New Leverage rule for FX COMING?

Like you, I have been trading for 5 years. Blew out a couple of very small accounts as I was learning in the early years. But I have developed a style that I'm comfortable with. Until recently, I used 200:1, but have been forced to double my account sizes in order to trade with the same confidence I had before the NFA rule change. If the cftc rule goes through, I will have to increase my accounts by a factor of 10 in order to continue trading forex. Not possible.

Whatever your experience in the forex market, please don't take the position that a reduction in leverage will be beneficial to all traders. I understand high leverage, I am comfortable with it, and there is no reason I should allow someone else to tell me they are in a better position to decide what is better for me than I am.

It's pretty funny that so many people are relaxed about this because they're currently with a non-US broker and assumes that this won't affect them in any way. U.S. brokers weren't the only ones that followed suit when the 100:1 leverage was enforced, don't know what makes people think they won't do the same when this one hits. Wonder what the reaction will be when that balloon pops.

Personally, I wouldn't want to switch to an overseas broker unless it was absolutely necessary ... and needless to say, effective. It's not easy to find a real, decent ECN that you end up being comfortable with ... I'd like to stick with the ones I've got (both US regulated).

That said, I'm hoping that this rule would not go into effect until the summer. Even using conservative calculations, my account would definitely have grown to at least $50K by that time, at which point I would naturally have started to use even less leverage anyway. 10% margin is harsh, but as long as there's still half a year's time before the rule is actually enforced, it wouldn't affect me at all.

Hi pipnu2me,

I have to be diplomatic in some responses . Traders can send comments even if they are for it.

To add on to LEXngton's post about having to add more money to an account to keep trading... Below is a list of current margin requirements and how 10:1 leverage would impact the margin requirement. All figures listed below are for one mini lot (10k) and taken from an FXCM (US) mini account.

Current Margin Requirement in USD:
EUR/USD: $160
USD/JPY: $100
GBP/USD: $180
USD/CHF: $100

If 10:1 leverage proposal goes into effect:
EUR/USD: $1,600
USD/JPY: $1,000
GBP/USD: $1,800
USD/CHF: $1,000

These are the amounts which would be required just to open one position. Not included are any additional funds you would need to have in your account just to avoid a margin call or allow for fluctuations if the trade goes into a loss.

^ Thanks for posting that clear-as-day explanation. At least one broker rep around here is laying everything out in the open.

Maybe all the people who still aren't getting why a change to 10:1 leverage is such a big deal will get it now. It's not about how much you can stretch your money, it's about how much margin is now required.

GFT also says they will come out with a formal statment within a few days, and they say they are actively lobbying as well. They did not say if they will allow traders to trade on their UK platform. I know or I think FXCM wll allow it though.

Fellow traders please feel free to use my comment letter already to go in regards to the proposed CFTC changes to leverage dropping it to 10:1 in the U.S.
Even if you are a foreign trader that trades somewhere other than the U.S. please participate and help a brother and sister out. If the U.S. market gets their way whose to say your market isn't next?

The letter below is a good form to start with please make personal changes to it so your voice is heard and it stands out uniquely. I've included where and how to send it as well for your convenience. Please pummel them with it by sending it via the multiple methods. Please make personal changes to it so it stands out as your voice. Whatever changes you make do not use profanity or anything too vulgar as they would likely just delete it or trash it.
Thank you for your efforts in advance. It probably won't do much good but we should give it a hearty try.

PS: feel free to post this and any thing additional you want to add at any other FX site you regularly visit. Get as many people involved in this as possible. It is very important that we get a movement going so they stop creating these stupid rules.

It is time to stand up and be counted.

Here is a comment letter already to go...give it to all your friends have them make personal changes to it and get anyone and everyone who trades FX to participate in this cause:

[email protected] with "Regulation of Retail Forex" in the subect header.

or FAX it to 202) 418-5521

or snail mail:

David Stawick, Secretary
Commodity Futures Trading Commission
1155 21st Street N.W.
Washington, DC 20581


Public Comment on Proposed Regulations Regarding Retail FOREX Transactions

To Whom It May Concern: I think lowering the leverage requirement for retail FOREX transactions will do the exact opposite in regards to customer protection.

It wouldn’t matter if you lowered or raised the leverage amount in terms of customer protection. The fact of the matter is many uneducated people try their hand at FOREX and lose. Reducing leverage will not change this outcome when FOREX brokers blanket the internet with advertising promising fast and easy money with a little disclaimer at the bottom of heavy risks of loss.

The fact is the FOREX is a zero sum market. Lowering the leverage of retail FOREX in the U.S. would do nothing but kill a legitimate business. Why would Americans keep trading in a climate that is laden with laws against them? Why would foreigners open a FOREX trading account in the U.S. when the rules are prohibitively against them compared to other jurisdictions around the globe? [Leverage works for you as much as against you.]

