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Proposed NFA Capital Requirement

  • #1,101
  • Feb 14, 2009 12:00am Feb 14, 2009 12:00am
This is how MB trading representative answer regarding to NFA net capital requirement

http://www.forexfactory.com/showpost...postcount=3019

Very optimistic i think?

anyone have comment?
Vedanta - The End Of Knowledge. ~ J. Krishnamurti ~
  • #1,102
  • Feb 15, 2009 3:21am Feb 15, 2009 3:21am
Quoting Aloen
forexsavior, what will happen to company that could not raise their net capital to meet the min requirement?
and also what will happen to their customer money?
Thanks
All that will happen is that they will close their US operation and move offshore or into Europe. You would most likely end up with your account going to FXCM judging by previous examples.
  • #1,103
  • Feb 16, 2009 10:41am Feb 16, 2009 10:41am
Quoting Aloen
This is how MB trading representative answer regarding to NFA net capital requirement

http://www.forexfactory.com/showpost...postcount=3019

Very optimistic i think?

anyone have comment?
So far MB has crossed each capital requirement it has met so at this point I have no reason to doubt Justin. Still, I wouldn't deposit with any firm until they show the $20 million. ODL had almost $19 million and they still decided to get out of the market. It isn't easy coming up with this kind of capital in the midst of the greatest credit crunch since the Great Depression.
  • #1,104
  • Feb 16, 2009 11:13am Feb 16, 2009 11:13am
Quoting forexsavior
So far MB has crossed each capital requirement it has met so at this point I have no reason to doubt Justin. Still, I wouldn't deposit with any firm until they show the $20 million. ODL had almost $19 million and they still decided to get out of the market. It isn't easy coming up with this kind of capital in the midst of the greatest credit crunch since the Great Depression.
Thanks for the confidence Savior - we will meet the requirements once again as we have always done in the past.

We have no reason not to, especially with the current projects we have in development, including the launch of MetaTrader and a few others which I cannot commit on, but they should please the FX community very much.
  • #1,105
  • Feb 26, 2009 2:30pm Feb 26, 2009 2:30pm
When will brokers be required to have $20 million capital?
"Trading is a mental sport." - Ziad Masri
  • #1,106
  • Feb 26, 2009 4:13pm Feb 26, 2009 4:13pm
Quoting Quickdraw
When will brokers be required to have $20 million capital?
I believe they have until the end of April.
  • #1,107
  • Feb 26, 2009 8:21pm Feb 26, 2009 8:21pm
Forexsavior, do you have any updates about Swiss-based forex brokers? In previous pages in this thread, you've mentioned that some of them are starting to apply and want to be regulated by Swiss authority agency.

Please advice.
  • #1,108
  • Feb 27, 2009 12:16pm Feb 27, 2009 12:16pm
Quoting zam4ever
Forexsavior, do you have any updates about Swiss-based forex brokers? In previous pages in this thread, you've mentioned that some of them are starting to apply and want to be regulated by Swiss authority agency.

Please advice.
Swiss firms have until this summer to get their banking licenses.
  • #1,109
  • Feb 27, 2009 1:34pm Feb 27, 2009 1:34pm
Cap Requirements set to Skyrocket

Just when you thought $20 million would be the final line of demarcation for U.S. based forex brokers the National Futures Association has announced that capital requirements will be going even higher:

http://www.nfa.futures.org/news/PDF/CFTC/FRSec11_IntNotc021909.pdf

Quote
Subsection (a)(ii) applies to Forex Dealer Members that execute any customer transactions other than by using straight-through processing and that also have liabilities to customers of more than $10 million. Where it applies, the Member’s capital requirement is the minimum capital required by subsection (a)(i) plus 5% of the liabilities over $10 million.
Quote

For example, if the minimum capital requirement is $20 million, a Forex Dealer Member that operates a dealing desk and has $208 million in liabilities to customers would be required to maintain adjusted net capital equal to or in excess of $29.9 million.

Forex Dealer Members with over $10 million in customer liabilities are subject to this alternative requirement unless they execute all customer transactions using straight-through processing. Straight-through processing refers to platforms that automatically (without human intervention and without exception) enter into an identical but opposite transaction with another counterparty, creating an offsetting position in the Forex Dealer Member’s own name. A Forex Dealer Member that offers several platforms will be exempt from this requirement only if each platform executes all customer orders using straight-through-processing.

Wow. So unless a forex firm hands off every trade to a bank they have to pay this whopping 5% tax on their customer liabilities. Only a handful of firms offer STP execution. It appears the NFA is trying to encourage more firms to go in that direction.
  • #1,110
  • Feb 27, 2009 2:47pm Feb 27, 2009 2:47pm
Quoting forexsavior

Wow. So unless a forex firm hands off every trade to a bank they have to pay this whopping 5% tax on their customer liabilities. Only a handful of firms offer STP execution. It appears the NFA is trying to encourage more firms to go in that direction.
Great move on behalf of the NFA!
  • #1,111
  • Feb 28, 2009 4:37am Feb 28, 2009 4:37am
Quoting forexsavior

Wow. So unless a forex firm hands off every trade to a bank they have to pay this whopping 5% tax on their customer liabilities. Only a handful of firms offer STP execution. It appears the NFA is trying to encourage more firms to go in that direction.
Hopefully, all good Swiss-based brokers will be successfully applying it before the summer end.

