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NFA - "No more Limit or Stop Loss orders"

  • #121
  • Jul 4, 2009 11:00am Jul 4, 2009 11:00am
Segregated, client money is held separately from company funds and cannot be used by broker except for client dealing purposes

http://www.forexfactory.com/showthread.php?t=62913

Quoting jiva34
<<Agreed. UK took the lead in requiring segregated accounts..while US is adding rules that do not offer protection...just rules for the sake of rules...why don't they require a segregated accounts. Oh no, that would put some of the retail brokers that are crooks under as they would not be able to use your money to fund their operations....strange regulators we have. The best NFA that can do is that it mandates that cash forex firms disclose that customer’s funds are not “protected”.>>

could you educate me a bit on the segregated...
  • #122
  • Jul 4, 2009 12:02pm Jul 4, 2009 12:02pm
<<Segregated, client money is held separately from company funds and cannot be used by broker except for client dealing purposes>>

Thankfully I have fxcm, UK. which I understand has segregated accounts.
Thanks for the link am going to do some dd on this..
  • #123
  • Jul 4, 2009 11:19pm Jul 4, 2009 11:19pm
Quote
Thankfully I have fxcm, UK. which I understand has segregated accounts.

Keep in mind that segregated accounts may not receive special treatment during a bankruptcy. Even if they have depositor funds in a separate account, those depositors are still just general creditors. Account segregation provides little to no real protection in most situations.

Basically it's just a way to ensure that general operating expenses don't cut into client funds.
  • #124
  • Jul 5, 2009 1:28am Jul 5, 2009 1:28am
Quoting ahmedfouad77
Would you mind explaining how to OCO in breakout strategy...!?!
for example you have a candle high and low...and you want to put a pending stop buy and sell on the high and the low of the candle...with stop loss and target profit....so how you can replace all these by using OCO...?? thank you...
you set two orders, OCO, to enter at a breakout above or below

once one order triggers and the other cancels, you then set two more entry orders, OCO, to act as a stop and loss for the open position
  • #125
  • Jul 5, 2009 9:01am Jul 5, 2009 9:01am
I received an email from my broker (GFT) informing me about the changes.
GFT's "Get the Fact" site has a little bit of info about the subject matter.
http://www.gftforex.com/getthefacts/

Those dealers that uses MT4 are the one's that will have to stop offering Stop and Limit orders or change MT4 over to a Net Position platform that is fully compliant with the FIFO rules set. I don't really understand why traders/brokers would want/need to move accounts to a UK based broker. That will not solve your problem. What will solve your problem is to use OCO instead of taking drastic measures of moving your accounts overseas. OCO is practically the same as using Stop/Limits and the learning curve is the smallest. As for those who uses EA's, you have a whole new set of problems to deal with but I am sure MetaQuotes will do something to support OCO on EA's. Just give it time. The most popular trading platform developer will not leave it's users in the dust. Infact, because of all the new changes the NFA has imposed on MetaQuote's MT4, I'm sure MT5 is just around the corner.
  • #126
  • Jul 5, 2009 10:24am Jul 5, 2009 10:24am
Why should such rule be introduced. Thank God i have an Alpari Uk account. its time to go UK and leave US and its NFA alone.
  • #127
  • Edited 12:45pm Jul 5, 2009 12:33pm | Edited 12:45pm
yeap, MT4 in it's current state is not compatible with FIFO. But moving UK will solve both the problems the EAs have with no hedging and will have with FIFO, as neither of these two silly rules exist under the FSA. Besides, the NFA is not done with their silly regulations, there is more to come.

Quoting Jhig
I received an email from my broker (GFT) informing me about the changes.
GFT's "Get the Fact" site has a little bit of info about the subject matter.
http://www.gftforex.com/getthefacts/

Those dealers that uses MT4 are the one's that will have to stop offering Stop and Limit orders or change MT4 over to a Net Position platform that is fully compliant with the FIFO rules set. I don't really understand why traders/brokers would want/need to move accounts to a UK based broker. That will not solve your problem. What will solve your problem...
  • #128
  • Edited 1:23pm Jul 5, 2009 12:57pm | Edited 1:23pm
Not neccesarily, as deposits may be treated differently in bankruptcy in the US and other countries, not necessarily as general unsecured claims. It also depends on whether the segregated accounts have not been pledged as collateral for loans. It also depends on the law where the bankrutpcy is filed. Therefore, segregated accounts in fact offer more protection, and depending on how treated by the broker, may offer full protection. I don't want to start a broker war here b/c you guys go ballistic, but here is the statement from one broker that uses segregated accounts "In the unlikely event of XXXXXX bankruptcy, clients of XXXXXX would be considered secured creditors and receive priority in bankruptcy proceedings." Bottom line, do your DD when choosing a broker and read the fine print.

