Proposed NFA Capital Requirement | Page 34 | 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

  • #661
  • Mar 18, 2008 7:14am Mar 18, 2008 7:14am
Bear Sterns,

First of all, you need to learn to read the full thread before you weigh in. Big firms like REFCO have been mentioned. Second of all, anyone that had money deposited with Bear Sterns didnt lose a dime.
  • #662
  • Mar 18, 2008 7:16am Mar 18, 2008 7:16am
Quoting fxtrader42
Bear Sterns,

First of all, you need to learn to read the full thread before you weigh in. Big firms like REFCO have been mentioned. Second of all, anyone that had money deposited with Bear Sterns didnt lose a dime.
Correct
  • #663
  • Mar 18, 2008 11:07am Mar 18, 2008 11:07am
Very cute, what of happened if the Gov't didnt bail them out? what would of happened if JP did not come in???

answer please
  • #664
  • Mar 18, 2008 11:27am Mar 18, 2008 11:27am
Quoting mike999
Very cute, what of happened if the Gov't didnt bail them out? what would of happened if JP did not come in???

answer please
IF IF IF
  • #665
  • Mar 18, 2008 2:02pm Mar 18, 2008 2:02pm
Mike,

I am glad that you have asked this question. Your question is a good one and very relevant but also very hard to answer.

First, it is important to figure out why Bear was on its way to bankruptcy and why the Fed and JPMorgan stepped in. Bear was going to become insolvent because their was a run on their capital. The same thing that happened to REFCO and a lot of other firms that went out of business in the past. Basically, clients feared that Bear had over leveraged themselves on some of their proprietary positions. Analysts looked at their balance sheet and came to that very conclusion. This causes all of the hedge funds, institutional clients, and other clients that trade through Bear to close or withdawal funds. This causes their stock price to go down and Bear's market value is greatly diminished. In turn, they no longer have the market value, the assets, or the reputation to receive funding in the Repo market or to offer funding in the Repo market. (If you dont know anything about the repo market I suggest you do some research as it is a very important market for banks.) They no longer can collect the fees associated with their prime brokerage business and trading fees which allows banks/brokers to make money hand over fist. All of this means that they no longer have the capital to finance their current business.

Why did JPMorgan and the Fed bail out Bear? The first reason and more so for JPMorgan is to make money. JPMorgan, if the deal goes through, will pay 230M for Bear. Bear's Madison Ave office is valued at 800M to 1B. The Fed has offered to help Bear with their riskiest assets (subprime mortgages) so JPMorgan will more then likely be able to make a lot of money if the deal goes through which is why they did the deal. The Fed also stands to make a good deal of money in the long run since they do not have to mark to market those risky assets like banks have to do on a daily basis. The big reason the Fed did this is because if Bear goes down the market will factor in that maybe a lot of other banks will go under as well. Yesterday it looked like the same thing was happening with Lehman eventhough Lehman was bigger and their suprime business was much less. So the Fed couldnt let one bank fail with the fear that other banks could follow. If there wasn't a recession and credit crisis the Fed probably wouldn't have stepped in since contagion wouldnt have been an issue.

With that being said, if no one rescues Bear there are many things that would or could have taken place.

First, the company would liquidate all assets over a period of time like their Madison ave office building and anything else on their balance sheet. What ever that sum of money turns out to be would be paid to the following in the order they are listed first.

  1. Creditors that Bear owes money too.
  2. If their is money left over clients that deposited money with Bear would be made whole or as close to whole as the left over capital would allow.
  3. Any residuals would go to the shareholders.

Clients that have deposits with Bear are protected up to 500k per account through the SIPC. If you have an individual account with them worth 500k and a joint account with your wife worth 500k both accounts would be okay. Anything over that would not be covered and might not ever be made whole again. This is the major reason why all of these hedge funds that might have had multi million or billion dollar accounts withdrew their money from Bear. Causing the run on their capital.

One thing to note, security firms are more highly regulated then FX firms. Also, Bear was a public company and most fx firms are not. This means their is a lot more transparency about the company then a loosely regulated and private company.

  • #666
  • Mar 18, 2008 2:16pm Mar 18, 2008 2:16pm
The question is also if the SIPC can stay solvent when something the size of Bear Stearns goes down..

