New Leverage rule for FX COMING? | Forex Factory

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New Leverage rule for FX COMING?

  • #1
  • First Post: Jan 14, 2010 10:09am Jan 14, 2010 10:09am
http://www.cftc.gov/newsroom/general...pr5772-10.html

CFTC put out a new rule submission yesterday in trying to lower retail FX leverage down to 10-1 from the now 100-1. So it would be 10k per standard lot and 1k per mini lot. And thats on usd based pairs any other pairs like the euro based or pound based would be about 15k or so. So lets see if any brokers can speak on this new rule submitted. There is as usual a 60 day comment period before they vote to put the rule in action. It seems from looking at the past the CFTC usually passes these things. Which would be detrimental to FX trading and brokers business. This is for NFA/CFTC regulated firms, but we saw other firms out side the US drop their leverage a month or so ago when the NFA/CFTC lowered the leverage from anything above 100-1, to 100-1. Which was fine and smart but 10-1 is riduculous for this especially with the protection the firms offer not to have a negative balance, unlike futures.Just my 2 cents but would be nice to hear what some brokers think of this or have heard of this.
  • #2
  • Jan 14, 2010 10:24am Jan 14, 2010 10:24am
If the death of retail forex trading in the US is looked at in terms of a clock, the time is 11:55pm. US traders are going to be leaving in droves and the NFA will be a smug little club for the few.
  • #3
  • Jan 14, 2010 10:27am Jan 14, 2010 10:27am
Quoting denvertrade
http://www.cftc.gov/newsroom/general...pr5772-10.html

CFTC put out a new rule submission yesterday in trying to lower retail FX leverage down to 10-1 from the now 100-1. So it would be 10k per standard lot and 1k per mini lot. And thats on usd based pairs any other pairs like the euro based or pound based would be about 15k or so. So lets see if any brokers can speak on this new rule submitted. There is as usual a 60 day comment period before they vote to put the rule in action. It seems from looking at the past the...
I can give a basic statement from FXCM. A formal statement will most likely be released in the days ahead.

FXCM is opposed to the 10:1 leverage proposal and is actively lobbying against it.

The proposal definitely strikes a nerve for those both for and against the reduction in leverage. If you would like to voice your concern for or against the proposal you can contact the CFTC by sending an email to [email protected] with “Regulation of Retail Forex” in the subject line. Your message will be posted unchanged on the CFTC website.

It is important that you do not list fake personal contact information otherwise the CFTC may think it is simply a broker voicing their opinion.

That is how you can make a difference. The rules are being made by what regulators see as what is best for you. So they need to hear directly from you if you want them to know what you think.
  • #4
  • Jan 14, 2010 10:27am Jan 14, 2010 10:27am
I hear ya, I am in the US and I would have no problem trading with a UK broker. I just do not want to see the UK broker follow inline with this rule. I know they did last time in Nov but that was to 100-1 which is more then enough. I cannot see them following this becuase it is a lot more popular over in the UK then it is here in the US. So in essence this would be the NFA and cftc handing over FX business to another country
  • #5
  • Jan 14, 2010 10:30am Jan 14, 2010 10:30am
Quoting Jason Rogers
I can give a basic statement from FXCM. A formal statement will most likely be released in the days ahead.

FXCM is opposed to the 10:1 leverage proposal and is actively lobbying against it.

The proposal definitely strikes a nerve for those both for and against the reduction in leverage. If you would like to voice your concern for or against the proposal you can contact the CFTC by sending an email to [email protected] with “Regulation of Retail Forex” in the subject line. Your message will be posted unchanged on the CFTC website....

Thanks Jason, I will be sending out the email today , I appreciate it. I will urge all traders I know to do the same.
  • #6
  • Jan 14, 2010 10:37am Jan 14, 2010 10:37am
Quoting denvertrade
I hear ya, I am in the US and I would have no problem trading with a UK broker. I just do not want to see the UK broker follow inline with this rule. I know they did last time in Nov but that was to 100-1 which is more then enough. I cannot see them following this becuase it is a lot more popular over in the UK then it is here in the US. So in essence this would be the NFA and cftc handing over FX business to another country
That is a good point because many traders moved to FXCM UK due to past regulatory changes on hedging and FIFO. This will probably only cause more business to leave the US.

We do not believe the FSA will make the types of changes to leverage which are currently being proposed by the CFTC because the FSA takes a different approach to regulating.

The CFTC has a rules based system. If you meet requirements on the checklist you can open a forex brokerage. $20 million in minimum capital, check! customer identification program, check! etc. The FSA operates differently in terms of how they create their rules. They take a closer look at each broker not only at the minimum amount of capital the company has but at the amount of capital they have even exceeding the basic amounts. They also look at the experience of management in the financial industry, how long the company has been operating, how long the systems have been running and reliability, etc. all in order to gauge what a broker is allowed to do or even if they will license the broker. So the mindset is much different in terms of their regulatory approach.