Quoting Rabid
Keep in mind that segregated accounts may not receive special treatment during a bankruptcy. Even if they have depositor funds in a separate account, those depositors are still just general creditors. Account segregation provides little to no real protection in most situations.

Basically it's just a way to ensure that general operating expenses don't cut into client funds.
  • #129
  • Jul 5, 2009 1:58pm Jul 5, 2009 1:58pm
Quoting wwwin
Not neccesarily, as deposits may be treated differently in bankruptcy in the US and other countries
Yes exactly, in bankruptcy, your deposit is protected up to €70 000 in France and Ł48 000 in England.
  • #130
  • Jul 5, 2009 3:22pm Jul 5, 2009 3:22pm
Quote
Not neccesarily, as deposits may be treated differently in bankruptcy in the US and other countries, not necessarily as general unsecured claims.
While it's true that different countries may treat depositors differently, you'd have to be an expert in international bankruptcy law in order to understand the complexities between parties and applicable laws.

Quote
Therefore, segregated accounts in fact offer more protection, and depending on how treated by the broker, may offer full protection
No. They may offer some protection, limited protection, but it does not depend on the broker. It depends on the laws of the country in which the broker operates. Here in the US, depositors have no priority status. Furthermore, there are different degrees of priority and another higher priority may still claim against part of the depositor account, leaving the rest of the depositors fighting over the scraps.

Case in point being employees. Different countries may give employees different priority status. If the employees end up with a higher priority than depositors (which can happen in the US, and I believe it can happen in the UK too), and their claims are beyond the funds in the operating budget, then they may have a claim against the segregated account. The fund, then minus employee pay (and anything else), would then be prorated and paid by the appointed trustee. You could end losing a percentage of your deposit this way, for instance.

Quote
I don't want to start a broker war here b/c you guys go ballistic, but here is the statement from one broker that uses segregated accounts "In the unlikely event of XXXXXX bankruptcy, clients of XXXXXX would be considered secured creditors and receive priority in bankruptcy proceedings." Bottom line, do your DD when choosing a broker and read the fine print.
That statement by said broker is factually in error unless their country provides for depositors having the highest priority during bankruptcy. Without knowing which broker, I can't verify that. However, I agree with your bottom line.

IMO it is generally not a wise idea to assume that segregated accounts will provide any bankruptcy protection. While it is true in a small minority of cases, it requires a deeper level of understanding than most are willing to apply. Therefore you get companies that imply that "segregated accounts" (which must be voluntarily maintained over time by their accountant) offer protection, when in fact they often do not. Meanwhile their customers don't challenge the assumption... until it's too late.

When you hear of "segregated accounts" don't assume that offers you any level of protection.

Quote
Yes exactly, in bankruptcy, your deposit is protected up to €70 000 in France and Ł48 000 in England.
We aren't talking about depositor insurance, we're talking about bankruptcy claims.

Depositor insurance will depend on whether your account qualifies. Here in the US, there is no depositor insurance on forex trades, but if your broker is insured thru the SIPC then your cash account balance might qualify. Naturally this varies from country to country, insurer to insurer.

This is a vastly different situation than making claims RE segregated accounts. Saying "we offer segregated accounts so your money is safe" is one thing, saying "your accounts are insured up to X by Y" is another. The latter may provide safety, provided you can verify their claim, the former provides little to none.
  • #131
  • Edited 4:44pm Jul 5, 2009 3:32pm | Edited 4:44pm
Quoting Rabid
"
That statement by said broker is factually in error unless their country provides for depositors having the highest priority during bankruptcy. Without knowing which broker, I can't verify that. However, I agree with your bottom line.
".
No you are wrong, as the statement is 100% correct, and as I said I will not get into a broker debate. You keep thinking the way you are as it does not make any difference to me. All I said is that segregated accounts offer more protection, which is 100% true, as some protection is more protection than no protection at all. How the broker treats the account makes a difference, as some may offer the account as collateral for loans and others do not. In addition, some may even give you a separate bank account in your own name if you deposit enough funds. For those of you that have an open mind, do your own DD.

Happy trading. I don't feel like wasting my time with people that will not change their mind in the face of evidence contrary to their thinking.

LOL, where did I mention depositor insurance??? THE ISSUE IS HOW DEPOSITS ARE TREATED UNDER BANKRUPTCY LAW. It has nothing to do with depositor insurance, although some brokers do offer private insurance covering the deposits, of the top of my head I know of one that offers up to 1 million insurance on cash balance...I cannot have an intelligent discussion with someone that changes the issue and quotes another poster and attributes the post to me. I have seen posters like you and all they want to do is argue instead of learning. GOOD LUCK.