P.S. regarding transparency of a public traded company, it is somewhat questionable after recent incidents (JP Morgan buyout with $2/share, when it traded in the 30ies on friday).
  • #667
  • Mar 18, 2008 2:34pm Mar 18, 2008 2:34pm
Quoting fxtrader42
Mike,

I am glad that you have asked this question. Your question is a good one and very relevant but also very hard to answer.

First, it is important to figure out why Bear was on its way to bankruptcy and why the Fed and JPMorgan stepped in. Bear was going to become insolvent because their was a run on their capital. The same thing that happened to REFCO and a lot of other firms that went out of business in the past. Basically, clients feared that Bear had over leveraged themselves on some of their proprietary positions. Analysts looked at their balance sheet and came to that very conclusion. This causes all of the hedge funds, institutional clients, and other clients that trade through Bear to close or withdawal funds. This causes their stock price to go down and Bear's market value is greatly diminished. In turn, they no longer have the market value, the assets, or the reputation to receive funding in the Repo market or to offer funding in the Repo market. (If you dont know anything about the repo market I suggest you do some research as it is a very important market for banks.) They no longer can collect the fees associated with their prime brokerage business and trading fees which allows banks/brokers to make money hand over fist. All of this means that they no longer have the capital to finance their current business.

Why did JPMorgan and the Fed bail out Bear? The first reason and more so for JPMorgan is to make money. JPMorgan, if the deal goes through, will pay 230M for Bear. Bear's Madison Ave office is valued at 800M to 1B. The Fed has offered to help Bear with their riskiest assets (subprime mortgages) so JPMorgan will more then likely be able to make a lot of money if the deal goes through which is why they did the deal. The Fed also stands to make a good deal of money in the long run since they do not have to mark to market those risky assets like banks have to do on a daily basis. The big reason the Fed did this is because if Bear goes down the market will factor in that maybe a lot of other banks will go under as well. Yesterday it looked like the same thing was happening with Lehman eventhough Lehman was bigger and their suprime business was much less. So the Fed couldnt let one bank fail with the fear that other banks could follow. If there wasn't a recession and credit crisis the Fed probably wouldn't have stepped in since contagion wouldnt have been an issue.

With that being said, if no one rescues Bear there are many things that would or could have taken place.

First, the company would liquidate all assets over a period of time like their Madison ave office building and anything else on their balance sheet. What ever that sum of money turns out to be would be paid to the following in the order they are listed first.

  1. Creditors that Bear owes money too.
  2. If their is money left over clients that deposited money with Bear would be made whole or as close to whole as the left over capital would allow.
  3. Any residuals would go to the shareholders.

Clients that have deposits with Bear are protected up to 500k per account through the SIPC. If you have an individual account with them worth 500k and a joint account with your wife worth 500k both accounts would be okay. Anything over that would not be covered and might not ever be made whole again. This is the major reason why all of these hedge funds that might have had multi million or billion dollar accounts withdrew their money from Bear. Causing the run on their capital.

One thing to note, security firms are more highly regulated then FX firms. Also, Bear was a public company and most fx firms are not. This means their is a lot more transparency about the company then a loosely regulated and private company.


I love your answer, and I respect you for it. But once again, if they had managed their risk, this wouldn not have happened.

SIZE DOESNT MATTER
  • #668
  • Mar 18, 2008 2:36pm Mar 18, 2008 2:36pm
Bear would have had to have been 1000times bigger to take down SIPC. Not a chance in hell Bear could have taken them down. God help us if a firm takes down SIPC.

