Proposed NFA Capital Requirement | Page 23 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

NFA case against Forex.com/Gain Capital 6 replies

NFA Takes Action Against Gain Capital 27 replies

What happens to brokers not meeting the NFA capital requirement? 4 replies

Is losing a requirement to be successful? 72 replies

MIG vs Northfinance Margin Requirement 2 replies

Attachments: Proposed NFA Capital Requirement
Exit Attachments

Proposed NFA Capital Requirement

  • #441
  • Oct 11, 2007 1:20pm Oct 11, 2007 1:20pm
Quoting AKforex
Forexsavior

What's your opinion for FXCM ?
Which Broker do you recommend ?
I have never recommended any one broker because the larger brokers all have different services that appeal to different kinds of traders. But firms like FXCM, Interbank, Oanda, GFT are all quite financially healthy and I would be comfortable trading with any of them.
  • #442
  • Oct 11, 2007 1:27pm Oct 11, 2007 1:27pm
Quoting forexsavior
I have never recommended any one broker because the larger brokers all have different services that appeal to different kinds of traders. But firms like FXCM, Interbank, Oanda, GFT are all quite financially healthy and I would be comfortable trading with any of them.
How long have you been trading fx?
  • #443
  • Oct 11, 2007 2:00pm Oct 11, 2007 2:00pm

FX Solutions ($23,062,000)
Gain Capital (36,679,000)
Forex Liquidity ($38,317,000)
Money Garden ($5,505,000)
HotSpot FX ($6,023,000)
I Trade FX LLC ($6,645,000)
IKon ($6,736,000)
IFX Markets ($9,078,000)
CMS Forex ($11,255,000)
ODL Securities ($12,642,000)
PFG Forex ($14,742,000)

are all quite financially healthy.

Can you tell us the basic criteria to choose fx broker ?
  • #444
  • Oct 11, 2007 2:50pm Oct 11, 2007 2:50pm
Quoting forexsavior
Why does the NFA want to raise capital requirements? Precisely because of firms like CFG. Of course, many of the fraudsters will be driven out of the business which is certainly a good thing and one of the reasons for the NFA to take action. But there will always be con-men in the financial markets. I believe the real reason the NFA is pushing so hard to raise capital requirements is its concern that there are many more potential CFG’s out there.

The fact is you need more than $1,000,000 to run this kind of business today. Ten years ago when there was no regulation you could a run a forex broker dealer on the cheap. Not now. After all a good compliance officer alone can run you upwards of $200,000 a year never mind all the accountants and book keepers and legal staff needed to run a fully functional compliance/accounting department. But guys like Don Snellgrove couldn’t afford that kind of staff. And neither can many of these poorly capitalized firms. When you are a small forex broker dealer start up you have one goal: GET CUSTOMERS. To do that you need a fully functional platform and an aggressive sales force. That costs money. Compliance can come second after that, if at all…

With this in mind I have outlined a checklist for the average trader looking to find a broker:

1) Make sure they are registered with the NFA (or appropriate regulatory body such as the FSA in the United Kingdom). Avoid unlicensed firms at all costs.

2) Check the firm’s regulatory background on the NFA’s website. (http://www.nfa.futures.org/BasicNet/) Be sure to also examine the background of the principals of the firm. This is extremely important because if you see that a principal has a record of working for a bunch of firms with dodgy backgrounds then you need to seriously reconsider that firm.

3) Check the firm’s financials. (http://www.cftc.gov/tm/tmfcm.htm) Make sure the firm you are dealing with is well capitalized. This should be one of the most important criteria used in deciding on a forex broker. As I have demonstrated meeting the minimum capital requirement should not be an ending point when considering a firm since at one time or another even the most crooked outfits are reporting they are in compliance with the cap laws. Furthermore, beware investing with firms below $5 million net capital right now until the situation with the NFA proposal is sorted out. No, the rule has not passed yet but it most likely will and should that time come it is very likely that some of the firms on the dead pool list wil go under. Why put yourself through the stress of wondering whether or not your firm will be able to make the cut?

4) Test a firm’s customer service in advance. Are they open on the weekends? Do they respond quickly to emails? Do they have actual customer service 24 hours a day or just a surly dealer outside business hours who doesn’t like talking to people? Customer service with a forex firm is a lot more important than customer service with your bank as it can often times have a direct impact on your p/l.

5) Avoid “get rich quick” scams. Easily said but even though everyone knows it people still fall for them, especially in forex. Whether those scams involve some broker promising software guaranteed to make you a millionaire or some money manager saying his fund always has a positive return don’t fall for the hype. Remember, if what they said were true they would be millionaires sitting on a beach in Bermuda not sweating it out trying to get you to buy in on their scheme.

