Proposed NFA Capital Requirement

Quoting forexsavior

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Here is my two cents on how to pick a broker Vick:

1) Make sure they are registered with the NFA (or appropriate regulatory body such as the FSA in the United Kingdom.) Avoid unlicensed/unregulated firms at all costs. And don't fall for the bogus Swiss Acronyms like 'ARIF' that unregulated Swiss brokers to try claim are legit regulatory bodies.

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. 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.

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. 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.

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Quoting FXBaby

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Thanks for starting this thread. This is my first day on this thread. I got lot info. Thanks to all.
I think onada has enough capital, i can go with them. What would u think forexsavior ?
I want to open an account with mbtrading but they donot have $5 million, but onada have(iam happy).
Sorry i have not read all thread. Please forgive if iam wrong. Iam just newbie.

Please keep posting.

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Quoting FXBaby

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Thanks for starting this thread. This is my first day on this thread. I got lot info. Thanks to all.
I think onada has enough capital, i can go with them. What would u think forexsavior ?
I want to open an account with mbtrading but they donot have $5 million, but onada have(iam happy).
Sorry i have not read all thread. Please forgive if iam wrong. Iam just newbie.

Please keep posting.

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Quoting fxchant

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In fact, this just arrived in my inbox from EFX/MBTF:

[FONT='Tahoma','sans-serif']Dear Client,[/font]
[FONT='Tahoma','sans-serif']As you may know, effective December 21, 2007 the NFA raised the net capital requirement for Forex Dealer Members from $1 million to $5 million. In an effort to keep our clients informed of MB Trading Futures financial condition, we have prepared an unaudited estimated net capital computation as of the December 18, 2007. MB Trading Futures has met and will meet any regulations or changes to regulations as required by the NFA.[/font]
[FONT='Tahoma','sans-serif']http://www.mbtrading.com/netcap121807.pdf[/font]
[FONT='Tahoma','sans-serif']We appreciate your continued business and support.[/font]
[FONT='Tahoma','sans-serif']
Happy Holidays,[/font]
[FONT='Tahoma','sans-serif']
MB Trading Futures, Inc.: NFA Member
3DForex, LLC: NFA Member
1926 East Maple Avenue
El Segundo, CA 90245[/font]

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Quoting letitride

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Yes they may meet the new requirements but if you look closely they don't have enough income to comfortably survive for much longer. Anyone who's good at crunching the numbers can you please tell me where I'm reading it wrong?

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Quoting letitride

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Yes they may meet the new requirements but if you look closely they don't have enough income to comfortably survive for much longer. Anyone who's good at crunching the numbers can you please tell me where I'm reading it wrong?

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Quoting fxchant

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LOL. Three months ago, everyone was saying they wouldn't get to $5 mil because they only showed $1.8 mil. They somehow got to $5 mil in three months and now you're worried about their income? Obviously, there's money somewhere in the MB chain that they can assign to their FCM how they want. I don't think they miraculously made $3 million in three months. Keep in mind that they also own 3FDX, which forexsavior pointed out has $8 mil in cap.

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Quoting forexsavior

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9) Easy Forex: $3,789,000
Under siege for their sleazy sales tactics, it's hard to imagine the NFA isn't going to drop the hammer on them soon.

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Quoting forexsavior

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Bad News for the folks over at Easy Forex. Not only are they below the $5 million capital requirement about to go into effect but now they are being sued by an angry customer who lost their shirt.

Of course, lawsuits from failed traders against forex brokers are a dime a dozen. But this case does not appear to be your ordinary frivolous lawsuit filed by some crank on a vendetta. Here are the details as reported in a major Israeli newspaper:
http://www.globes.co.il/serveen/glob...76313&fid=1725

What jumps out is the line from the Easy Forex broker who brags on television to a news reporter that "a guy gets wiped out - I get my commission. A guy comes up a winner and turns a profit - I pay." I have heard of market makers running amok and giving customers bad order execution for their own benefit but I have never heard of an introducing broker getting compensated only when their customers lose.

So I did some digging to try and find this video. Here it is in all its glory:
http://news.nana10.co.il/Article/?Ar...peID=1&sid=126

Unfortunately, you need to speak Hebrew, which most of us don't. But a friend translated for me and the gist of the interview is that Easy Forex actually does compensate these brokers everytime their customers LOSE money. Talk about being underhanded. Aren't introducing brokers usually compensated with a portion of the spread? Not here. Apparently these brokers would go into the religious community where the regulatory oversight is scant and get these guys to open accounts knowing they would get creamed.