I mentioned transparency due to the fact that the public has access to their annual and quarterly reports. Private firms do not have to offer any of that to the public. The only one's that see that information are the regulators and their lenders. The stock price only indicates what the market thinks the company is worth by factoring in many different pieces of information. Not sure how the stock price going to 2 from 30 shows a lack of transparency. If anything it shows just the opposite.
  • #669
  • Mar 18, 2008 2:55pm Mar 18, 2008 2:55pm
Noone but Bear themselfs knew how big the writedowns are. Apparently, JP Morgan came to the conclusion, after getting access to Bears books during the merger process, that the bank is basically worthless (their market-cap at $2/share is even less than the value of their building in NY..). The reports didnt prevent the market from valueing a worthless bank at $30+, i wouldnt call something like that exactly transparent. I agree that a public company is *more* transparent, but this event puts things quite into perspective in my optinion.
  • #670
  • Mar 18, 2008 3:30pm Mar 18, 2008 3:30pm
Quoting fxtrader42
Bear would have had to have been 1000times bigger to take down SIPC. Not a chance in hell Bear could have taken them down. God help us if a firm takes down SIPC.
From what I can find, the SIPC has a $1.7 billion fund. That isn't so big these days... along with a couple more billion in credit lines.
  • #671
  • Mar 18, 2008 4:11pm Mar 18, 2008 4:11pm
Shrike, what isnt transparent about the fact that the market thought the company was worth $30+ on friday but on Sunday the company agreed to sell for $2. The market thought it was worth 30 this doesnt mean that the company is worth 30. Also, Bear agreed to a deal at $2 and this doesnt necessarly mean that this is what the company is actually worth. I mean JPMorgan looked at the same books that were available to all of us. As we both noted their office building is worth almost 5 times the sale price. The problem is coming up with a value for all of their collateralized debt. The issue of transparency lies in the fact that banks use their own valuation methods to value these debts. The breakdown in my opinion is with the lack of regulation as to the methods used to value that debt. Nothing will ever be completely transparent. If things were completely transparent why would someone be willing to buy or sell at one price and someone else would be willing to buy or sell at another? Market participants always feel that they might know something someone else doesnt. More so, market participants feel that the data that is available to everyone means something to them that might lead someone else to think something completely different.

The most interesting thing is that Bear shares are trading at around 5 dollars a share and even got as high as 8 today. If the deal goes through anyone holding that stock would only get $2. This obviously means that the market thinks the deal will not go through or at the very least it will not go through at $2 per share. Now that gives me perspective.
  • #672
  • Mar 18, 2008 4:15pm Mar 18, 2008 4:15pm
Quoting mike999
How come no one is mentioning that a big firm with so much capital is in the toilet, like " Bear Sterns"???

Its not the money, its the way you manage your risk.

Live and learn!!!
Mike999 there has never been a recorded case of a well capitalized, registered forex dealer broker going out of business in the manner of a Bear Stearns. Remember, Refco was unregulated. And FXLQ was never well capitalized, they were merely lying about how much money they had. FXLQ only proves that the CFTC capital reports should be taken with a grain of salt. But the evidence is still overwhemling. In retail forex, stick with well capitalized firms.
  • #673
  • Mar 18, 2008 4:24pm Mar 18, 2008 4:24pm
Quoting phy
From what I can find, the SIPC has a $1.7 billion fund. That isn't so big these days... along with a couple more billion in credit lines.
Phy, the 1.7 billion is what I saw on their balance sheet as well. I have no idea how large their credit lines are.

There are a few things to note. First, if Bear were to go down, how much is there on deposit? A lot of the big funds I am sure were working with credit lines where a much smaller amount of the actual funds money would have been on deposit. The second is that the banks cant touch a certain amount of client funds which have to be held to cover client exposure. That money would not be lost. Another thing is after Bear liquidated how much would be left to make client deposits whole. I imagine but have no way of knowing that with Bears assets all most all clients would have been made whole. If they werent made whole as long as the assets covered at least 500K of the account the SIPC wouldnt have had to shell out a dime. The last thing I want to mention is that companies as big as Bear rarely go out of business they are usually bought before they go under. Salomon brothers is a perfect example
  • #674
  • Mar 19, 2008 12:10pm Mar 19, 2008 12:10pm
I have been hearing a lot about FXDD and people have been asking me about their regulatory status. So what's the scoop?

FX Direct Dealer is a New York City based broker located in Manhattan . FXDD used to be affiliated with Tradition Securities. However, today Tradition only owns a small percentage of the firm. Thus FXDD is in no position to claim Tradition as a parent company for regulatory purposes.

So aren’t they then required to register according to the law? Not according to FXDD. Here is a response I got from a customer service rep over at FXDD when I asked them this question on their chat:

Quote
Forex Inquiries: FXDD began as a subsidiary of Tradition North America within the Tradition Group of companies. (http://www.traditiongroup.com/uk/home3.asp). FXDD's management, operation, compliance, customer relations and its financial policies and procedures were structured to meet the Tradition Group's oversight and those policies and procedures remain firmly in place. Our managers have deep experience in the foreign exchange markets and we conduct our business as highly qualified professionals. As yet, the OTC spot forex market in the United States is not subject to regulation by the SEC or the CFTC. FXDD is not a member of any private self regulatory organization such as the FINRA or the NFA and is not registered with either the CFTC or the SEC. Congress is considering legislation that will require all forex dealers to register, probably with the CFTC and join NFA as it is the only recognized private futures regulatory authority. So,as the regulatory environment for spot foreign exchange changes, FXDD will keep its options open and, if congress passes new legislation, FXDD will register with the designated oversight agencies. Having said that, FXDD manages its business in conformity with well established dealing protocols and the customs and practices of the foreign exchange dealing community. FXDD has thousands of clients who have chosen us as their dealing firm because of the manner in which we conduct our business and because of our historic association with the Tradition Group. We maintain extensive dealing lines with the top global banks and have never had any issues relating to the protection of customer assets or the manner in which we handle our client accounts.

