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FIA Opposes FINRA’s Proposed Leverage Limitation for Retail Forex 3 replies

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Leverage Limitation for Retail Forex

  • #21
  • Quote
  • Jan 30, 2009 7:03pm Jan 30, 2009 7:03pm
I highly doubt this will be passed. The gov't is usually incredibly off the mark when comes to initial regulation proposals. Bare witness to the new CDS proposal this week that requires holding the underlying bonds in order to trade the CDS, enacting it would wipe out 80% of the market.
  • #22
  • Quote
  • Jan 31, 2009 3:15pm Jan 31, 2009 3:15pm
Just checking the preferred brokers list at http://www.forexfactory.com/brokers.php

The ones headquartered outside the USA are

Delta Stock -Sofia, Bulgaria

dbFX -Frankfurt, Germany

ACM -Geneva, Switzerland

MIG Investments -Unlisted. The telephone number's country code, 41, suggests they are in Switzerland. WHOIS info on their domain, migfx.com indicates an address in Neuchâtel, Switzerland.

Alpari (UK) Ltd. -London, UK

ODL is headquartered in Chicago and London. Alpari has two divisions, a U.S. and a UK one. Who's to say that the U.S. regulators wouldn't blackmail Alpari or ODL into giving up information on their "foreign" clients? It's something to think about.
Not all sins are created equal
  • #23
  • Quote
  • Jan 31, 2009 3:38pm Jan 31, 2009 3:38pm
None of which have exactly the best history.
  • #24
  • Quote
  • Jan 31, 2009 4:05pm Jan 31, 2009 4:05pm
Quoting Rabid
None of which have exactly the best history.
That's very true. There are certainly other brokers but I haven't been sourcing them out.

Oanda claims two headquarters, New York and Toronto. Which is it?
Not all sins are created equal
  • #25
  • Quote
  • Jan 31, 2009 10:01pm Jan 31, 2009 10:01pm
If this becomes the law, I think there will be a lot of prop firms opening for forex trading, and the existing ones adding forex to their markets selection.
Trax Tibidax Tibidox...
  • #26
  • Quote
  • Feb 1, 2009 6:28am Feb 1, 2009 6:28am
NFA is proposing 25:1 leverage cap on all non-majors, according to
general counsel at FXDD.

Can you say "screwed?"
  • #27
  • Quote
  • Feb 1, 2009 10:48am Feb 1, 2009 10:48am

Clearly, we need to open accounts in Europe. American brokers if this rule goes forward, will be closed. A real failure.

We have to make a lot of money to live quiet as the poor.
  • #28
  • Quote
  • Feb 1, 2009 1:21pm Feb 1, 2009 1:21pm
There's Europe but preferably, any G20 country that doesn't have a name beginning with a "U" and ends with "nited States of America" or has an economy based on chicle exports.
Not all sins are created equal
  • #29
  • Quote
  • Feb 1, 2009 1:25pm Feb 1, 2009 1:25pm
Quote
NFA is proposing 25:1 leverage cap on all non-majors, according to general counsel at FXDD.

Ugh. While I could live w/ a 25:1 cap, just proves that this is a systemic issue.

Write comments to all proposals, we need to make sure our voice is heard if we plan to keep trading in the US.
  • #30
  • Quote
  • Feb 1, 2009 1:57pm Feb 1, 2009 1:57pm
Quoting ChicagoRob
NFA is proposing 25:1 leverage cap on all non-majors, according to
general counsel at FXDD.

Can you say "screwed?"
Well IB is already at that level, in fact, they're at 20:1 maintenance margin for non-base crosses (even less for certain exotics). But this will be a big hit for all other US FX shops if it goes into effect.

One has to wonder if the guys at Knight (HotSpot) factored this into the sell equation as well, could be exiting at the right time.
  • #31
  • Quote
  • Feb 1, 2009 2:14pm Feb 1, 2009 2:14pm
Hmm... even 25:1 is more than enough to blow a newbies' account within minutes...
  • #32
  • Quote
  • Feb 1, 2009 2:22pm Feb 1, 2009 2:22pm
Just another instance of government deciding they need to protect people from their own stupidity.

