New Leverage rule for FX COMING? | Page 5 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

High leverage vs Low leverage 74 replies

High Leverage vs Low Leverage 21 replies

High Leverage vs Low Leverage 20 replies

Leverage is coming down 11 replies

Proposed New Leverage Legislation 10 replies

Attachments: New Leverage rule for FX COMING?
Exit Attachments

New Leverage rule for FX COMING?

  • #81
  • Jan 20, 2010 4:33am Jan 20, 2010 4:33am
Quoting tar
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
That's not exactly true. You would still need considerably more in your account in order to trade the same way you trade today. Also, think about this, in order to make the same trade it will cost you 10 times the amount due to the pip spreads to make the same trade. This increases the cost per trade which seriously cuts into your profit margin.

Bottom line, if this bill passes it will be the death warrant for US OTC Forex brokers. I am already in the process of opening a foreign account with a different broker. Still keeping my US account open but with a minimal amount of money.

Also if this bill passes it will put thousands on the unemployment line and will cause a few businesses to go bankrupt. This is not an intelligent bill at all. Yes I have written the CFTC and am writing my representatives tomorrow.
  • #82
  • Jan 20, 2010 4:40am Jan 20, 2010 4:40am
There is little intelligence left in government, the CFTC included. Expecting anything other than the worst possible case from these clowns is setting yourself up for disappointment.

The US is killing all of it's businesses one by one. It started with manufacturing, now it's worked it's way to trading. Plan for your exodus now, it's the only way you'll stay in business.
  • #83
  • Jan 20, 2010 4:45am Jan 20, 2010 4:45am
Quoting Rabid
There is little intelligence left in government, the CFTC included. Expecting anything other than the worst possible case from these clowns is setting yourself up for disappointment.

The US is killing all of it's businesses one by one. It started with manufacturing, now it's worked it's way to trading. Plan for your exodus now, it's the only way you'll stay in business.

Maybe being invaded and taken over by China won't be a bad thing really longer term.

We all know it's coming!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #84
  • Jan 20, 2010 4:51am Jan 20, 2010 4:51am
Quoting Turveyd
Maybe being invaded and taken over by China won't be a bad thing really longer term.

We all know it's coming!!
I don't think China is any more competent. They're just better at pressuring people to ignore problems.
  • #85
  • Jan 20, 2010 5:04am Jan 20, 2010 5:04am
Quoting Rabid
I don't think China is any more competent. They're just better at pressuring people to ignore problems.

Your not denying it's coming then I see
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #86
  • Jan 20, 2010 5:36am Jan 20, 2010 5:36am
Quoting Turveyd
Maybe being invaded and taken over by China won't be a bad thing really longer term.

We all know it's coming!!
In 60 years China has not even been able to invade an island (Taiwan) 90 miles off their coast much less make it to the USA. Sheeeeeeesh guy.
  • #87
  • Jan 20, 2010 5:36am Jan 20, 2010 5:36am
Quoting Turveyd
Your not denying it's coming then I see
At the rate we're going, I don't think China will need to invade us. We'll just give them everything we own and call it a day.
  • #88
  • Jan 20, 2010 5:39am Jan 20, 2010 5:39am
Quoting nanningbob
In 60 years China has not even been able to invade an island (Taiwan) 90 miles off their coast much less make it to the USA. Sheeeeeeesh guy.

Pretty sure they could do it, but it's a tiny island why bother.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #89
  • Jan 20, 2010 5:43am Jan 20, 2010 5:43am
Quoting Turveyd
Pretty sure they could do it, but it's a tiny island why bother.
I live and work in China. Taiwan is in the news every day and the govt. has the population all ready for the day they invade. They have not won the civil war from 1949 until those escaped Chinese are captured and brought back in the fold. They have their hearts set on it. Makes me understand how a government can get people all riled up about going to war over a piece of rock. Its a big pride thing with this government. China is putting two aircraft carriers out to sea in a couple of years, then things could get dicey here in Asia.
  • #90
  • Jan 20, 2010 7:31am Jan 20, 2010 7:31am
Some info on the leverage rule and a link to a summary of the rule...


MAKE A SUBMISSION PEOPLE



As many of you already know, the CFTC has proposed changes to better regulate the retail forex market. The change that has attracted a lot of attention is the one that limits leverage to 10:1, including the most widely traded curtrency pairs . This has not yet been enacted and the CFTC is in a 60 day period accepting comments from the public on the proposed changes.

