DislikedIt will have no effect on us as traders. That article floating around the web is not correct in what it implies as the law does not apply to registered firms. As long as we remain registered with an approved Federal regulatory agency (i.e. the NFA), that section of the Bill does not apply to us. I had this confirmed by our legal department. (No, the government isn’t just going to pass a law that shuts down an entire market.) What they are looking to do is shut down unregulated trading where transactions can be harmful to someone or used as money...Ignored
I was talking to someone (can't say who, he's a ranking member of our government) who said that there is going to be a push to lower leverage globally down to 25 to 1. Evidently, Japan has already regulated that max leverage allowable is 50 to 1 and they are going to 25 to 1 in a year. FSA over in the UK is looking to do the same. I guess that the point of this section of the Dodd-Frank Reform Bill is to close off the possibility of firms dropping out of the NFA to maintain higher leverages. Essentially, this is making it ILLEGAL to transact FX at all without being a member of the NFA or a regulatory entity while requiring that those firms that are members abide by the max leverage rule, whether it be 100, 50, or 25 to 1.
The person I spoke to pointed to three things:
1) Recent filings of fraud by certain large deal desk firms that basically amounts to giving them a license to steal from us (traders) via bad execution (this points ultimately to the need for a competitive exchange).
2) Rampant money laundering and movement of "concerned" (i.e. terrorist) funds through the unregulated system. The idea was that an unregulated "company" could set up as an FX shop, allow "deposits" from abroad, those losses turned into gains for the "company" and now the funds were legally here in the US.
3) Higher-percentage of customer losses on accounts using high leverage.
Overall, it sounded like a concerted global effort to make this into a real market with lower leverage and really try to squash out the illegal factors that currently overwhelm the market. What would be your comments on that?