6) Experience means nothing in forex. Keep in mind this industry is only 10 years old. This isn’t the equity market where you have brokerage firms that have been around for decades. Everyone is new to forex including the brokers selling themselves to you. Don Snellgrove had more experience in this industry than almost anyone but his firm was not the better for it. Stability is what matters. And larger firms tend to be more stable because they have the capital to ride out the storms in this industry. Furthermore, many of them are backed by well established corporate partners or investors while smaller firms are mainly on their own with limited resources at their disposal.

So there you have it. Those are the lessons from the Collapse of CFG. Take them to heart and trade wisely.
Hey are some tips for you AKForex
  • #445
  • Oct 11, 2007 3:28pm Oct 11, 2007 3:28pm
Quoting forexsavior
Hey are some tips for you AKForex
According your Tip 2:
The firms with clean records (No Regulatory actions)
are
GFT
OANDA
IFX
HOTSPOTFX
IKON
I TRADE FX LLC
MONEY GARDEN
FOREX LIQUIDITY
FX SOLUTIONS

That means that your recommendation for FXCM and Interbank is wrong.
Thank you
  • #446
  • Oct 11, 2007 3:36pm Oct 11, 2007 3:36pm
Quoting AKforex
According your Tip 2:
The firms with clean records (No Regulatory actions)
are
GFT
OANDA
IFX
HOTSPOTFX
IKON
I TRADE FX LLC
MONEY GARDEN
FOREX LIQUIDITY
FX SOLUTIONS

That means that your recommendation for FXCM and Interbank is wrong.
Thank you
don't let all regulatory action stop you from picking a broker, i trade with odl and interbankfx if you check there's you would be like damn im not going with these guys, but i have made a lot of money with these guys and never got screwed out of my money, and remember the bigger you or the more eyes on you.
If I Go Broke Trying Then I Will die happy.
  • #447
  • Oct 11, 2007 3:41pm Oct 11, 2007 3:41pm
Quoting AKforex
Forexsavior

Which is the subject of this thread? fraud or capitalization ?

Let's see all the regulatory actions against the brokers the last month:

1) 27/09/2007 FXCM: http://www.nfa.futures.org/basicnet/...46&contrib=NFA , http://www.nfa.futures.org/basicnet/...46&contrib=NFA,
It's worth reading through the actual complaint on this one to see what happens when bean counters go wild, but it doesn't actually reflect much re. the stability of FXCM.
  • #448
  • Oct 11, 2007 4:32pm Oct 11, 2007 4:32pm
1) I never said anything for the financial stability of FXCM
2) I follow forexsavior's tips
  • #449
  • Oct 11, 2007 5:10pm Oct 11, 2007 5:10pm
Quoting AKforex
1) I never said anything for the financial stability of FXCM
2) I follow forexsavior's tips
For 1)the thread is on fx capitalization requirements, not regulatory overkill in the nanny state (which is what the complaint against FXCM seems to be). As for 2), I just do my own due diligence, but I do enjoy this discussion...
  • #450
  • Oct 11, 2007 10:20pm Oct 11, 2007 10:20pm
Quoting AKforex
Forexsavior

Which is the subject of this thread? fraud or capitalization ?
This is a very fair and well made point. If it is worth pointing out a fraud action against a "deadpool list" member, I would think it would be equally worthy to note a firm not on said list which has regulatory action against them. Perhaps that undermines the intent to support the "Deadpool" argument, but you could simply not mention one sided regulatory action (only one side of the two lists), if you intend to not mention the action against the "healthy" list as well. If you prefer supporting your argument over balanced reporting of the risks to traders, you are hardly acting within standards of journalistic ethics. In offering benefit of the doubt though, perhaps you missed the action AK referred to:

I would think that "***failing to uphold high standards of commercial honor and just and equitable principles of trade***; and failing to establish and implement an adequate anti-money laundering program.", and "failure to supervise", would be things a person such as yourself would want to announce, if indeed your interest is to protect traders as you would have us all believe.

Well noted AK, and thanks for the link. While the reading is at times informative, the motives of the OP continue to be justifiably suspect.
  • #451
  • Oct 12, 2007 3:00am Oct 12, 2007 3:00am
Forexsavior

According to your posts
441
<<I have never recommended any one broker because the larger brokers all have different services that appeal to different kinds of traders. But firms like FXCM, Interbank, Oanda, GFT are all quite financially healthy and I would be comfortable trading with any of them.>>

444
<< With this in mind I have outlined a checklist for the average trader looking to find a broker:

1) Make sure they are registered with the NFA (or appropriate regulatory body such as the FSA in the United Kingdom). Avoid unlicensed firms at all costs.

