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Proposed NFA Capital Requirement

  • #1,161
  • Apr 16, 2009 8:21am Apr 16, 2009 8:21am
i just read from a website NFA Will Make another Rule about
Max Leverage will be 1:25 !
Charting Markets into the Future...MǎҖ€¥.
  • #1,162
  • Apr 16, 2009 8:39am Apr 16, 2009 8:39am
Quoting MaXeY
i just read from a website NFA Will Make another Rule about
Max Leverage will be 1:25 !
Great! Now they are definitely chasing money away from USA .

P.S: hmmm, I am tempted back to my ignorance thesis...
  • #1,163
  • Apr 16, 2009 9:06am Apr 16, 2009 9:06am
if they really want to impose 1:25 max leverage, they should also decrease the lot sizes as well.

Mini lot size is 10K volume; they should add 100 and 10 volume as well to really protect the trader from themselves.

im now looking for another broker before the shit hits the fan
  • #1,164
  • Apr 16, 2009 9:07am Apr 16, 2009 9:07am
Quoting Jairo
Great! Now they are definitely chasing money away from USA .

P.S: hmmm, I am tempted back to my ignorance thesis...
Maxey,

Can you post the link where you read that, please and thank you.
  • #1,165
  • Apr 16, 2009 9:10am Apr 16, 2009 9:10am
I know what you are talking about now. the rule is 100-1 on majors and 25-1 on all others.
  • #1,166
  • Apr 16, 2009 9:11am Apr 16, 2009 9:11am
That’s exactly what this is the US broker pay the NFA/CFTC/ Finra fees to use the “good seal of approvals” and bend the playing field in their favor. US has to be the worst place to open an account. But again the us is full of gullible people so I guess the US brokers will serve on them.
  • #1,167
  • Apr 16, 2009 9:15am Apr 16, 2009 9:15am
Quoting Tom_C
That’s exactly what this is the US broker pay the NFA/CFTC/ Finra fees to use the “good seal of approvals” and bend the playing field in their favor. US has to be the worst place to open an account. But again the us is full of gullible people so I guess the US brokers will serve on them.
Tom,

Glad you have a clue as to what you are talking about. This goes for every US company; 75%-85% of their books of business is foreign business. BTW how are the new regs bending the playing field in the brokers favor? None of this is good for brokers in the US. Why do you think so many are now setting up shop offshore as well...
  • #1,168
  • Apr 16, 2009 5:54pm Apr 16, 2009 5:54pm
http://www.alarabiaforex.com/article.php?ID=7388&vote=3

buts its In Arabic

Quoting fxtrader42
Maxey,

Can you post the link where you read that, please and thank you.
Charting Markets into the Future...MǎҖ€¥.
  • #1,169
  • Apr 17, 2009 5:05am Apr 17, 2009 5:05am
Quoting MaXeY
i just read from a website NFA Will Make another Rule about
Max Leverage will be 1:25 !
Insane? Maybe, but it might make traders fund their accounts properly and stop them from over leveraging in news "trading" (gambling).
  • #1,170
  • Apr 17, 2009 5:25am Apr 17, 2009 5:25am
Quoting oakmonster
Insane? Maybe, but it might make traders fund their accounts properly and stop them from over leveraging in news "trading" (gambling).
That phrase sound like "please deposit more money, we are not interested in your $300 mini accounts anymore."

Come on. That is what this Leverage thing will do! Brokers simply realized that they need/want more money from loser traders.

Over leveraged or under leveraged or just right leveraged, loser traders will lose the money one way or the other. They will continue trading poorly and still lose. PERIOD. So what the heck with "dropping leverage" to protect traders from themselves gonna prove? NOTHING. It is simply a ploy for brokers to suck your money and then declare bankcrupt. BYE BYE Trader Money!
  • #1,171
  • Apr 18, 2009 3:06am Apr 18, 2009 3:06am
Quoting ragnakore
That phrase sound like "please deposit more money, we are not interested in your $300 mini accounts anymore."

Come on. That is what this Leverage thing will do! Brokers simply realized that they need/want more money from loser traders.

