large and mainstream forex dealer when in reality there is just some lone hustler, sipping tea in a cramped apartment running the whole show. In the aftermath of the shutdown of the U.S. retail forex industry U.S. traders will be bombarded by offshore forex boiler rooms and many will be taken advantage of unnecessarily. There is no cop on the beat in the world of the unregulated, overseas retail forex dealer. Therefore, it makes no sense that CFTC would encourage people to open accounts at these offshore dealers instead of trading at a perfectly compliant and regulated domestic forex dealer.
[/li][/ul]
[U]A Healthy, Regulated Industry with a Cop on the Beat[/U]
The key to solving forex fraud resides within the CFTC’s own proposed rules (absent the 10% margin rule). Over the last several years the NFA has aggressively tightened up its rules regulating retail forex by raising the minimum capital requirement to $20 million (which doesn’t include additional capital requirements on net positions), conducting more aggressive audits of firms (NFA registered forex dealers must submit monthly reports to CFTC and weekly reports to NFA), imposing tough marketing standards, and raising the bar in general for admission to the Association. As a result, the days of the small time forex dealer with just a few thousand dollars in capital opening a forex firm have long since ended. These tougher regulations have cleared out the worst elements in the dealer community, leaving only the unregulated forex referring broker community to be cleaned up next. These rules will do exactly that.
But by requiring customers post 10% margin and wiping out all forex dealers (who are not engaged in fraud and who want to see an industry where the only people employed in it are licensed and on the level) the trading public will be left with no one but the ponzi schemers to do business with inside the United States. The fact is the overwhelming majority of customers who trade in the retail forex industry are not victims of fraud. They are investors who enjoy trading currency online. They should not be punished for the sins of criminals. And they won’t be in a well-regulated domestic forex industry that works with the CFTC to report on those solicitors who are not going by the new letter of the law. But first there has to be a healthy industry to regulate in order to finally put an end to fraud. If the 10% margin rule is withdrawn
that’s precisely what we will have.
Statement taken from here http://blogs.fxstreet.com/francesc/files/2010/02/fighting-fraud-in-retail-forex.pdf
Great article! I totally agree. I am not sure the regulators are knowledgeable enough to govern this industry. I believe that if this proposal were to pass retail forex would end in the US.
This is not a proposal to better the industry, but to kill it. It’s going to be a flood towards the offshore brokers. What do you guys think?
I think we need to email <[email protected]> and tell them Hell no! Keep your hands off my leverage!
This is what will happen to the industry if we don’t beat this rule.
I am beginning to think that I may be one of the few that either does not care about the rile or will be unaffected by it.
Concentrate on the trading itself, not on the regulations.
Regulations do change from time to time, but this will change money management thats all. There is always a way out of situation even with this regulation.
CFTC has posted over 5,000 comments for January alone! Email <[email protected]> and keep the pressure on them!!!
That’s the spirit.
Best Regards,
Matt Jones 
.
Thanks Matt. I am always positive:) I believe in hard work and discipline.
Most of successfull traders have something similar and it is that they were all good in sports and did some physical exercises. Sports requires discipline - the same thing as trading in finance markets:) - Discipline.
Do not waste your valuable time or energy
writing off useless letters to NFA and/or CFTC.
An utter, complete waste of your very valuable
time and energy.
Rather, if you have not moved already, get
ready to close your US based accounts, and
get ready to go to UK or Switzerland.
Don’t get caught off guard when it is too late
just like what NFA did with anti-hedging.
Be trading in your chosen leverage of choice
in UK or Switzerland sitting pretty instead than
worrying about whether CFTC will put this
lunatic ruling in place.
This is not the case. Every country has their own
regulatory body. And they don’t give a crap about
NFA or CFTC’s useless babbles and threats. I suspect
that if CFTC is going to be pigheaded retards about it,
they will then go as far as to forbid US citizens from
going abroad and somehow threaten offshore brokers
doing business in US with some sort of sanctions or
fines to prevent them from accepting US citizen’s
accounts. That is also easily overcome. I will simply
then move to Switzerland. Simple. I am already trading
at Dukascopy. I am just waiting to see the degree of
our useless regulatory bodies’ level of lunacy. I want
to see just how crazy they really are. And how much
hell bent they are on ruining the forex business as
we all know it in US. I won’t put it past them however.
Not only are they power hungry, stupid, insane, and
retarded they are also incredibly stubborn and cannot
own upto making mistakes left and right. They should
rather go after crooked firms misrepresenting "hedge"
rather than forbid hedge. And they should go after
firms that abuse leverage marketing to newbie retail
traders rather than make it so that only the wealthy
depositors will be able to benefit from forex trading.
I suspect that most people haven’t even done the
calculation. Unless your deposit is substantial, you
won’t even come close to making what you make now
unless you drastically risk more on each and every
trade using 1:10 leverage. Most people with $500
deposits will be making pennies on their trades.
It’s not a waste of time. The attention generated is pointing out their conflicts of interest, and if they continue they will get in very serious trouble.
If the right people get wind of their underhanded attempted monopolizing/destruction of the U.S. forex market, which can have very real economic repercussions for the U.S., the people who run the agencies involved have a real possibility of being booted and even facing huge fines and or jail time.
At the very best their proposal points out that they dont understand what it is they are trying to regulate, and shouldn’t be allowed to regulate it in the first place. At worst they are purposely trying to force retail traders out of forex and ruin U.S. brokers, and should all be jailed.
P.S. Besides how much time does an e-mail take?