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Proposal to phase out Hedging

  • #201
  • May 11, 2009 10:56am May 11, 2009 10:56am
to my surprise, the new policy also effects pending orders..
  • #202
  • May 11, 2009 3:24pm May 11, 2009 3:24pm
I noticed that last night, i cant buy stop and a sell stop on the same currency,,the new hedging rule applies for pending orders as well.?
  • #203
  • May 11, 2009 3:50pm May 11, 2009 3:50pm
Quote
That's for an OCO?
Not just. Oanda takes opposing market orders and pairs them off into the net position. This means you could actually put a sell limit order above your current long (for instance) and use that as a take profit order if you wanted. Every new trade you take just results in the net sum position for any given pair.

So if you want a stop&reverse on a long just put a sell stop at the chosen point and make sure it's enough to offset your long and enough to take a new short.

Sounds like on IBFX you can't do that. Instead of just offsetting the order correctly, it actually prevents you from putting in the sell stop. That's very bizarre.
  • #204
  • May 11, 2009 4:18pm May 11, 2009 4:18pm
Quoting Rabid
......That's very bizarre.
It is, very strange. I can't understand why it's so difficult to modify the platform to accept any order, any direction, just as long as it adjusts the net position like in your example. Isn't that all the new NFA rule requires?
  • #205
  • May 11, 2009 5:39pm May 11, 2009 5:39pm
Quoting pipmutt
It is, very strange. I can't understand why it's so difficult to modify the platform to accept any order, any direction, just as long as it adjusts the net position like in your example. Isn't that all the new NFA rule requires?
That's the obvious answer. If NFA's motive is genuinely to protect traders against unncessary costs being imposed by brokers, then why not allow traders to place nedged positions (or indeed any types of orders that they wish), and have the law enforce the broker to modify his platform so that only the net position is effective?

At the end of the day it's semantics, and illustrates how superficial the ruling really is.
  • #206
  • May 11, 2009 10:48pm May 11, 2009 10:48pm
Quote
First, Hedging refers to leaving both a buy and sell trade opened at the same time and on the same currency pair.

Second, it does not matter when you open the opposing position—a minute later, an hour later, a day later, etc. You cannot have both a buy and a sell trade left opened at the same time and on the same currency pair per the NFA and as of May 15. (IBFX will actually stop allowing hedged trades as of May 8 in preparation for the NFA’s official date of May 15.)

Specificially, as of today with IBFX, you cannot leave any two opposing...

According to IBFX, brokers like MBT, Currenex brokers and GFT will now be deemed NFA non-compliant because these brokers use a SELL to close a BUY and according to IBFX letter, this is deemed illegal.
  • #207
  • May 11, 2009 10:53pm May 11, 2009 10:53pm
The NFA doesn't say you can't take opposite trades, it just says that brokers have to use a particular accounting method to insure there's a single net position for each pair. Ie: You can't have an active long and an active short, but if you're long you can take a short to close the active long. Or if they're of different lot sizes the net position would reflect the sum of the trades. All it does is require specific net position accounting.
  • #208
  • May 12, 2009 4:29am May 12, 2009 4:29am
Quoting hanover
That's the obvious answer. If NFA's motive is genuinely to protect traders against unncessary costs being imposed by brokers, then why not allow traders to place nedged positions (or indeed any types of orders that they wish), and have the law enforce the broker to modify his platform so that only the net position is effective?

At the end of the day it's semantics, and illustrates how superficial the ruling really is.
I dunno, I think FIFO is a fairly unambiguous, industry standard concept and it's really all NFA should have needed to do, it achieves their objective perfectly. Unfortunately for their clients some brokers (ie IBFX) have interpreted the simple FIFO rule in their own weird and wonderful way and applied all sorts of other rules of their own! I guess that's their prerogative but using compliance as an excuse to impose other restrictions on their clients is a bit suspect, at best they're ignorant or at worst, just plain dishonest. They would have been better off sticking to their original story and blaming Metaquotes!

I don't know how NFA usually present these things but it seemed odd that they made two completely separate issues (Offsetting Transaction and Price Adjustments) part a and b of the same rule, as if they're associated in some way.
  • #209
  • Edited 10:10am May 12, 2009 9:59am | Edited 10:10am
Quoting ragnakore
According to IBFX, brokers like MBT, Currenex brokers and GFT will now be deemed NFA non-compliant because these brokers use a SELL to close a BUY and according to IBFX letter, this is deemed illegal.
lol, I didn't know IBFX could 'deem' a broker NFA non-compliant.. I figured the NFA would do that

What a joke they are. The ruling is pretty clear, you can't carry two active positions against each other (offsetting) at the same time, the orders must be offset on a FIFO basis. MBTrading, Currenex, etc. already offset them using FIFO. That is why you can't be long and short the same currency. I mean, when you have an open buy... what the flying flugg do you think a close order is!? All it is is a sell order that closes the buy! There's no such thing as a 'close' order, you short a long position to close it, and you buy a short-sold position to close it.

It's their business, I'm sure they take it seriously and have some smart guys there (who can at the very least read).. but I have serious doubts about whether they (IBFX) really think MBT etc. are against the NFA, or if they are only saying so because they want to place further restrictions on their own clients and not look bad...

"Forex Dealer Members may not carry offsetting positions in a customer
account but must offset them on a first-in, first-out basis."
  • #210
  • May 12, 2009 10:31am May 12, 2009 10:31am
This is a totally hilarious situation. Mathematically deluded 'hedgers' meet inapt broker.

If i follow this whole 'hedging' discussion any longer my brain will drip out of my nose.
  • #211
  • May 12, 2009 10:56am May 12, 2009 10:56am
IBFX claim they're following the rule, ".....new NFA Compliance Rule 2-43 regarding forex orders"...., they've taken the word 'orders' as meaning exactly that, orders. They say they're waiting on clarification about whether the rule applies to clients orders, positions, or both.

Interestingly they also claim to be STP....
  • #212
  • May 12, 2009 11:04am May 12, 2009 11:04am
Quoting shrike
This is a totally hilarious situation. Mathematically deluded 'hedgers' meet inapt broker.

If i follow this whole 'hedging' discussion any longer my brain will drip out of my nose.
LOL!!!
  • #213
  • Last Post: May 12, 2009 10:32pm May 12, 2009 10:32pm
Quoting pipmutt
IBFX claim they're following the rule, ".....new NFA Compliance Rule 2-43 regarding forex orders"...., they've taken the word 'orders' as meaning exactly that, orders. They say they're waiting on clarification about whether the rule applies to clients orders, positions, or both.

Interestingly they also claim to be STP....
STP for STUPID?
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