Uh, someone should let FXDD Know that OTC spot forex IS regulated in the United States and they ARE subject to regulation by the CFTC.

I have put the question to FXDD by email but have yet to get a response. Customers need to be aware that this firm is swimming in some very murky regulatory waters. The CFTC could crash through FXDD’s door at any moment and demand the firm shut down their business because they are not regulated. Every retail forex dealer in the United States has accepted the CFTC as their regulator but FXDD is claiming they have no jurisdiction?

This firm in my opinion is a very risky place to put your money. Buyer Beware.
  • #675
  • Mar 19, 2008 4:26pm Mar 19, 2008 4:26pm
Forexsavior to the rescue once again. Well not really, once again! I dont know who he talked to at FXDD nor do I care and nor do I think he actually spoke with someone. However, if he did the customer rep knew less then what it took me 10 mins to figure out by doing some basic research.

Tradition Securities and Futures is registered as an FCM. NFA ID #0271289. If you look them up you can see that they are owned by Tradition North America Inc. Also, if you look at fxdd's webpage you can see that their company address is the same as Tradition Securities and Futures.

Now how are they linked to CFT (Compagnie Financiere Tradition)? First if you go to the same site forexsavior posted you can view the company profile. Click on company profile, then click on international presence and then click on North America. Which shows that Tradition (north america) inc is a new york based subsidiary of CFT and it shows the same address as FXDD's.

Now the research I have done means absolutely nothing. This is what means something. FXDD's website no longer links it self to Tradition which it used too. Obviously FXDD wants to be linked to Tradition considering Tradition is in the top five for IBD's in the world. This made me think and I decided to look at Tradition's 2006 Annual report. I found that in December 2006 Tradition sold 80% of its holdings in FXDD.

Taken from Tradition's 2006 Annual report:

The decision was taken to dispose of the Group’s retail operations
in online forex products in the United States and the United
Kingdom in 2006. Gaitame.com Co. Ltd in Tokyo experienced a
substantial increase in its activities during the year.

Gaitame.com Co. Ltd, in which the Group holds a 41.82%
controlling interest, enjoyed a sharp rise in trading volumes in
2006. Gaitame offers online forex trading to a clientele made
up predominantly of private investors. The company is the
market leader in this segment in Japan.
In December 2006, Compagnie Financière Tradition sold 80%
of its holding in FXDD.com, its subsidiary FXDirectDealer
LLC. FXDD.com specialises in online forex trading in the
United States.
Tradindex.com, through our London based subsidiary Monecor
(London) Ltd, runs a website specialising in spread betting and
CFDs. This company was also sold at the end of 2006, subject

to regulatory approval from the FSA.

It looks like Tradition wants little to do with the retail market anymore. FXDD has been doing business in the US for over a year now with only 20% of the compnay owned by Tradition. I am not sure what regulations are imposed on FXDD right now by the NFA. However, I am sure of this, they still share the same office as all of Tradition's other entities in NYC. I can assure you that the NFA knows whats going on with FXDD. It is illegal for a company to take customer deposits if they are not regulated and if FXDD was doing business in the US illegally the NFA would have shut them down all ready. I imagine somehow they still fall under Tradition's umbrella.
If you have an account with FXDD call the NFA with your concerns and certainly dont listen to what forexsavior says. He cant even do ten minutes of research so it should be well documented that he doesn't do any real research and offers nothing of substance. He is only on this forum to scare FF members thus trying to get you all to move your accounts to a firm that shows a higher net cap. Do your own research and if something smells funny do a little digging on your own. If you still dont know call the NFA. If they cant help you relieve your concerns then find a better company. Remember better capitalized firms arent always better or safer companies. No need to take my word or anyone elses as we are not the ones investing your money; you are!
  • #676
  • Mar 20, 2008 7:04am Mar 20, 2008 7:04am
Quoting fxtrader42
Forexsavior to the rescue once again. Well not really, once again! I dont know who he talked to at FXDD nor do I care and nor do I think he actually spoke with someone. However, if he did the customer rep knew less then what it took me 10 mins to figure out by doing some basic research.

