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Proposed NFA Capital Requirement

  • #1,201
  • May 5, 2009 11:38am May 5, 2009 11:38am
Quoting rnettles
Who do you think is next forexsavior to go on the chopping block in the US?
My guess is an Easy Forex or an Alpari will pack up and leave. They have offices in other places. Why stick around and deal with all these burdensome new regulations in addition to these hefty capital requirements?
  • #1,202
  • May 5, 2009 5:55pm May 5, 2009 5:55pm
NFA Delays Ban on Stops/Limits

Francesc at FX Street is hearing that the NFA’s rule banning the use of stops/limits as part of the NFA’s new FIFO edict will not be enforced until July 31st:

http://blogs.fxstreet.com/francesc/2...-to-july-31st/

Quote
Hi everyone

On April 30th I published here that the NFA will not be allowing stop and limit orders on open positions as this conflicts with their FIFO - first-in, first-out - new policy.

This had to go into effect may 17th along the announced prohibition of hedging.

At this time, the only update I’ve got so far is that due to the strong opposition of forex brokers, FIFO is being delayed to July 31st.

Francesc
Never a dull moment in the U.S. forex market.
  • #1,203
  • May 5, 2009 9:05pm May 5, 2009 9:05pm
Confirmation Email from the NFA:

Notice to Members I-09-12
May 5, 2009
Revised Effective Date for Portions of NFA Compliance Rule 2-43(b)
Notice I-09-10, issued on April 13, 2009, stated that new NFA Compliance Rule 2-43(b) would be effective for any positions established after May 15, 2009. Rule 2-43(b) prohibits Forex Dealer Members (FDMs) from carrying offsetting positions in a customer account and requires that they be offset on a first-in, first-out (FIFO) basis.

NFA has received several requests to extend the effective date due to the complexity of the programming changes required to comply with the FIFO requirement. After considering those requests, NFA has decided to extend the effective date for the FIFO part of the rule until July 31, 2009. Therefore, FDMs may not carry offsetting positions in the same account if either of those positions was established after May 15, 2009, but FDMs may offset positions on some basis other than FIFO through July 31, 2009.


Questions concerning this notice should be directed to Edward Dasso, Managing Director, Compliance ([email protected] or 312-781-1551) or Lauren Brinati, Senior Manager, Compliance ([email protected] or 312-781-1215).
  • #1,204
  • May 5, 2009 9:16pm May 5, 2009 9:16pm
I suggest they throw this rule in the trash bin.
  • #1,205
  • May 5, 2009 11:28pm May 5, 2009 11:28pm
Even if they do trash this new FOF rule who’s to say what’s next, seems they come up with something new each month harmful to trades, have we seen anything in te traders favor? No!
I’m happy with my overseas broker F the US brokers, to risky.
  • #1,206
  • May 6, 2009 2:23am May 6, 2009 2:23am
Quoting Tom_C
.....have we seen anything in te traders favor? No!
I’m happy with my overseas broker F the US brokers, to risky.
I think this qualifies as "in te traders favor", don't you? Does your overseas broker offer the same protection?


Price Adjustments
For orders executed after June 12, 2009, Compliance Rule 2-43(a) will prohibit an FDM from adjusting executed customer orders, with two exceptions. The first exception is where the adjustment is done to settle a customer complaint in favor of the customer. The second exception is where an FDM exclusively operates a "straight-through processing" model and the liquidity provider with which it entered into the automatic offsetting position changes the price of an executed order with the FDM.
  • #1,207
  • May 6, 2009 4:13am May 6, 2009 4:13am
I think this qualifies as "in te traders favor", don't you? Does your overseas broker offer the same protection?


Price Adjustments
For orders executed after June 12, 2009, Compliance Rule 2-43(a) will prohibit an FDM from adjusting executed customer orders, with two exceptions. The first exception is where the adjustment is done to settle a customer complaint in favor of the customer. (This if fine) The second exception is where an FDM exclusively operates a "straight-through processing" model and the liquidity provider with which it entered into the automatic offsetting position changes the price of an executed order with the FDM. (This should not be allowed!)
  • #1,208
  • May 6, 2009 4:26am May 6, 2009 4:26am
Quoting Jairo

Price Adjustments
For orders executed after June 12, 2009, Compliance Rule 2-43(a) will prohibit an FDM from adjusting executed customer orders, with two exceptions. The first exception is where the adjustment is done to settle a customer complaint in favor of the customer. (This if fine) The second exception is where an FDM exclusively operates a "straight-through processing" model and the liquidity provider with which it entered into the automatic offsetting position changes the price of an executed order with the FDM. (This should not be allowed!)