PS, Anyway, this thread started as stops and limits under FIFO. What I would like to know is what is MetaQuotes Software doing to have MT4 comply with FIFO, as to date they have been silent on the subject and if they don't come up with a solution by 8-1-09, any broker regulated by NFA that does not come up with their own solution will be fined if they continue to offer MT4 in its present form.
  • #132
  • Jul 5, 2009 5:07pm Jul 5, 2009 5:07pm
Does the NFA plan to destroy MT4 in the USA? - Today, 06:41 PM



On April 29th, I wrote an article about some new NFA rules . They ended hedging with NFA registered brokers (bad), and also restricted the ability of brokers to wreck profits by claiming price feed errors (extremely good).

Everyone was so focused on the hedging part that some of the implications of the wording got overlooked. There was a little detail about FIFO (first in, first out). I assumed this was only talking about hedges. Evidently, the NFA FIFO rule has some more implications. FPA member Pratomo posted some info from FXCM about the problems in the forums 2 days ago and I've done a little more digging. I don't think most forex traders are going to like how this will affect trading with NFA registered brokers.

It seems that the NFA plans to apply FIFO to ALL positions on a currency pair., not just old hedged trades This means if you have 2 separate sell orders on the USDJPY, you can't close the 2nd one you opened before closing the first order. You can only close them in the order that you opened them (or all at once). No more running a long- term strategy on an account and using the same account for a little bit of day trading. I don't know if this was something the NFA intended or if it's something that one of their over-zealous regulators suddenly realized he could foist off on on all of us by deliberately misinterpreting the original intent of an already poorly designed set of regulations.

It gets worse. Much worse. Stop losses and take profits apply to individual orders. If this is implemented, you won't be able to set a proper stop loss or take profit on any platform with an NFA registered broker after July 31st, 2009. Some platforms allow you to set up a pair of OCO orders. These will act as SL and TP, but only for the size of position you set them to. If your total positions on a pair comes to 2.4 lots, you'll need to set your OCO to 2.4 lots if you want everything to close. There are 2 drawbacks. First, you need to set up the OCS (or set of OCOs) to the correct amount to cover all your positions without going over or under. Second, if you miscalculate your risk and get a margin call before hitting the OCOs, those OCOs will still be waiting to be activated, thus risking a 2nd margin call.

And finally, the worst of the worst for those of us who really like to use MT4. MetaTrader 4 doesn't work this way. Currently, brokers don't seem to accept pending orders that would make your position on a pair neutral because of the NFA's anti-hedging rules. The end effect of this is that if you trade with MT4 and open a second position on a pair, there won't be any way to set a stoploss. Unless the people at MetaQuotes do something about this, you probably won't be able to have a stoploss on even a single position.

Since SL, TP, and the ability to close individual orders in any order are built into MT4, it is possible that NFA regulated brokers may not even be able to offer trading through MT4 starting on August 1st, 2009.

If this rule happens and MT4 remains usable, the only thing I'll be using any of my NFA brokers for is long term, super-low leverage position trades. All the rest of my trading will be moved to non-NFA brokers outside the USA. If they really wipe out MT4, I'll be defunding my USA accounts and moving everything offshore (ok, I'm “forex platform challenged” and I admit it).

The NFA claims that these rules will make it easier to keep track of their positions – even though this strips out stoplosses from MT4 and complicates them on other platforms. It looks like the NFA wants it to be easier to see why traders get margin called rather of helping traders prevent margin calls.

Is the NFA really intend on destroying retail forex in this country? Do they really want to take money out of the USA and send it overseas? I don't know what they really mean to do, but it's not hard to see what the real consequences are. My only hope is that someone in charge at the NFA realizes that this is an amazingly stupid thing to do and stops it from happening.

Last time I suggested contacting the NFA and throwing a screaming fit. This time I encourage it:


Email: [color=#8297c8][b][email protected][/b][/color].

Chicago Headquarters
300 S. Riverside Plaza, #1800
Chicago, IL 60606-6615
(312) 781-1300
(312) 781-1467 (fax)

New York Office
120 Broadway, #1125
New York, NY 10271
(212) 608-8660
(212) 964-3913 (fax)


If the NFA doesn't back down on this, all normal methods of dealing with risk management in MT4 are gone, and methods in many other platforms will become much more complicated. Some NFA registered brokerages do offer accounts to US citizens at their FSA regulated UK branches. It should be interesting to see how quickly more of them do this and how much money ends up moving to the other side of the Atlantic.

Previously, I'd always been firmly in favor of selecting an NFA regulated brokerage. If this really happens, I'll have to change my advice on this.


New NFA Rules

Pratomo's posting with info from FXCM

FAQ on FIFO at Daily FX

My article on Risk Management – for use with brokers that can legally offer stoplosses

My article on the problems with the NFA's anti-hedging rules
  • #133
  • Jul 5, 2009 5:38pm Jul 5, 2009 5:38pm
I, right up front, apologize for not, actually, reading all the posts in this thread BUT, let me tell you that I Do feel somewhat gratified that I took the leap & milked what my skill level allowowed Before they closed the orifice.