It does not take any leverage to blow an account.
  • #33
  • Quote
  • Feb 1, 2009 2:36pm Feb 1, 2009 2:36pm
Don't see the problem.

Les say my account is 10.000 USD
I risk 3% on a 80 Pip Stoploss.
This means I have to buy/sell 37500 units of foreign currency. Or 0.375 Lots.
Now we divide 37500 by 25 and we get that I have to use 1500 USD of my 10k to place the trade. Where's the problem.
If I manage to get 240 pips out of that trade I'm up a might 9% on my capital with one trade. Isn't that enough?

Another example. With that same account you risk 3% on a 30 Pip stoploss. So you trade 1 Lot (100.000 Units).
100.000/25 = 4000 Margin of 10.000. Risk still is 3%.
  • #34
  • Quote
  • Feb 1, 2009 3:08pm Feb 1, 2009 3:08pm
Bah Tjpld! Spielverderber!

1000:1 _is_ needed. You can't trade with lower leverage!1!

But ok, just kidding. 1:1 would be a bit too less I guess, but everything above 10:1 would be more than enough for most traders with real accounts.
  • #35
  • Quote
  • Feb 1, 2009 3:17pm Feb 1, 2009 3:17pm
5:1 is already enough for me...more than that...I would be sweating and grinning my teeth for each pip that moved against me lol...
  • #36
  • Quote
  • Feb 1, 2009 3:17pm Feb 1, 2009 3:17pm
Quoting Tjpld
Don't see the problem.

Les say my account is 10.000 USD
I risk 3% on a 80 Pip Stoploss.
This means I have to buy/sell 37500 units of foreign currency. Or 0.375 Lots.
Now we divide 37500 by 25 and we get that I have to use 1500 USD of my 10k...
Makes perfect sense. However, my main concern is that regulation, in time, could lead to over-regulation. If you give an inch, they might try to take a mile.
Not all sins are created equal
  • #37
  • Quote
  • Feb 1, 2009 3:51pm Feb 1, 2009 3:51pm
Quote
Don't see the problem.
25:1 leverage is usable. The FINRA proposal is 1.5:1 leverage, that is not usable.

Still, the frog/boiling pot analogy may apply.

Quote
Makes perfect sense. However, my main concern is that regulation, in time, could lead to over-regulation. If you give an inch, they might try to take a mile.

Nod. Is there really a need to limit leverage? I can see on stocks while it'd be needed, since it's possible to short a company into oblivion and wreck the financial system w/o leverage limits. But it would take trillions of dollars to impact the USD in that way, and it wouldn't last as long. This goes from trying to stabilize the markets into trying to protect us from ourselves. That's just not needed.

At that point it goes to principle. Why should we accept regulation when it's not needed?
  • #38
  • Quote
  • Feb 1, 2009 4:33pm Feb 1, 2009 4:33pm
Quoting Rabid
At that point it goes to principle. Why should we accept regulation when it's not needed?
That's exactly it. The bad traders will blow their accounts even with 1.5 to 1. That's the market's way of correcting itself. Those who aren't meant to trade won't stay in anyways. So to pass rules saying "you can only use this much margin"? Bleh!
Not all sins are created equal
  • #39
  • Quote
  • Feb 1, 2009 9:57pm Feb 1, 2009 9:57pm
Funny thing is, with a cap on leverage the Fx survival rate would probably go up a few percent. The attrition rate for stocks is much lower due to less leverage.
  • #40
  • Quote
  • Feb 1, 2009 10:30pm Feb 1, 2009 10:30pm
Quoting scexglobal
Funny thing is, with a cap on leverage the Fx survival rate would probably go up a few percent.
Only for a few quarters if that. If one is bad at trading, whether he blows his account with $1000 once over a month or with $100 repeated 10 times over a year, the account is still gone.
Not all sins are created equal
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