2) Check the firm’s regulatory background on the NFA’s website. (http://www.nfa.futures.org/BasicNet/) Be sure to also examine the background of the principals of the firm. This is extremely important because if you see that a principal has a record of working for a bunch of firms with dodgy backgrounds then you need to seriously reconsider that firm.

3) Check the firm’s financials. (http://www.cftc.gov/tm/tmfcm.htm) Make sure the firm you are dealing with is well capitalized. This should be one of the most important criteria used in deciding on a forex broker. As I have demonstrated meeting the minimum capital requirement should not be an ending point when considering a firm since at one time or another even the most crooked outfits are reporting they are in compliance with the cap laws. Furthermore, beware investing with firms below $5 million net capital right now until the situation with the NFA proposal is sorted out. No, the rule has not passed yet but it most likely will and should that time come it is very likely that some of the firms on the dead pool list wil go under. Why put yourself through the stress of wondering whether or not your firm will be able to make the cut?

4) Test a firm’s customer service in advance. Are they open on the weekends? Do they respond quickly to emails? Do they have actual customer service 24 hours a day or just a surly dealer outside business hours who doesn’t like talking to people? Customer service with a forex firm is a lot more important than customer service with your bank as it can often times have a direct impact on your p/l.

5) Avoid “get rich quick” scams. Easily said but even though everyone knows it people still fall for them, especially in forex. Whether those scams involve some broker promising software guaranteed to make you a millionaire or some money manager saying his fund always has a positive return don’t fall for the hype. Remember, if what they said were true they would be millionaires sitting on a beach in Bermuda not sweating it out trying to get you to buy in on their scheme.

6) Experience means nothing in forex. Keep in mind this industry is only 10 years old. This isn’t the equity market where you have brokerage firms that have been around for decades. Everyone is new to forex including the brokers selling themselves to you. Don Snellgrove had more experience in this industry than almost anyone but his firm was not the better for it. Stability is what matters. And larger firms tend to be more stable because they have the capital to ride out the storms in this industry. Furthermore, many of them are backed by well established corporate partners or investors while smaller firms are mainly on their own with limited resources at their disposal.

So there you have it. Those are the lessons from the Collapse of CFG. Take them to heart and trade wisely.

The only brokers that we can trust are Oanda and GFT.

YES or NO ?
  • #452
  • Oct 12, 2007 5:46pm Oct 12, 2007 5:46pm
This may have been posted somewhere in this thread already, and if it has I'm sorry, but I felt compelled to make a comment.

The NFA is NOT a government organization. It is merely a group of firms composed of voluntary members. That's it. As such, they cannot "shut down" anybody. The most they can do is kick a firm out of their "members only" association, but they have no legal authority, power, or ability to shut down a firm.

It seems everyone is quaking in their boots about the NFA "shutting down" undercapitalized brokers. Really? How will they do that exactly? By what legal authority?

Of course, perception is reality, so if people think a firm is weak, they will withdraw their money because of that fear, and then lo and behold, the firm does go out of business after all. But in that case, it's only because they lose their customers, not because the big bad NFA comes in and "shuts them down."

If a firm wants to operate outside of NFA membership and approval, they can have at it all they want; nothing's going to stop them.

I do think it's important to see where a firm stands in their NFA affiliation and standing however, simply because it demonstrates a firm's level of committment to ethical business practice and accountability.

But I felt like I had to make this comment, as it seems a lot of people think the NFA is somehow connected with the government (which they are not), and they worry about the NFA "shutting down" various brokers (which they have no authority to do).

I'm sure I'm offending some people with this post, but hopefully it will be of some benefit to someone, so that at least makes it worth it.

Thanks for reading...
  • #453
  • Edited 10:10pm Oct 12, 2007 5:57pm | Edited 10:10pm
Quoting TC East
This may have been posted somewhere in this thread already, and if it has I'm sorry, but I felt compelled to make a comment.

The NFA is NOT a government organization. It is merely a group of firms composed of voluntary members. That's it. As such, they cannot "shut down" anybody. The most they can do is kick a firm out of their "members only" association, but they have no legal authority, power, or ability to shut down a firm.
There's better information here:
http://www.nfa.futures.org/aboutnfa/indexAbout.asp

Particulatly note the paragraph:
Membership in NFA is mandatory, assuring that everyone conducting business with the public on the U.S. futures exchanges-more than 4,200 firms and 55,000 associates-must adhere to the same high standards of professional conduct.

FWIW, think of other self-regulating associations, like the AMA, the Bar Association, or various Professional Engineering societies. They aren't the Kiwanis Club.