Next Please.... Want My Money.... {I know you do} Let's Trade 'Dung Beatles'

Clue:
Hybrid Fuels & {belive it or not} Water.

Look Forward Grasshopper.
  • #134
  • Jul 5, 2009 5:39pm Jul 5, 2009 5:39pm
Quote
No you are wrong, as the statement is 100% correct, and as I said I will not get into a broker debate.

A broker keeping a completely segregated account will not, in most cases, add any protection in the event of a bankruptcy. If you care to explain your rationale then we could discuss it intelligently, but as you won't, we can't.

I've already explained how even in countries that give depositors a priority in bankruptcy (which is a minority), there are often times where other parties have even higher priority.

Quote
All I said is that segregated accounts offer more protection, which is 100% true, as some protection is more protection than no protection at all.

Yes, but that's not true either. In the case of bankruptcy, most segregated accounts don't often offer any more protection than no protection at all. There are some cases where that's not true, but more often than not it is.

People should not assume that a broker's statement about having segregated accounts translates to any additional protection on their behalf, even if it's implied. Now that's something the NFA *SHOULD* regulate.

Quote
Happy trading. I don't feel like wasting my time with people that will not change their mind in the face of evidence contrary to their thinking.

If you cared to provide some, perhaps. Cite cases maybe?

I'll cite the famous REFCO case. Refco had a segregated account for customer funds. On more than one occasion they'd been accused of transferring funds from that account to their general operating fund. In the end, it did little to protect investors. The net result was that people got hosed.

Quote
LOL, where did I mention depositor insurance??? THE ISSUE IS HOW DEPOSITS ARE TREATED UNDER BANKRUPTCY LAW.

Obviously I wasn't addressing you, I was addressing the other person that brought up FSA and EU depositor insurance. I prefer to reply to same-topic posts as a single reply in order to avoid post floods.

Quote
.I cannot have an intelligent discussion with someone that changes the issue and quotes another poster and attributes the post to me. I have seen posters like you and all they want to do is argue instead of learning. GOOD LUCK.

I didn't attribute it to anyone, it was a non-attributed block quote (scroll up, your name is not there). I don't pay attention to ppl here, I pay attention to what is said. You want to make this personal? WTF?

As for learning... If what you're teaching is that segregated accounts provide bankruptcy protection, then you're teaching a lie and it needs to be addressed so that others don't fall for it. If you're trying to teach some general semantical nonsense like "segregated accounts provide 'more' protection" then that also needs to be addressed, since it's nothing but rhetorical mumbo-jumbo.
  • #135
  • Jul 5, 2009 6:09pm Jul 5, 2009 6:09pm
From what Ive read in this thread, if you are trading using a US Broker, the effect will be that any Forex robot or expert advisor you may have relied on will no longer work.

You will need separate accouts for different trading strategies, eg you could not build a long tem position & scalp in the same account without destroying your long term strategy.

If you move your money offshore to trade you will have to consider current tax considerations & possible future , often talked about, offshore tax penalties.

It woud appear the unregulated market is becoming less so in the US
  • #136
  • Jul 6, 2009 9:22am Jul 6, 2009 9:22am
Come to a live Q & A with FXCM on FIFO and FXCK UK TODAY July 6th at 11 AM EST

http://forexforums.dailyfx.com/nfa-f...-6-11amet.html
  • #137
  • Jul 6, 2009 10:27am Jul 6, 2009 10:27am
your hot


Quoting jsales
Come to a live Q & A with FXCM on FIFO and FXCK UK TODAY July 6th at 11 AM EST

http://forexforums.dailyfx.com/nfa-f...-6-11amet.html
  • #138
  • Jul 6, 2009 10:27am Jul 6, 2009 10:27am
Just left the above mentioned Q&A. Very little substance going on there. Highly screened questions. They're not addressing the negative implications on our trading methods and strategies.

Typical corporate tip-toe-ing on eggshells so as not to disturb the young hatchlings.
_______________ Here 2 Learn
  • #139
  • Jul 6, 2009 10:32am Jul 6, 2009 10:32am
they are answering questions on what options you will have available to trade with . any implications that may have on your trading style is for you to adjust.... your dumb



Quoting Abacus
Just left the above mentioned Q&A. Very little substance going on there. Highly screened questions. They're not addressing the negative implications on our trading methods and strategies.

Typical corporate tip-toe-ing on eggshells so as not to disturb the young hatchlings.
  • #140
  • Jul 6, 2009 11:40am Jul 6, 2009 11:40am
So first they want to 'protect' the valued people, by limiting leverage, etc. Now, hey! Why not just take out stop losses!!

SCARY!
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