Tradition Securities and Futures is registered as an FCM. NFA ID #0271289. If you look them up you can see that they are owned by Tradition North America Inc. Also, if you look at fxdd's webpage you can see that their company address is the same as Tradition Securities and Futures.

Now how are they linked to CFT (Compagnie Financiere Tradition)? First if you go to the same site forexsavior posted you can view the company profile. Click on company profile, then click on international presence and then click on North America. Which shows that Tradition (north america) inc is a new york based subsidiary of CFT and it shows the same address as FXDD's.

Now the research I have done means absolutely nothing. This is what means something. FXDD's website no longer links it self to Tradition which it used too. Obviously FXDD wants to be linked to Tradition considering Tradition is in the top five for IBD's in the world. This made me think and I decided to look at Tradition's 2006 Annual report. I found that in December 2006 Tradition sold 80% of its holdings in FXDD.

Taken from Tradition's 2006 Annual report:

The decision was taken to dispose of the Group’s retail operations
in online forex products in the United States and the United
Kingdom in 2006. Gaitame.com Co. Ltd in Tokyo experienced a
substantial increase in its activities during the year.
Gaitame.com Co. Ltd, in which the Group holds a 41.82%
controlling interest, enjoyed a sharp rise in trading volumes in
2006. Gaitame offers online forex trading to a clientele made
up predominantly of private investors. The company is the
market leader in this segment in Japan.
In December 2006, Compagnie Financière Tradition sold 80%
of its holding in FXDD.com, its subsidiary FXDirectDealer
LLC. FXDD.com specialises in online forex trading in the
United States.
Tradindex.com, through our London based subsidiary Monecor
(London) Ltd, runs a website specialising in spread betting and
CFDs. This company was also sold at the end of 2006, subject

to regulatory approval from the FSA.

It looks like Tradition wants little to do with the retail market anymore. FXDD has been doing business in the US for over a year now with only 20% of the compnay owned by Tradition. I am not sure what regulations are imposed on FXDD right now by the NFA. However, I am sure of this, they still share the same office as all of Tradition's other entities in NYC. I can assure you that the NFA knows whats going on with FXDD. It is illegal for a company to take customer deposits if they are not regulated and if FXDD was doing business in the US illegally the NFA would have shut them down all ready. I imagine somehow they still fall under Tradition's umbrella.
If you have an account with FXDD call the NFA with your concerns and certainly dont listen to what forexsavior says. He cant even do ten minutes of research so it should be well documented that he doesn't do any real research and offers nothing of substance. He is only on this forum to scare FF members thus trying to get you all to move your accounts to a firm that shows a higher net cap. Do your own research and if something smells funny do a little digging on your own. If you still dont know call the NFA. If they cant help you relieve your concerns then find a better company. Remember better capitalized firms arent always better or safer companies. No need to take my word or anyone elses as we are not the ones investing your money; you are!

You tore forexsavior a new a**hole
  • #677
  • Mar 20, 2008 1:20pm Mar 20, 2008 1:20pm
Quoting fxtrader42
Tradition Securities and Futures is registered as an FCM. NFA ID #0271289. If you look them up you can see that they are owned by Tradition North America Inc. Also, if you look at fxdd's webpage you can see that their company address is the same as Tradition Securities and Futures.
fxtrader I believe you are the one in need of doing his research. Right now Tradition states they have $768,000 in adjusted net capital according to the latest CFTC Report, which disqualifies them from having enough money to offer retail forex according to the NFA's own rules.

In fact, FXDD never even references their relationship with Tradition as a reason to do business with them, which is odd considering how large Tradition is you would think they'd be proud to cite their close relationship. Yet it is nowhere on the website.

And to further discredit you here is the response I got when I asked a compliance officer at FXDD last year what their relationship was with Tradition.

