DislikedJustin,
Where was the language on this? I've reviewed the forex section and didn't notice that stipulation..
http://agriculture.house.gov/inside/...onf/CRlang.pdf
Also, while on the subject of regulation, what's your take on this?
(7) prohibiting retail customers from acting as counterparties to each other in forex transactions.
It has come to the attention of the Division that some entities have offered trading plat-forms through which retail customers have traded forex directly with one another. These plat-forms are sometimes referred to as “matching systems.” To the extent that retail customers trading through one of these matching systems become counterparties to one another, the require-ment that the counterparty to a retail customer be one of the entities enumerated under Section 2(c)(2)(B)(ii) of the Act would not be met, thus, such transactions would violate Section 4(a) of the Act and/or Section 4c(b) and Regulation 32.11 thereunder. The fact that a firm operating such a trading platform is registered as an FCM, or is one of the other counterparties enumerated under the Act, would not be sufficient to meet the requirement under the Act that the counter-party to a retail customer be one of the regulated entities listed under Section 2(c)(2)(B)(ii) of the Act. CFTC source
That's from last year, I'm just curious if that had any effect on client orders being matched against each other on MBT's platform? Still possible?Ignored
In response to this quote, it’s actually much simpler than it seems, and I would imagine that this short version will answer any questions. As an FCM, we cannot directly offset customer orders. However, MB Trading as an FCM does not execute any orders at all. Your orders are routed to 3DFX, which is the ECN and is also a separate non-retail FCM. As the ECN, 3DFX compiles bank quotes and orders from retail FCMs like MB Trading. So it is not their “customers” that are hitting each other. By the way, this is also the reason that 3DFX itself is not required to meet the same net capital requirements of an FCM like ourselves (MBTF), since they don’t have retail customers. So while we currently have to meet the $5 million (going to $10 million, then $15 million, then $20 million over the next year or so), 3DFX currently is required to meet only the $1.5 million threshold. Remember that the goal of ECN trading is that it be anonymous to all, so the ECN itself shouldn’t know who the customer is. They only know that the order comes from MBTF, etc.
If that isn’t clear, let me know.