Over leveraged or under leveraged or just right leveraged, loser traders will lose the money one way or the other. They will continue trading poorly and still lose. PERIOD. So what the heck with "dropping leverage" to protect traders from themselves gonna prove? NOTHING. It is simply a ploy for brokers to suck...
Relax. A properly funded account means lower risk. Opening a 10,000 mini lot on a $300 account is more risky than opening the same on a $1000 account right? Higher margin requirements means you can open less trades or lower volume, thus lowering your risk. I do agree though that a bad trader at 1:500 leverage is still a bad trader at 1:5.

Maybe what the NFA is doing is helping the bucketshops? The no Hedging rules will not affect a bucketshop since they don't need a hedged netting position on the market because none of their client's trades are placed to the market anyway.

So I agree to part of what you are saying.
  • #1,172
  • Apr 28, 2009 2:37pm Apr 28, 2009 2:37pm
http://www.nfa.futures.org/news/news...ArticleID=2277

http://www.nfa.futures.org/basicnet/...14&contrib=NFA
  • #1,173
  • Apr 28, 2009 3:35pm Apr 28, 2009 3:35pm
Quoting fxtrader42
http://www.nfa.futures.org/news/news...ArticleID=2277

http://www.nfa.futures.org/basicnet/...14&contrib=NFA
Wow, 250K fine, that seems high for one count.

Although it seems they dismissed one of the charges:

"The hearing panel determined that NFA did not prove the failure to supervise charge; therefore, Count II was dismissed with prejudice."

So, they say it was supervised, but they don't agree with the way the AML policy was followed? I'm not sure I understand.
  • #1,174
  • Edited 3:53pm Apr 29, 2009 3:28pm | Edited 3:53pm
Lots of news to cover with I Trade FX being fined, Crown Forex in a knock down drag out fight with clueless Swiss regulators and the next cap requirement set to kick in. More on these topics in the days to come…

But I’ve been doing a lot of reading about this hedging rule on the bulletin boards and it appears this rule could be far more consequential than originally thought.

First of all let’s look at the language in the NFA rule itself:
http://www.nfa.futures.org/news/newsNotice.asp?ArticleID=2273

Quote
New Compliance Rule 2-43(b) requires an FDM to offset positions in a customer account on a first-in, first-out basis, thereby prohibiting a trading practice commonly referred to as "hedging."


“First in, First out” is not a concept that comes into play all that often in forex trading. Traders can hold multiple positions in the same currency pair and close any of those positions at any time in any order they like. Is NFA now saying that traders can no longer do this? Is the NFA rule not only intended to ban hedging, but to completely make over the manner in which traders can open and close their positions? If so that’s pretty big news. I checked in with a couple brokers and they are tight lipped at the moment as they are still waiting for guidance from the NFA itself.

The deadline to convert to a no-hedging platform is June 12.

Developing…
  • #1,175
  • Apr 29, 2009 6:39pm Apr 29, 2009 6:39pm
Brokers should act against this intrusion from NFA because they will lose clients. Who is NFA to tell traders how to trade? Jmho.
  • #1,176
  • Apr 29, 2009 9:36pm Apr 29, 2009 9:36pm
Quoting Voldemort
at the end of the day, if you are long x and short x then you have no position. technically you should not be charged anything for this because you have no position... you are flat.

Unless you have a sell and buy at the same price you are not FLAT.

You have exposure in terms currency. For example you have USD account

you have 1lot usdjpy buy at 97 and 1 lot usdjpy sell at 100

you are flat USD but you still have a 300,000 JPY positon that hasnt settled yet. Since most brokers convert your PL to you margin account automatically, they should only swap 300,000 jpyusd position untill you close your position.
  • #1,177
  • Apr 30, 2009 10:53am Apr 30, 2009 10:53am
The new hedging rule, which is set to kick in on May 15, (the June 12 date is when grandfathered orders must be closed as well), is even more complicated than first thought.

First, Back Bay FX, an introducing broker to several of the big forex dealers, is confirming that FIFO will be the new order of the day:
http://www.forexfactory.com/showpost...17&postcount=5

Quote
Hi All,

As part of our due diligence on the NFA's "anti-hedging" rule from April 13 (NFA rule 2.43(b)), we have been informed of a follow up or clarification from the NFA. We have not been able to get the NFA to confirm or deny, but we have heard from multiple independent sources.

The NFA has informed the clearing firms that they will need to use First In-First Out (FIFO) accounting for retail traders. This has an important effect on all traders, but specifically MetaTrader4 users!!

