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Proposed NFA Capital Requirement

  • #1,221
  • May 7, 2009 11:04am May 7, 2009 11:04am
The stampede of small brokers out of the U.S. market continues. GFS Forex and Futures has announced they are shutting down their U.S. forex operation. GFS has purchased City Credit Capital in the U.K. and is relocating their business to London. However, they are no longer allowing U.S. customers to trade forex with them:

http://www.gfsforex.com/eng/announcement/index.htm

Quote
Dear Valued Clients,
GFS Forex & Futures, Inc. is pleased to announce that we will be expanding territorially with the anticipated merger of City Credit Capital (UK) Ltd. ("CCC"), a United Kingdom based brokerage firm registered with and regulated by the Financial Services Authority ("FSA"). As part of this expansion, GFS is moving its trading operations for over-the-counter products to our London operations.

Because this move means that our US operation will no longer be able to handle your forex trading account, you will need to transfer or close your GFS forex account. You should, therefore, decide which course of action you want to pursue. You can liquidate your open positions at anytime and close your account simply by completing and submitting the GFS Fund Withdrawal Form available on GFS' website. We will also assist you in transferring your account to a forex broker of your choice.
If you have questions about these matters or wish to deliver your transfer or liquidation orders personally, you can contact Mr. Alan Ho at GFS Forex and Futures, Inc., One Post Street, Suite 2550, San Francisco, CA 94104, (415) 321-7188, [color=windowtext][font=Times New Roman][email protected][/font][/color].

You need to understand that the last trading day for your GFS forex account will be Friday May 8, 2009. If you have not already closed or transferred your account before this date, by 4:00 pm East Coast Time on 8th May 2009, all open positions will be automatically closed at that day's closing price and any funds remaining in your account will be sent to you. Please recognize that we may need to verify a current wire transfer address for receipt of your funds and may need to contact you to obtain this information.
On April 20, 2009, GFS posted a notice on its website which could be taken as an offer for GFS to transfer your forex account to CCC. While CCC is registered with the FSA in the UK, it is not registered in any capacity with the CFTC nor is CCC a Member of NFA. Pursuant to the Commodity Futures Modernization Act (the "Act") and NFA Rules, GFS may only transfer forex accounts and positions of its US retail customers to certain enumerated entities to act as the new counter-party for any such transferred forex positions. CCC is not such an enumerated entity under the Act or NFA Rules.

Consequently, if you are one of our US retail customers, GFS may not transfer your forex positions or account to CCC. GFS regrets any confusion this posting may have caused.

Once again, the moral of the story is to stay clear of these smaller U.S. based forex dealers until they can clearly meet the $20 million capital requirement and demonstrate that they can adapt to the NFA’s new rules and regulations. Having your account forcibly liquidated with barely any notice should not be part of the bargain when you open up an account with a forex dealer.

The CFTC should be releasing their new financial data any day now. It should be required reading for anyone with an account in the U.S.
  • #1,222
  • May 7, 2009 11:06am May 7, 2009 11:06am
This is a post from justin in the MBtrading thread

Quote
I just wanted to let everyone know that effective today (May 6, 2009), MB Trading Futures has posted enough funds to meet the new net capital requirements, which will be reflected in our next filing, which is for the month of May. As we have stated from the beginning, MB Trading Futures believes in the regulatory process and believes that these new net capital requirements are beneficial for protecting traders’ funds. We plan to continue to meet and exceed the requirements as they are set forth.
  • #1,223
  • May 7, 2009 9:15pm May 7, 2009 9:15pm
I'm surprised they didn't sell their US business. That's been the trend recently: ODL, Hotspot, Itrade. Maybe they rather close the account rather than sell it.