Didn't we already have this discussion, here
  • #1,209
  • May 6, 2009 6:10am May 6, 2009 6:10am
Quoting pipmutt
Didn't we already have this discussion, here
Yes, there are advances, but why do they still allow prices of executed orders be changed? Isn't it absurd?
  • #1,210
  • May 6, 2009 9:19am May 6, 2009 9:19am
Quoting Jairo
Yes, there are advances, but why do they still allow prices of executed orders be changed? Isn't it absurd?

Not really, they have to allow for genuine errors which inevitably happen in any sort of electronic trading.

The other side of the coin is would you expect your broker to reimburse you for an erroneous spike which took out your stop, or would you just accept the loss?

In fact as Shrike pointed out in this post, the new rules are actually unfair to non-STP FDM's because they won't be allowed to reverse any of your winning trades, only losing ones! Who are NFA intending will benefit from that rule, the broker or the trader?
  • #1,211
  • May 6, 2009 3:29pm May 6, 2009 3:29pm
Quoting Tom_C
Even if they do trash this new FOF rule who’s to say what’s next, seems they come up with something new each month harmful to trades, have we seen anything in te traders favor? No!
I’m happy with my overseas broker F the US brokers, to risky.
One question!
Why do you want to trade with offsetting positions?

For example, I would like to have a real powerful reason for hedging.
What is the real benefit for traders?
A good trader will know that this will rise the cost of transactions.

Everybody is complaining about the new FOF rules but no one is actually giving any good reason against it. Everybody is just arguing about how the government is getting into people’s life. It's just like a spoil child who does not stop crying because his parents don't allow him to eat candies.
  • #1,212
  • May 6, 2009 3:39pm May 6, 2009 3:39pm
Quoting pipmutt
Not really, they have to allow for genuine errors which inevitably happen in any sort of electronic trading.

The other side of the coin is would you expect your broker to reimburse you for an erroneous spike which took out your stop, or would you just accept the loss?

In fact as Shrike pointed out in this post, the new rules are actually unfair to non-STP FDM's because they won't be allowed to reverse any of your winning trades, only losing ones! Who...
Why should we poor retail traders pay for the errors generated by electronic systems (brokers, market makers, whoever else)? Their systems failed? They should take the loss. Authorities' true role should be to force them to swallow it.
  • #1,213
  • May 6, 2009 3:45pm May 6, 2009 3:45pm
Quoting profitmaker
One question!
Why do you want to trade with offsetting positions?

For example, I would like to have a real powerful reason for hedging.
What is the real benefit for traders?
(...)
The question was not for me but I have a strong reason to hedge (now a strong reason to trade very far from NFA brokers):

Guess when I started a hedging strategy? I am sure you will guess right. I could have done the same by an equivalent non-hedging strategy. But I can assure you (I made the system) --> hedging makes it much simpler. Double swaps is a cheap price to pay for simplicity. NFA is taking these possibilities away from retail traders' hands before too many people know that there are real advantages in hedging and this will make market makers and bucket shops lives tougher. They lie when they say they are protecting traders from themselves. In fact, they are protecting the interests of other market participants, not retail traders.
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  • #1,214
  • May 6, 2009 3:58pm May 6, 2009 3:58pm
Quoting Jairo
Why should we poor retail traders pay for the errors generated by electronic systems (brokers, market makers, whoever else)? Their systems failed? They should take the loss. Authorities' true role should be to force them to swallow it.
Uh, what? This is nonsense. Stock trades are busted all the time (I should know, I have to deal with them), mistakes happen, and when it's a genuine error, you should not get to benefit from it-- nor should you be penalized (which it sounds like the NFA essentially got rid of, which is good).
  • #1,215
  • May 6, 2009 3:59pm May 6, 2009 3:59pm
Quoting Jairo
Why should we poor retail traders pay for the errors generated by electronic systems (brokers, market makers, whoever else)? Their systems failed? They should take the loss. Authorities' true role should be to force them to swallow it.
No-one is asking you to pay, they're saying why should you profit from these pricing errors. If you're trading with a non-STP broker they're not even saying that, under the new NFA rule the broker is going to have to suffer the loss.