FIFO accounting means that if a trader has a position in a currency pair that was formed by the combination of two orders, when the trader goes to close out a portion of that position, the first order in will have to be the first order closed. HUH? Here is an example of the new ruling:

Trader bought 100,000 EUR/USD this morning (call it the morning trade), and bought another 100,000 this afternoon (call it the afternoon trade). So the total position is 200,000 EUR/USD. When the trader chooses to close part of his position by selling 100,000 EUR/USD......the trader must close the morning trade. He/She can not close the afternoon trade before the morning trade. Sooooooo.....

This ruling will significantly affect the use of Stop Loss and Limit Orders on open positions. Think of it....in the above example, you would not be able to put a Take Profit order on your afternoon trade until/unless you had closed the morning trade; the closing order of the open trades must be FIFO! Without some complicated changes being made to the coding of the retail FX platforms, the clearing firms will have to eliminate the use of Stops and Limits.

This clarification (once confirmed) will effect almost all trading styles, but specifically effect the following strategies:

- Martingale
- Grid Trading
- One Cancels Other (OCO) orders

Please note that the above is in addition to the main part of rule 2.43(b) which eliminates hedging for retail traders.

Francesc at FX Street received the same information this morning from an executive at another fx dealer:
http://blogs.fxstreet.com/francesc/2...-limit-orders/

Quote
An important executive of the Retail Forex industry just informed me that the NFA will not be allowing stop and limit orders on open positions either, as this conflicts with their FIFO - first-in, first-out - new policy. This goes into effect may 17th.

This is bound to rock the U.S. retail industry and send customers packing in droves. How can the NFA ban this critical risk management tool? Trading without a stop is like driving in a demolition derby without a seat belt. Traders should follow this news very closely and if it turns out to be true start researching brokers that have offices in the U.K.
  • #1,178
  • Apr 30, 2009 11:26am Apr 30, 2009 11:26am
Quote
Trader bought 100,000 EUR/USD this morning (call it the morning trade), and bought another 100,000 this afternoon (call it the afternoon trade). So the total position is 200,000 EUR/USD. When the trader chooses to close part of his position by selling 100,000 EUR/USD......the trader must close the morning trade. He/She can not close the afternoon trade before the morning trade. Sooooooo.....

This ruling will significantly affect the use of Stop Loss and Limit Orders on open positions. Think of it....in the above example, you would not be able to...

This is a bit silly.

If you buy 100000 EURUSD at 1.3000 in the morning, and then 100000 more at 1.3100 in the afternoon, your average positions is 200000 at 1.3050. It doesn't matter which position you close first. If you put a take profit of 100000 at 1.3200, you took 150 pips profit from the averaged price of 1.3050. If again at 1.3300 you took profit on the remaining 100000, you took 250 pips from 1.3050. Total profit of 400 pips.

Without FIFO, if you took profit at 1.3200 on the first position, that is 200 pips (1.3200 - 3000). If you took profit at 1.3300 on the second position, that's 200 more pips (1.3300 - 3100). Total profit of 400 pips.

Now, how they can conclude from the above that stop and limit orders are being eliminated, I don't know. Maybe they have some inside information, but certainly from the NFA's hedging ruling, there is no reason to believe they are eliminating stop and limit orders. You may not be able to use stop and limit orders on INDIVIDUAL orders in the same pair (i.e. like in non-FIFO example above), because they will just be set against the net position, per FIFO, but that's entirely different from not being able to use stop and limit orders altogether.
  • #1,179
  • Apr 30, 2009 11:33am Apr 30, 2009 11:33am
Quoting smittens4212
You may not be able to use stop and limit orders on INDIVIDUAL orders in the same pair (i.e. like in non-FIFO example above), because they will just be set against the net position, per FIFO, but that's entirely different from not being able to use stop and limit orders altogether.
Smittens your logic is correct. However, a lot of traders use automated software that only recognizes individual orders (individual tickets). In short, the trading software for both dealers and system traders often revolves around the ticket system. Thus, banning the use of stops on individual orders in essence bans stops altogether.
  • #1,180
  • Apr 30, 2009 12:08pm Apr 30, 2009 12:08pm
Yes, if your broker allows for putting separate positions on the same currency then there are going to be some issues.
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