Looks like all those critics of market makers have some new ammunition to fire away with in the great ECN vs. Market Maker debate.

By the way, beware forex brokers with evil grins...

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Quoting forexsavior

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Zam this is a post I did on EasyForex earlier. If you have money in their Australian branch you shouldn't be effected by what happens in the U.S. I'm guessing they would just shut down the U.S. branch if they don't plan on ponying up the dough.

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Quoting jleblang

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Hi everyone ~

I’d like to walk you through the MBTF spreadsheet that was sent out to all of our customers and posted here.

Meanwhile, all I can say is, we are the real deal and we’re not going anywhere. We plan on continuing the march away from the deal desks in 2008. Happy New Year!

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Quoting zam4ever

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Dukascopy, I have 2 friends who are opened accounts with them. What is the function of Association Romande des Intermédiaires Financiers (ARIF)? Is ARIF reliable to provide high confident when selecting Swiss-based forex brokers?

How about any regulated swiss forex brokers regulated by Swiss Federal Banking Commission (SFDF)?

Kindly, please advice me.

cheers

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Quoting Moe

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i think i see what you see, they are not as big as i thought.

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Quoting jleblang

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Hi everyone ~

I’d like to walk you through the MBTF spreadsheet that was sent out to all of our customers and posted here.

Since the new requirement kicks in next week, we wanted to show our CURRENT (as of yesterday) numbers. The postings to the CFTC site are actually almost 45 days behind. In other words, the numbers that appeared there around December 12 were as of the end of October. Therefore, January 12, you will see the numbers from the end of November. Obviously, people want to know NOW what our numbers are NOW, so we decided to put up a financial statement for the 18th. Keep in mind that typically, we only file end of month, so this was done on the fly.

Now, I want to walk you through the spreadsheet, which is linked here:http://www.mbtrading.com/netcap121807.pdf

Let’s just get to the two things that matter. Let’s start with the Net Capital line, which is $7 million and change. It’s the difference between our Assets and Liabilities currently. THAT is the number that the NFA now measures. On the sheet, the next line is $268,598, which is a haircut that we have to take, which we took end of day December 18, based on a percentage of customer positions for that day. If you subtract that from the Net Capital, you get the Adjusted Net Capital, which is $6.7 million. Now, that haircut number can change a lot on any given day. In fact, for the end of October, we had a haircut of over $2 million, which meant that our Adjust Net Capital was just over $3 million. Here is the deal, though. If you keep going down the table, you’ll see the rest of the form shows the $1,000,000 requirement, which was the requirement as of yesterday, and then the Excess is the difference between the $1 million required and the $6.7 ANC, minus one other haircut. UNDER THE NEW RULES, the Net Capital requirement is now going to be $5 million, but no haircuts are required. In other words, the $7,001,420 number is our Net Capital against the $5 million that the NFA requires. Period. And it no longer is subject to fluctuation based on customer position sizes at the end of the month.

So that’s the first point, and the main point, and I hope it clears all of that up. The other question that someone raised has to do with the income/expense lines at the top of the sheet, implying that somehow we were losing money and that puts us at risk (I think they were assuming that the $5.4 ENC was our Net Cap and not the actually Net Cap, which gave them the concern that we could slip under $5 million easily if we lost money for a month or two). Since these numbers are not audited, we intentionally gave extremely light, conservative numbers, and let me explain exactly what I mean by that. The Est expenses of $300,000 may be accurate or close to it. However, our entire commissions for the month are realized on the last day of the month. In other words, the only income showing in the $75,000 income line is just random income (interest and such) that doesn’t relate to our business. Since this is a snapshot taken on the 18th of the month, and since all of our commissions are realized on the last day of the month, we showed none of it. Not even month to date numbers. And that’s a seven-figure number.

I love how boards work on the Internet. Two years ago, everyone said we couldn’t make a forex ECN (we did). Then they said we weren’t one because minis couldn’t work in the Interbank market (they do). Then they said that we were late with Omega because it didn’t come out in Q1 2007 (we said 2007). Then they said we would go out of business because we didn’t have the $5 million for the new NFA requirement (we said we were never worried and we were right). And now, we try to provide conservative numbers to show our net cap and people think we’re losing money (we aren’t).

Meanwhile, all I can say is, we are the real deal and we’re not going anywhere. We plan on continuing the march away from the deal desks in 2008. Happy New Year!

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Quoting matsf

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I am following up on last week's forex-to-futures comparison.

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