For background and links to relevant acts here:
http://en.wikipedia.org/wiki/Nationa...es_Association
  • #454
  • Oct 15, 2007 2:38pm Oct 15, 2007 2:38pm
To be honest, some of the NFA actions like the threatened capital requirement hike to $20mill and requiring even the IB's to be registered smells of a money grab.
  • #455
  • Oct 15, 2007 4:07pm Oct 15, 2007 4:07pm
Quoting HalifaxCB
There's better information here:
http://www.nfa.futures.org/aboutnfa/indexAbout.asp

Particulatly note the paragraph:
Membership in NFA is mandatory, assuring that everyone conducting business with the public on the U.S. futures exchanges-more than 4,200 firms and 55,000 associates-must adhere to the same high standards of professional conduct.

FWIW, think of other self-regulating associations, like the AMA, the Bar Association, or various Professional Engineering societies. They aren't the Kiwanis Club.

For background and links to relevant acts here:
http://en.wikipedia.org/wiki/Nationa...es_Association
Halifax...I'm not suggesting the NFA is insignificant, but merely that they aren't a government agency as a lot of people believe. And, membership in NOT mandatory, regardless of what that quote says. For example, Tradex (I know they are out of business); they operated for quite a while not being an NFA member, and they are gone now for various reasons, but not because they're weren't in the NFA.

The NFA is significant and I regard them that way, but I also think it's important to know who they are and what they can and can't do. They are not all-powerful, and have no legal authority themselves (which is different from the CFTC for example).

Anyway, mainly posting for informational purposes; it's all good...
  • #456
  • Oct 15, 2007 11:06pm Oct 15, 2007 11:06pm
It's only a matter of time before a large securities (et al) firm jumps in. Some of these big trading firms would sneeze at a trade error in the millions, let alone a net cap requirement of 20m. I'm kind of surprised none of them have.
  • #457
  • Oct 16, 2007 6:34am Oct 16, 2007 6:34am
I will not take the credit for it, so I am placing the link to someone who replied to Forexsavior in the forum of forexnews.com . Which does bring up a good point.


http://www.forexnews.com/fxforum/for...693&PN=1&TPN=6
  • #458
  • Oct 16, 2007 3:56pm Oct 16, 2007 3:56pm
Quoting mike999
I will not take the credit for it, so I am placing the link to someone who replied to Forexsavior in the forum of forexnews.com . Which does bring up a good point.


http://www.forexnews.com/fxforum/for...693&PN=1&TPN=6
If you are talking about the falkbusi post (which is pretty much the same as AKforex put here) , you should be sure to read through the decisions - not just the charges - before coming to any conclusions, for or against. Due diligence, and all that....
  • #459
  • Oct 16, 2007 8:11pm Oct 16, 2007 8:11pm
Quoting jafar00
To be honest, some of the NFA actions like the threatened capital requirement hike to $20mill and requiring even the IB's to be registered smells of a money grab.
Ya think? This is what cracks me up about this business. Just set aside what you think, and read through this carefully.

1) Deal desk model is in danger, which is where all of the money has been made in this industry.

2) It is NOT necessary for a company to be NFA registered to trade spot forex. As someone else just stated on these boards, this is a self-regulated industry. It isn't the government.

3) The NFA is made up of its members and survives because of its members.

4) As with most self-regulated industries, the larger firms become the biggest piece of the guiding body, which gives them a lot of control over where they want the industry to go.

5) Let me be clear. A firm could open up and trade forex, with or without $5, $20, or $50 million in capital without registering with the NFA. The only price that they would pay is in public confidence. Think about that carefully.

6) Firms like Oanda, FX Solutions, InterbankFX have managed to raise enormous sums of money over the last few months since the drum beat for higher minimum net capital requirements popped up (fueled by posting the board that started this thread on multiple boards across the web).

So let me get this straight. The NFA IS the industry here. It is made up of people that are lobbied by the industry, who the industry pays. New taxes have been hiked to pay the NFA per customer trade and other forms. And the net outcome of the policies has been...that the biggest names in the industry just took in a lot of money.

Now, I'm sure some people are going to flip this around and say "But the consumer needs to be protected from all of the scam firms out there, and raising the capital requirement pushes them out of business."

Hey, I'm not going to argue that there are scam firms. It is a convenient bonus here, in my opinion, that the actions suit both needs. But does anyone need me to point out that the largest customer takedown in forex history was Refco, one of the biggest "members" out there? Money grab indeed. Thanks for bringing it up, I agree.
FXChant Singing the World of Forex
  • #460
  • Oct 23, 2007 7:20am Oct 23, 2007 7:20am
Forexsavior is done for
1 trader viewing now