Jason
  • #7
  • Jan 14, 2010 10:46am Jan 14, 2010 10:46am
Jason would you mind if I posted the basic statment on another forum to get people to send emails?
  • #8
  • Jan 14, 2010 10:49am Jan 14, 2010 10:49am
Quoting denvertrade
Jason would you mind if I posted the basic statment on another forum to get people to send emails?
Sure, you're welcome to post the email address and details, or link back to the statement.
  • #9
  • Jan 14, 2010 11:13am Jan 14, 2010 11:13am
So if voting will take place two months from now, and hypothetically assuming that the rule is approved/accepted, then would it go into effect immediately at that point, or would they then set a date later on in the future for when the rule would actually come into effect? In other words, how soon could this actually start to impact trading?
  • #10
  • Jan 14, 2010 11:49am Jan 14, 2010 11:49am
Quoting Jason Rogers
Sure, you're welcome to post the email address and details, or link back to the statement.
Thanks Jason
  • #11
  • Jan 14, 2010 4:33pm Jan 14, 2010 4:33pm
10 to 1 leverage is a killer. Let CFTC know how you feel people or we'll be stuck with this rule.
  • #12
  • Jan 14, 2010 8:01pm Jan 14, 2010 8:01pm
Quoting sullyforex
10 to 1 leverage is a killer. Let CFTC know how you feel people or we'll be stuck with this rule.
I've already sent my own email ...

it'd be nice if forexfactory admins would make a special action against it.
If that rule passed in US many US traders could give up trading...

m78
  • #13
  • Jan 14, 2010 9:44pm Jan 14, 2010 9:44pm
Quoting Jason Rogers
I can give a basic statement from FXCM. A formal statement will most likely be released in the days ahead.

The proposal definitely strikes a nerve for those both for and against the reduction in leverage.

Jason, perhaps you can help me understand why a trader would be supportive of a reduction in leverage. As a trader, I do not care what leverage another trader uses. Nor do I care if he hedges. I consider it an infringement of my rights that another trader might consider himself to be in a better position to make this decision for me than I am myself. And I am confident there is no government official who can do so.
  • #14
  • Jan 14, 2010 9:50pm Jan 14, 2010 9:50pm
I've just written my own email to [email protected] with "Regulation of Retail Forex" in the subject line expressing my total dissagreement with the proposed new 10:1 leverage rule. If this rule was to go into effect it would FORCE me and many others to leave our regulated NFA broker and find one who's unregulated here in USA or overseas. I simply do not have the funds to trade at 10:1 leverage the size lots I need to trade to make enough money!

I've been trading forex for over 5 years now and make a living doing so and never have I blown/lost my account balance at a 100:1 forex broker. The rule must not be accepted and all forex traders who have a vested interest need to express their opinion at the address given above.
  • #15
  • Jan 14, 2010 10:30pm Jan 14, 2010 10:30pm
Complaining about it as a 'small fry' wont really help. The fact is, they don't want the small fries in the market. It all comes down to the government being blamed for the crisis, and then the govt pointing fingers at financial services providers.

Its not going to be fun for US traders.
  • #16
  • Jan 14, 2010 10:37pm Jan 14, 2010 10:37pm
Quoting Takisd
Complaining about it as a 'small fry' wont really help. The fact is, they don't want the small fries in the market. It all comes down to the government being blamed for the crisis, and then the govt pointing fingers at financial services providers.

Its not going to be fun for US traders.

iT SUCKS but the US traders will have the same oppurtunity with the firms they are with. I am not with FXCM but I am with a big regulated firm here in the US and they already told us we can trade in the UK accounts if the leveraged is changed here. The UK did not change the leverage in NOV it was brokers choice to keep with NFA but if the leverage goes this low they will not becuase they want business. So we do not want it to happen but we will have the same options to trade. Plus its not so much the government in my opinion that is doing this I beleive it is the CME that offers futures currencies. They still have their 500 dollar day trading margins and this ddoesnt affect them. So they want to squeeze spot fx out and have everyone trade the micro fx and fx futures. We shall see, but plus write the cftc about this!!
  • #17
  • Jan 14, 2010 11:00pm Jan 14, 2010 11:00pm
The thing to remember is. The 'regulators' do not regulate the market. They regulate the business. So you are no safer with or without regulation. Its just the owners of FX company who are regulated.
  • #18
  • Jan 14, 2010 11:55pm Jan 14, 2010 11:55pm
Just go and grab a 20K credit card and use it to fund your account = instant leverage boost....
or perhaps another mortgage on the ........ oh well never mind.

Glad i live in Oz
  • #19
  • Jan 15, 2010 2:46am Jan 15, 2010 2:46am
http://www.forexfactory.com/showthread.php?t=215827
  • #20
  • Jan 15, 2010 8:40am Jan 15, 2010 8:40am
Quoting denvertrade
I am not with FXCM but I am with a big regulated firm here in the US and they already told us we can trade in the UK accounts if the leveraged is changed here.
Do you mind sharing the name of your broker?

I understand the FSA regulates in a completely different manner from the cftc, and I want to learn more about their positions and policies. Anyone have information?
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