Here is an excerpt from the article. Does this matter concern you as a trader? Will it change who you keep your account with? Will it mess up your preference for Metatrader4 since most of the higher capitalized brokers do not use MT4?
New NFA proposal could cause
significant shakeup among forex brokerages(Currency Trader - 8/07)
"New rule changes proposed by the National Futures
Association (NFA) could have a significant effect on
several brokerages that trade foreign exchange.
The NFA wants to raise capital requirements for all registered
Forex Dealer Members (FDM) to $5 million, plus it
wants improved accounting standards. The NFA is hoping
the increased standards will prevent the ongoing problem of
forex brokerages going bankrupt and/or committing fraud.
The proposal could potentially wipe out 90 percent of
existing forex brokerages, although it’s likely major consolidation
would occur if the rule passes. Forex brokerage FXCM
has been the most vocal supporter of the rule, although they
have received support from some other big firms.
Naturally, there is opposition from the less-capitalized
firms.
The NFA estimates the new rules, combined with existing
rules, will force firms to have at least $10 million in adjusted
net capital to remain in business.
According to data obtained from the CFTC, the new rules
would leave only six forex brokerages: FXCM, GFT Forex,
Oanda, FXSolutions, Gain Capital, and CMS.
The NFA listed four specific reasons for the rule change.
First, trading spot forex, which FDMs do, creates more risk
than trading futures and options listed on an exchange.
Second, since spot forex is not a priority under the NFA’s
Bankruptcy Code, it’s particularly important for FDMs to
have adequate capital.
Plus, two of the three bankruptcy proceedings in which
the NFA has taken part in the past four years have involved
smaller FDMs, and with the cumulative amount of retail
funds under account surpassing $1 billion, the NFA is concerned
that an FDM might be unable to meet its financial
obligations to its customers.
As a result, firms that meet the new capital requirements
will also have to file an internal control report prepared by an
independent auditor, and the NFA would have limited ability
to request certification of an FDM’s finances. Also, each
FDM would have to designate an individual to oversee the
firm’s finances, and that person would be subject to discipline