Quoting forexsavior
The stampede of small brokers out of the U.S. market continues. GFS Forex and Futures has announced they are shutting down their U.S. forex operation. GFS has purchased City Credit Capital in the U.K. and is relocating their business to London. However, they are no longer allowing U.S. customers to trade forex with them:

http://www.gfsforex.com/eng/announcement/index.htm



[size=3][FONT=Times...
  • #1,224
  • May 8, 2009 10:54am May 8, 2009 10:54am
The CFTC has just released their latest net capital figures. With I Trade FX and GFS Forex departing the U.S. market that leaves only a little more than a dozen firms left standing.

http://www.cftc.gov/marketreports/fi...fcms/index.htm

The following firms have net capital below $20 million

Easy Forex $15,552,000
Ikkon Royal $16,423,000
Alpari $16,557,000
MB Trading $17,031,000
Advanced Markets $19,686,000

The following firms have net capital above $20 million

Forex Club $21,354,000
CMS Forex $29,360,000
PFG $30,444,000
Interbank FX $38,393,000
FX Solutions $45,032,000
GFT Forex $87,169,000
Gain Capital $95,879,000
FXCM $113,463,000
Oanda $161,723,000

As always conduct your due diligence and make sure the firm you are trading with will be able to comply with the new $20 million capital requirement that is about to go into effect.
  • #1,225
  • May 9, 2009 12:29am May 9, 2009 12:29am
Or, trade fx futures. FCM's can give you the shaft too, but the likelyhood of such
isn't any worse than compared with an OTC forex dealer, NFA regulated or otherwise.
When the deal goes down, they're all about the same. Again, regulated or otherwise.
If funds are supposed to be segregated, but the books are cooked and the truth is a lie,
and the Certified Financial Statements are just Certified Bullshit, what's the difference?

You're gonna have to deal with crooks. Just know the crooks your dealing with.
If there is any honesty among thieves, look for those bastards and play with them.
Take their money when you can, while you can. They'll surely do the same to you.

Let's say I was up a couple thousand for the week. I think it would be smart to
have them send, let's say half of that back to me. Even a check is fine if
paying the wire transfer fee upsets you. Since it's profit, there's really no hurry anyway.
Just get it out of their hands and into yours. Plus, you've grown the account as well.

A little here and a bit more there. You've spread your risk and limited your exposure.
Hell, spend some of the money ! You earned it. If not, why'd you trade in the first place ?
Don't be a greedy pig. Take some profits and do something worthwhile with them.

Cover your ass. Nobody else, not the CFTC, not the NFA, not President Obama, nobody else will.
Cover your OWN ASS. Don't leave youself exposed to the "unlikely possibilty" that
some "unlikely event" might "unlikely happen". Just don't let it "unlikely happen".

Allright, enough about that. Good luck.
  • #1,226
  • May 11, 2009 6:34am May 11, 2009 6:34am
Good advice Toshi. I'm forever withdrawing back to my original capital amount and over time my initial "risk capital" has become free money. I am now fully in offshore brokers having closed my final US broker account after all these NFA shenanigans.

The secret to good relations with your offshore broker is by trading conservatively and steadily. Don't over leverage during news or something and you will be fine with them. Sure, in retail brokers you are at the mercy of the dealing desk, but if you give them time to hedge your positions (trade daily charts ) and use proper money management they will not have an excuse to erase any profits or play any games with you.

And again, as Toshi pointed out.. Withdraw Regularly!
  • #1,227
  • May 11, 2009 7:02am May 11, 2009 7:02am
Quoting toshi
Or, trade fx futures. FCM's can give you the shaft too, but the likelyhood of such
isn't any worse than compared with an OTC forex dealer, NFA regulated or otherwise.
When the deal goes down, they're all about the same. Again, regulated or otherwise.
If funds are supposed to be segregated, but the books are cooked and the truth is a lie,
and the Certified Financial Statements are just Certified Bullshit, what's the difference?

You're gonna have to deal with crooks. Just know the crooks your dealing with.
If there is any honesty among thieves,...
Or, trade with an FSA regulated broker where funds are covered up to GBP50k if the broker goes bust. I'm not sure how far cover extends outside UK but I'm sure there are ways round it.