By the way, in "The Forex Savior Seal of Approval", you're listing your recommended brokers:
http://www.forexfactory.com/showpost...postcount=1062

So, from your list and below links, some of them are claiming either they're (No Dealing Desk + STP + ECN) or (No Dealing Desk + STP), as writen in it.
http://www.100forexbrokers.com/stp-ecn-brokers

How do you identify and isolate the brokers which are claiming that they're truly offer NDD+STP+ECN and NDD+STP execution, but in reality they're not?

Please advice, thank you and have a nice weekend!
  • #1,112
  • Feb 28, 2009 8:00pm Feb 28, 2009 8:00pm
Forexsavior,

My broker is FXDD. Are they a NFA member? If so, where do they rank in capitalization (how much are they capitalized)?

If they are not a NFA member, then can they still be allowed to conduct business in the U.S., regardless of how much capital they have?
"Trading is a mental sport." - Ziad Masri
  • #1,113
  • Mar 2, 2009 8:41pm Mar 2, 2009 8:41pm
My question is how do they deal with the "no dealing desk" firms that just clear through themselves. where do they fall?
  • #1,114
  • Mar 5, 2009 2:55pm Mar 5, 2009 2:55pm
Quoting zam4ever
Hopefully, all good Swiss-based brokers will be successfully applying it before the summer end.

By the way, in "The Forex Savior Seal of Approval", you're listing your recommended brokers:
http://www.forexfactory.com/showpost...postcount=1062

So, from your list and below links, some of them are claiming either they're (No Dealing Desk + STP + ECN) or (No Dealing Desk + STP), as writen in it.
http://www.100forexbrokers.com/stp-ecn-brokers

How do you identify and isolate the brokers which are claiming...
There is no public information on which brokers have which model. So you have to simply ask each broker what model they have.
  • #1,115
  • Mar 5, 2009 2:57pm Mar 5, 2009 2:57pm
Quoting Quickdraw
Forexsavior,

My broker is FXDD. Are they a NFA member? If so, where do they rank in capitalization (how much are they capitalized)?

If they are not a NFA member, then can they still be allowed to conduct business in the U.S., regardless of how much capital they have?
FXDD is not yet a member of the NFA. They have a pending application. However, they still aren't a member. They are basically stuck in purgatory at the moment. At any moment the CFTC could swoop in. Be very careful with FXDD.
  • #1,116
  • Mar 5, 2009 2:57pm Mar 5, 2009 2:57pm
Quoting Voldemort
My question is how do they deal with the "no dealing desk" firms that just clear through themselves. where do they fall?
Unless a firm is passing of their trades directly to another counter-party they'll have to pay the tax.
  • #1,117
  • Mar 5, 2009 3:42pm Mar 5, 2009 3:42pm
The dangers of trading in Switzerland were revealed once again as Crown Forex is to be shuttered according to Francesc over at FX Street:

http://blogs.fxstreet.com/francesc/2009/03/05/update-finma-decision-on-crown-forex-is-to-liquidate-but-not-yet-effective/

Crown was an unregulated Swiss broker and thus their demise is certainly not a surprise. This is always the chance customers take when they open an account with an unregulated broker. Nevertheless, traders need to beware trading with any Swiss brokers unless they have a banking license. Let the corpse of Crown Forex be all the proof you need.
  • #1,118
  • Mar 6, 2009 12:41am Mar 6, 2009 12:41am
So for instance MB Trading pass everythign to 3D FX which i beleive shares an owner with MB(not 100% there) ...and im pretty sure fxcm and interbank fx do something similar do they have to pay this tax?

so technically they are not the counterparty but the owner of thier company could be through another company? which is infact just a big dealing desk?
  • #1,119
  • Mar 6, 2009 7:52am Mar 6, 2009 7:52am
Quoting Voldemort
So for instance MB Trading pass everythign to 3D FX which i beleive shares an owner with MB(not 100% there) ...and im pretty sure fxcm and interbank fx do something similar do they have to pay this tax?

so technically they are not the counterparty but the owner of thier company could be through another company? which is infact just a big dealing desk?

I guess its possible to use a proxy FDM and "STP" to a desk, but i doubt its worth it, atleast if both firms are in the US. They would need to come up with 2x 20mm for the new min. capital requirement, plus the desk gets the 5% riskhaircuts for prop positions. And the desk would need to come up with margin for their liquidity providers since you cant just wire out customer funds from the proxy FDM.

Maybe its worth it if you "STP" to a firm in some lame offshore domicile.
  • #1,120
  • Mar 6, 2009 8:06am Mar 6, 2009 8:06am
Quoting shrike
I guess its possible to use a proxy FDM and "STP" to a desk, but i doubt its worth it, atleast if both firms are in the US. They would need to come up with 2x 20mm for the new min. capital requirement, plus the desk gets the 5% riskhaircuts for prop positions. And the desk would need to come up with margin for their liquidity providers since you cant just wire out customer funds from the proxy FDM.

Maybe its worth it if you "STP" to a firm in some lame offshore domicile.

Shrike, if they only clear QEP's they would not have to put up 20M and haircuts are not taken into account with QEP's. i.e. 3DFX.
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