We have already suffered massive restrictions in the U.S. already from the NFA with imposing No hedge rules and FIFO. Most U.S. brokers have already opened brokerages outside the U.S. already due to the enactment of these rules and to my knowledge all have plans to do so.

By enacting this legislation to restrict and limit traders further will only cause a mass exodus of FOREX trading in the retail U.S. markets.
This will cause American traders to put their money in less than scrupulous brokers with less ethics than what the U.S. permits via the NFA oversight.

So if American traders put their money in a foreign FOREX broker how can you say this will benefit the trader? How will this protect the American trader? How will this benefit the U.S. based broker? How will this encourage investment from foreign means in the retail U.S. FOREX market when rules around the globe are more favorable to the trader?

Are we not satisfied until we move all high paying jobs overseas?

Before we were hit with all the erroneous NFA rules and regulations we were afforded up to 400:1 leverage. Guess what? people were blowing accounts even at that level. Changing the level of leverage will do nothing to prevent someone from blowing an account or losing in FOREX.

The U.S. retail FOREX market is an infant when comparing it to the U.K. and various other places. Yet they don’t see the need for these kinds of rules and restrictions. If you are so worried about the consumer you should educate them and not restrict them.

Because an educated trader will know better when the time comes. Limiting leverage or some of these other ridiculous things the lawmakers that be come up with all in the name to protect us from OURSELVES? What a pathetic joke. If it’s not obvious already I would hope that you elect to leave leverage rates the way they currently are at the minimum of 100:1. Otherwise the blood of the retail U.S. FOREX markets are on your hands and the people you are trying to protect will be leaving your jurisdiction in droves. BTW, this isn't a threat it's a promise.

Sincerely,

I would encourage everyone to write letters individually and to not send a standard form letter. It is important for the CFTC and for Congress to recieve unique letters from commenters in order for voices to be heard. Take the form letter above and make individual changes to it. I just know that if the CFTC receives a bunch of form letters our comments will not be considered serious.

[quote=pip_seeker;3371138]Fellow traders please feel free to use my comment letter already to go in regards to the proposed CFTC changes to leverage dropping it to 10:1 in the U.S.
Even if you are a foreign trader that trades somewhere other than the U.S. please participate and help a brother and sister out. If the U.S. market gets their way whose to say your market isn't next?

Done! emailed right now and I am from the UK!

Dear Sir/ Madam,

I believe lowering the leverage requirement for retail Forex transactions will do the exact opposite in regards to customer protection.

Lowering the leverage of retail FOREX in the U.S. would do nothing but kill a legitimate business. Why would Americans keep trading in a climate that is laden with laws against them? Why would foreigners open a FOREX trading account in the U.S. when the rules are prohibitively against them compared to other jurisdictions around the globe?

By enacting this legislation to restrict and limit traders further will only cause a mass exodus of FOREX trading in the retail U.S. markets.

This will cause American traders to put their money in less than scrupulous brokers with less ethics than what the U.S. permits via the NFA oversight.

So if American traders put their money in a foreign FOREX broker how can you say this will benefit the trader? How will this protect the American trader? How will this benefit the U.S. based broker? How will this encourage investment from foreign means in the retail U.S. FOREX market when rules around the globe are more favorable to the trader?

The U.S. retail FOREX market is an infant when comparing it to the U.K. and various other places. Yet they don’t see the need for these kinds of rules and restrictions.

If you are so worried about the consumer you should educate them and not restrict them.

If it’s not obvious already I would hope that you elect to leave leverage rates the way they currently are at the minimum of 100:1. Otherwise the 'blood' of the retail U.S. Forex markets are on your hands and the people you are trying to protect will be leaving your jurisdiction in droves.

Put your Focus on better client Protection of Funds like the FSA has in the UK. Like real segregation of client Funds etc.

Or is your real desire to truly destroy the US Retail Forex Industry and all the jobs, income and investment that go with it?

Regards

Well said! This is very important.

yeah by all means make whatever changes you want to it, you might think of something I didn't.

Just remember to keep vulgarity out of it or it will just be deleted. We want to debate it civily so every voice is truly heard.

Everyone should be involved in this whether you are from the U.S. or not. Let them know where you are from and tell them you wouldn't open an account in the U.S. and why etc.

We need all the participation we can get... spread the word.

Thank you!

It won't make much difference if they made up their minds, then it's already done, its a matter of time now. If they do then all US traders will open accounts in the UK or Europe with pound and euro's, they doing lot better anyway.

US will take a FOREX suicide if this happens, and once it's too late they will change it back once they realize how stupid they were with a very logically visible mistake. JUMP JUMP JUMP maybe the industry will survive the jump of 100 floors.