You didn't answer the question though. Would you expect a refund if an erroneous spike triggered your stop? I expect the answer is yes, so it's only fair for the broker to expect a refund as well.

You seem to be anti-NFA for some reason, did you have a bad experience with them or are you just following the crowd?
  • #1,216
  • May 6, 2009 4:10pm May 6, 2009 4:10pm
Quote
Guess when I started a hedging strategy? I am sure you will guess right. I could have done the same by an equivalent non-hedging strategy. But I can assure you (I made the system) --> hedging makes it much simpler. Double swaps is a cheap price to pay for simplicity. NFA is taking these possibilities away from retail traders' hands before too many people know that there are real advantages in hedging and this will make market makers and bucket shops lives tougher. They lie when they say they are protecting traders from themselves. In fact, they...

If hedging is such a boon to the brokers and market makers, why are they fighting the NFA? Why are some moving offshore so they can continue to offer hedging?

The way you talk, you'd think the brokers would love this decision. But they don't.

Why?
  • #1,217
  • May 6, 2009 4:44pm May 6, 2009 4:44pm
Quoting pipmutt
No-one is asking you to pay, they're saying why should you profit from these pricing errors. If you're trading with a non-STP broker they're not even saying that, under the new NFA rule the broker is going to have to suffer the loss.

You didn't answer the question though. Would you expect a refund if an erroneous spike triggered your stop? I expect the answer is yes, so it's only fair for the broker to expect a refund as well.

You seem to be anti-NFA for some reason, did you have a bad experience with them or are you just following...
Wiping out the effect of network errors looks fine. But I may click my mouse in error and I will not intend to blame that on anybody else. The retail trader is called too often to pay for others' errors... That doesn't seem fair to me.

If NFA would let me close all my old hedged trades whenever I want, I would not get pissed off at them. If they think they are smart enough to teach me how I shouldn't trade, that is fine for me. I decide if I trade under their jurisdiction or not. But they are going to force people to close trades against their will, imposing losses. If a trader wants to hold to profit or to margin call, what do they have to do with it? I want they protect my money from being robbed, not protect me from my trading errors. Nobody can protect any trader from himself. I don't want their protection from myself. I want to have the right to make my mistakes. My account equity, not NFA, will tell if I am right or wrong.
  • #1,218
  • May 6, 2009 4:47pm May 6, 2009 4:47pm
Quoting smittens4212
If hedging is such a boon to the brokers and market makers, why are they fighting the NFA? Why are some moving offshore so they can continue to offer hedging?

The way you talk, you'd think the brokers would love this decision. But they don't.

Why?
They are losing clients. People are moving funds away from NFA. I don't know if this is a significant move. But judging from how much hedging strategies can be profitable, I think it may be.
  • #1,219
  • May 6, 2009 4:57pm May 6, 2009 4:57pm
Quoting Jairo
If NFA would let me close all my old hedged trades whenever I want, I would not get pissed off at them........But they are going to force people to close trades against their will, imposing losses.
Maybe I've misunderstood the rule but I don't think they're forcing anyone to close trades against their will or imposing losses on traders, have you actually read the new rules........

Offsetting Transactions
New Compliance Rule 2-43(b)............
Rule 2-43(b) is effective for any positions established after May 15, 2009. Offsetting positions that were established prior to the effective date do not have to be liquidated, but once either position is closed out after May 15, it may not be reestablished as a hedge..........


This business was in desperate need of regulation and from what I can see the new rules are a benefit to traders.
  • #1,220
  • May 6, 2009 5:00pm May 6, 2009 5:00pm
So let's start with the assumption that these new rules were put in place to help the brokers, something that many of you guys are arguing.

If the brokers do leave or fight the NFA, it's because they are losing customers to non-NFA regulated brokers, so actually the NFA is hurting them.

Right? Or are you still failing to see the disconnect in logic here...

Either way I don't see how you can argue this regulation helps them. It eliminates a way for them to capture additional spreads and carry costs, and it will make them lose some of their customers.

How again is the NFA in the pockets of the brokers?
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