Don't forget that by withdrawing trading capital you're also limiting the benefits of compounding, it can work out quite expensive in the long run.

It's a choice now between the security of funds by trading with an FSA regulated broker, or the benefit of knowing that no matter what your NFA-regulated broker thinks of your trades, once he's filled them he can't reverse them regardless of overleverage, news, spikes, latency etc etc!

Either one or the other, unfortunately not both....
  • #1,228
  • May 11, 2009 10:51am May 11, 2009 10:51am
Quoting pipmutt
Don't forget that by withdrawing trading capital you're also limiting the benefits of compounding, it can work out quite expensive in the long run.
You are of course forgetting how risky forex is
It's better to start out with decent capital in the first place and withdraw regularly. I'd rather compound my bank account
  • #1,229
  • May 11, 2009 1:00pm May 11, 2009 1:00pm
Quoting oakmonster
You are of course forgetting how risky forex is
It's better to start out with decent capital in the first place and withdraw regularly. I'd rather compound my bank account
I agree it's certainly a risky business, it's fun all the same though!

I would sooner start small and compound than start big and withdraw, opposite ends but I guess we meet in the middle eventually (hopefully!)
  • #1,230
  • May 18, 2009 2:33pm May 18, 2009 2:33pm
FXDD is making waves these days by refusing to adopt the NFA’s new hedging rule:

http://blogs.fxstreet.com/francesc/2...ilver-trading/

Quote
To our valued clients,

In our effort to provide the best solution for your trading regarding the NFA’s new rule on hedging, please know that we have been in contact with the NFA and have offered several solutions which we believe will accommodate almost all types of trading strategies and comply with the NFA rules. Our discussions with the NFA are ongoing and we will keep you advised. In the mean time, know that FXDD is making no immediate changes to any platforms and that you will be fully advised prior to any proposed changes.

The FXDD Team....

How can they do this? Simple. FXDD still isn’t licensed by the NFA.

http://www.nfa.futures.org/basicnet/...d=0397435&rn=N

It’s easy to thumb your nose at regulators when you don’t actually have to answer to them. FXDD applied to become a member of the NFA in April of 2008. One year later their application remains unapproved.

Should traders be concerned about this? Absolutely. Not only is FXDD unlicensed (and therefore in possible violation of U.S. law) but now they are actually thumbing their nose at the very regulator who they are seeking to get that license from.

This is not prudent behavior on FXDD’s part and traders should stay clear of this firm until they are actually authorized to operate inside the United States.
  • #1,231
  • May 18, 2009 4:33pm May 18, 2009 4:33pm
I disagree. I think FXDD is the only one that is actually doing the rational thing here, rather than acting like a lamb to slaughter, or a lemming off a cliff.

You should avoid the brokers that are adopting the NFA rule. Market makers are allowed to hedge, why isn't everyone else? Ask yourself that question.
  • #1,232
  • May 18, 2009 6:28pm May 18, 2009 6:28pm
Quoting blazespinnaker
I disagree. I think FXDD is the only one that is actually doing the rational thing here, rather than acting like a lamb to slaughter, or a lemming off a cliff.

You should avoid the brokers that are adopting the NFA rule. Market makers are allowed to hedge, why isn't everyone else? Ask yourself that question.
Brokers with enough financial power should move away from US, in my opinion. Go to UK, FSA does not have this jurassic bureaucratic mentality. Fighting NFA stupidity from inside US is suicidal.
  • #1,233
  • May 18, 2009 9:18pm May 18, 2009 9:18pm
Quoting Jairo
Brokers with enough financial power should move away from US, in my opinion. Go to UK, FSA does not have this jurassic bureaucratic mentality. Fighting NFA stupidity from inside US is suicidal.
I agree, NFA is losing credibility as a serious organization that we should pay attention to.
  • #1,234
  • May 18, 2009 10:46pm May 18, 2009 10:46pm
Quoting blazespinnaker
I agree, NFA is losing credibility as a serious organization that we should pay attention to.
I disagree, although inconveinient i think its a step in the right direction. Forex is in desperate need of some further structure. Plus if brokers woudl just impliment the regulation properly it wouldnt be that big a deal. the reality is that positions get consolidated and rolled over in this buisiness and the NFA is trying to give traders some more transparency.