So this is supposed to be "land of the free" smells like the "land of the regulations to keep rich people competition freeeeeeeee"

The rule being put forth is so hypercritical its not even funny, it is really designed to put otc brokers out of business so that the commodities brokers can step in and take the business. The whole leverage issue is a complete red herring as you can now trade mini forex futures contracts with the commodities brokers with like 50:1 leverage.


http://www.cmegroup.com/trading/fx/f...-e-micros.html

Thanks for your response, Jason.

We need to consider the possibility the intent of the cftc may not be to push forex to 10:1. As I look through all the posts in this and other threads, I see most people take a position either for or against 10:1.

Put yourself in the position of a regulator. If you want to push a regulation through, and you make it extreme, then wouldnt the public be more accepting of a compromise position to a less extreme measure, say 25:1? Or even 50:1?

Considering the situation a year ago when the talk was about 2:1, this move towards 10:1 already seems like a softening to those of us who are naive enough to believe 10:1 is their true intent.

I think the objective is to reduce leverage this year, to whatever they can get without creating a new monster. Some traders are OK with 10:1. Some of us need 100:1. But we are all in this together. If we dont stand together and support each other on this now, we will all suffer separately at some point.

If you intend to respond to the cftc's request for comments, please make sure you think through what you want them to hear from you. Think about this from their point of view. Read the information that is currently available from the cftc and the various news outlets regarding the stated purpose of the proposed changes--"to combat fraud". Then take the time to compose a well thought out position that states 1) how this change will affect you personally--that is, will you have to increase your account sizes, will you have to lower your expectations from trading, or will you have to work at trading longer hours, etc in order to compensate for the change, and 2) suggest the cftc look at other methods to control fraud--that is, please dont penalize the people for whom the retail spot currency market was created in order to punish those who would use the forex markets in order to launder money obtained in an unlawful manner.

Thanks kibescorp. "How much margin is required". Reason that is important is because that determines how much you must have in your funded accounts. A change to 10:1 will require you to have 10 times as much in your funded accounts as with 100:1. If you currently have $10,000 on deposit with your broker, you will need to deposit $90,000 more.

Thank you for all your comments and keeping the thread alive. However, don't give excuses as a reason to not draft a letter to the CFTC.

They are accepting comments on the proposal it's not law yet. Each comment will be posted for all to see. The exact comment you posted here with your concern or likely effect on the U.S. market should be drafted in a letter to the CFTC.

You have a voice and now is not the time to make excuses. You need to become the biggest Biznatch in the world right now and tell the CFTC exactly what you think this proposal will do to the U.S. markets and you and your trading. [but do it civily leave out the vulgarity.]

We need as many people as possible to draft and mail individual letters to the CFTC.

The example of the Fx micro futures at 50:1 is a perfect example, but we don't want them to lower it to 50:1 either. But this is likely where this is coming from.

We need everyone to stand together even if you currently trade at 10:1. If 10:1 wins out the next legislation may lower it to 1:1, by that time the group that trades spot FX will be so small any new legislation will win out without much fanfare. So everyone should think really hard and long their position on this as it effects everyone sooner or later.

A good number of people took the same stance when NFA made their proposal and when FIFO hit it effected everyone. This should serve as a perfect reminder that this will effect you in some way sooner or later.

Once you have drafted your letter, please spread the word get more people involved in doing the same thing.

here are multiple ways to send your letter to the CFTC.

email: [color=#22229c][email protected][/color] with "Regulation of Retail Forex" in the subect header.

or FAX it to (202) 418-5521

or snail mail:

David Stawick, Secretary
Commodity Futures Trading Commission
1155 21st Street N.W.
Washington, DC 20581

Well said, I'm with you!

Moderator, could this thread be made a "Sticky" for the next 53 days while the CFTC is still accepting public comment on this proposed rule?

This is not a very good idea, actually we could manually bump this thread everyday, and it will stay in the front page at www.forextactory.com.

Regarding the proposal, it's for sure coming from the interests of commodity brokers and CME, who realized the huge business potential in the retail FX Market. Pure money issue. Althought they will use "better customer protection" as their mask, our spot fx traders will point it out directly leverage has nothing to do with it, except the segregation of customer fund like FSA.

Meanwhile, please also be aware of the PR work from the commodity brokers, they will hire people posts in internet forums in hope of collapse our coalition. Let's Unite Together!

Thank you
zkf

No u dont need 10 times your funds with the broker u only need 10 times the deposit margin , unless you was trading ALL-IN and u use your whole balance as a margin = means u r not profitable

this IS NOT true...

most people trade with a strategy that maximizes their account/risk with regards to being both profitable and taking measurable risk. So if someone needs say $10K right now to trade with confidence then with 10 times less leverage the trader will need $100K total or assume 10 less risk = 10 times less profit

of course if someone has $10K and trades nano lots ... using really 10:1 or less then of course such a trader is just having a hobby ... makes no money and will not be affected

but if you want to make any money out of forex then you're trying to maximize the profit vs risk ... so you put "all" your money at work even if you risk only 0.5% on each trade (having good MM rules)...