Answer: "NONE"

It is clear that FXDD is on its own in a regulatory sense. Yet they do not have their own license. The reason may be because of the recent court cases that have challenged the legitimacy of the CFTC to regulate retail forex. I'm guessing FXDD is using those cases as precedent for not having to be regulated. But until I get a response back I don't know. Another poster at Elite Trader said the same thing: http://www.elitetrader.com/vb/showth...29#post1845929

Care to try again Fxtrader?
  • #678
  • Mar 25, 2008 10:40am Mar 25, 2008 10:40am
Anyone find it funny how some of these brokers, such as ibfx, manage to pull money out of the air when its required? ..... Hello FXLQ...
  • #679
  • Apr 8, 2008 12:47pm Apr 8, 2008 12:47pm
The new CFTC Numbers Are Out. Here they are:
http://www.cftc.gov/marketreports/fi...fcms/index.htm

Above $20 Million
Oanda $159,786,916
RJ O'Brien $101,983,527
FXCM $81,150,191
GFT Forex $68,407,128
Gain Capital $66,579,458
I Trade FX $35,037,710
Interbank FX $25,733,263

Below $20 Million
PFG $17,986,053
FX Solutions $16,140,253
CMS $13,726,169
ODL $12,639,482
GFS Forex $10.4
IFX $12,343,198
CMC $8,773,706
Alpari $9,001,039
Ikon $8,271,674
Easy Forex $7,799,807
Hotspot $7,675,145
MB Trading $8,015,568
Friedberg Mercantile $7,985,613
Forex Club $7,639,479
Money Garden $6,367,331
Bacera $5,554,498
Advanced Markets $5,239,792
  • #680
  • Apr 11, 2008 11:42am Apr 11, 2008 11:42am
Switzerland gets an Enema

And so it begins. Switzerland has finally decided to flush their financial system and purge the worst forex dealers from their bloated and cramped bowels. Henceforth, any forex dealer who wishes to do business in Switzerland MUST get a banking license. No longer can firms deceive the public by claiming they are regulated because they have a worthless registration with ARIF or some other anti-money laundering committee. Now they must get an actual license, that comes with an actual license number, which allows the trading public to do an actual background check on them. I congratulate the Swiss on taking this huge step forward and with that, leaving the dark ages and entering the modern era.

For more information on this new law read below. Next week I'll discuss how this law is effecting forex brokers all over Europe. Already two major players are closing their doors (WestCap FX and Northfinance.) Other Swiss brokers are sure to close up shop as well. If you have your money at a Swiss broker you should immediately check with them to see if they plan on complying with the new law. If they do not plan on complying TAKE YOUR MONEY OUT NOW. And if they plan on fleeing to some God forsaken island where there is no regulation TAKE YOUR MONEY OUT NOW.

Quote
Switzerland: Foreign exchange traders
Thouvenin Rechtsanwälte, Zurich

http://www.iflr.com/?Page=10&PUBID=3...702998&TYPE=20

The Swiss Federal Banking Commission (SFBC) estimates that about 150 foreign exchange (forex) traders are registered as financial intermediaries in Switzerland, who have not been subject to regulation under Swiss banking and finance legislation. In particular forex traders managing accounts for more than 20 individual clients did not fall under SFBC supervision in the past, as long as those accounts were not interest-bearing and were only used to execute customer orders.

In recent years, the SFBC has seen a growing number of complaints, especially from smaller investors, regarding transparency, liquidity and risk disclosure, let alone the substantial losses sometimes suffered by these investors.

The SFBC took action in November 2007 by proposing an amendment to Article 3a paragraph 3 section c of the Swiss Banking Ordinance. Forex dealers will be required to apply for a banking status under the Swiss Banking Act of 1934, as amended. At the same time, security dealers and precious metal traders continue to be exempted with their client accounts under said Article 3a paragraph 3 section c. A banking status under the Swiss Banking Act requires a minimum paid-in share capital of Sfr10 million ($9 million) and further equity requirements to appropriately cover credit, operational and other risks. Bank management members in Switzerland must meet certain professional standards. A Swiss bank must also meet organisational standards, providing for separate corporate bodies for supervision, management and control.

From April 1 2008, existing forex traders in Switzerland are required to register with the SFBC. The registration process ends on June 30 2008. One year later, that is, on March 31 2009, forex traders must meet the above requirements and must have applied for a banking licence.

It is expected that many forex dealers will not be able to obtain a Swiss banking licence because they may not be able to meet the capital and/or organisational requirements. Instead of applying for a banking licence they may explore other legal avenues, such as teaming up with a Swiss bank or Swiss security dealer for example and acting as an independent asset manager, converting their business model by no longer accepting deposits from the public, or by offering their forex products by means of securities or through mutual funds.
0 traders viewing now