So you dont trust the NFA and CFTC but you are telling me that you trust some shady FX broker in cyprus?

i think you will find that this hedging business is a non issue in a couple of months and all of these US firms trying to drive businesss to overseas entities are going to be coming home sooner rather than later.
  • #1,235
  • May 18, 2009 11:18pm May 18, 2009 11:18pm
Who do you use?

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.
  • #1,236
  • May 19, 2009 1:12am May 19, 2009 1:12am
Quoting blazespinnaker
Market makers are allowed to hedge, why isn't everyone else? Ask yourself that question.
Please explain the thinking behind that question would you.

You're not the first person on here to make the same comparison and I'm just wondering how you connect the two.


Quoting blazespinnaker
I agree, NFA is losing credibility as a serious organization that we should pay attention to.
They're not asking you to pay attention to them, they're regulating brokers not traders.
  • #1,237
  • May 19, 2009 4:08am May 19, 2009 4:08am
The whole point of trading is the evolution of smart money. This is self evident.

Unless those trades are somehow manipulating markets, abusing inside info, or causing systemic risk .. then the NFA should leave the ***** alone.

There are situations, and they are definitely rare (but all profitable trading situations are rare! if they weren't, we'd all be kings and queens), when apposing trades can be posted simultaneously and both can end up running positive.

Here is one situation: I buy at x and limit sell at y with tight profit taking all around. If y closes out x because hedging is no longer allowed, then if the market jumps quickly up, down, and up again before I can get in another trade, then I lose half the profit.

Simple mathematical fact.

And now NFA in their daddy knows best logic, has eliminated the opportunity to profit in those situations, because of their high school math skills, they don't think traders can predict those situations.

Fact is, NFA is just a pylon now for traders. Once we looked at them as the seal of approval... know they're just something we have to figure out how to get around.
  • #1,238
  • May 19, 2009 4:54am May 19, 2009 4:54am
Quoting blazespinnaker

if the market.....
Fortunes are made and lost on 'if' the market did this or 'if' the market did that, it's written on every headstone in the traders graveyard, it's the traders lament

But I wasn't so much asking about the logistics of the 'hedging/nedging' strategy (the answer to that one should be obvious), I was asking about the thinking behind your original comment, "Market makers are allowed to hedge, why isn't everyone else?", it's as if you're saying their respective requirements are similar in some way and I was just wondering how. Traders need exposure to produce profit whereas marketmakers hedge exposure to avoid risk.
  • #1,239
  • May 19, 2009 11:54am May 19, 2009 11:54am
Quoting blazespinnaker
I disagree. I think FXDD is the only one that is actually doing the rational thing here, rather than acting like a lamb to slaughter, or a lemming off a cliff.

You should avoid the brokers that are adopting the NFA rule. Market makers are allowed to hedge, why isn't everyone else? Ask yourself that question.
Rational? FXDD is trying to get a license from the NFA. How do they get that license if they are busy kicking them in the teeth at the same time?
  • #1,240
  • May 19, 2009 12:37pm May 19, 2009 12:37pm
Quoting forexsavior
Rational? FXDD is trying to get a license from the NFA. How do they get that license if they are busy kicking them in the teeth at the same time?
Its long game which was strated long time ago after FXDD won the court against NFA and got the right operate in the USA without licenses from nfa. But rules changed and they need to be licensed now, so for revenge from NFA they will delay providing the license to fxdd so long as they can.
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