We are all for better regulation that tightens rules that protect the individual trader. We are not in favor of regulation that we feel is excessive and will drive retail forex business offshore, where there is less regulation. We encourage you to submit your comments on the proposed changes. Remember exercising your right to speak is your responsibility and no one elses.
To see a summary of the proposed changes with a link to the full report, see
http://www.global-view.com/forums/thread.html?id=12326&f=4&tk=&afx=&s=&gvi=&w=&th=1&nr=&subj=CFTC+Proposed+Regulations

See below for instructions on how to submit your comments.
[font=Arial, Helvetica, sans-serif][email protected]You may submit comments, identified by RIN3038-AC61, by any of the following methods:

1) Email : . Include [/font]
Regulation of Retail Forex
in the subject line of the message.
2) Federal eRulemaking Portal: http//www.regulatio ns.gov/search/ index.jsp Follow instructions for submitting comments.

3) Fax (202)418-5521
4) Mail: Send to David Stawick, Secretary, Commodity Futures Trading Commission, 1155 21st Street,. N.W., Washington, DC 20581
  • #91
  • Edited 7:55am Jan 20, 2010 7:34am | Edited 7:55am
THIS IS WHAT I WROTE in my emailed submission. Just sharing so that people can re-word my submission to help make a difference. (Don't quote it, CFTC will pick that up)

Remember the email is: [font=Arial, Helvetica, sans-serif][color=#22229c][email protected][/color][/font].


RIN3038-AC61

To Who It May Concern,

Information has been going around that the CFTC are going to introduce a leverage limitation of "10:1", on every currency pair including the most highly traded pair like the EURUSD, USDJPY, GBPUSD, AUDUSD, USDCHF, USDCAD, EURJPY or GBPJPY.

To put it bluntly the people who proposed this idea within the CFTC are flipping nuts. All you are going to do is close down legitimate USA based forex businesses and limit the abilitieis of both trader and retail forex broker alike. I believe an internal investigation to see whether any CFTC proposer of this 10:1 leverage limitation has any vested interest in off shore forex broker businesses, because it is obvious to me that these are the people who stand to benefit by such an excessive, extreme ruling.

If you want to stop illegitimate forex dealers from doing illegitimate stuff, have a tick analysis rule to prevent fake slippage / gappage in the bid / ask quotes. Or you could have no requote rule allowed in the retail forex market as they are not trading in the complete market but a sand box market where slippage/gappage is a made up scenario.

Maybe if your aiming to protect the new trader, the new trader must take a test that demonstrates that they understand the effects of leverage. Don't screw up an entire industry because there are a few stupid people that don't understand the risk they are entering into.

There are many brokers around the world now offering more than 100:1 and traders will very quickly pull all there money out of the USA brokers and migrate to international brokers if a 10:1 leverage limitation or even a 50:1 leverage limitation is introduced.

As a customer of a retail market broker I enjoy high leverage (outside of the USA now with 200:1), as I have a high tolerance to risk and understand the negatives. However, the high leverage and the significant trends found in the forex market makes it possible for every person to make a living out of trading and not just the big financial institutions.

A 10:1 leverage limitation on major pairs or even the larger crosses, is just plain stupid. A 50:1 leverage limitation isn't good enough for most traders.

Major USD pairs in my opinion include EURUSD, USDJPY, GBPUSD, AUDUSD, USDCHF and USDCAD.
Significant crosses include: EURJPY, GBPJPY, AUDJPY, CHFJPY, EURGBP, EURCHF, GBPCHF, EURAUD and GBPAUD.

Yours sincerely
  • #92
  • Jan 20, 2010 10:21am Jan 20, 2010 10:21am
  •  onu
  • | Joined Feb 2006 | Status: superior senior member | 746 Posts
Some days ago I wrote them too, even not directly affected anymore of this US BS:

"Dear Sir,

I m not US citizen and usually i don't stick my nose in the regulatory policy of other countries. But I think you should know how all this affects all traders, no matter whats their nationality.

Since 2003 i traded with US located and regulated broker. It was a safe haven so far.
The recent new NFA rules and the new planned 1:10 leverage forced me to close all accounts in USA . And many fellow traders left already and opened accounts with European and Australian regulated brokers.
The good thing about this emigration is, these brokers are even safer and way better regulated/supervised by the regulatory bodies. I wasn't aware of this until I was obliged to take a closer look at it. Thank you for pointing me at this new direction!
I just feel sorry for all the US traders and brokers, you do them absolute no favor with all these questionable over regulation. A lot of business goes elsewhere now, but not to them.
I don't understand why the US is going the path to destroy a blossom industry which feeds a lot of traders and broker employees.

Regards, "
  • #93
  • Jan 20, 2010 10:27am Jan 20, 2010 10:27am
this new leverage rule will wipe me out of the Forex market i trade only mini's through an USA broker and i won't risk $1000 to make $100 on a 100 pip move. i will not go to a broker outside of the USA because they will steal my money and i will have no power to stop them if they close shop. all the foreign brokers are bucket shops. so the retail trader like me only may have 2 months left to trade, i am very sad.
  • #94
  • Jan 20, 2010 10:43am Jan 20, 2010 10:43am
  •  onu
  • | Joined Feb 2006 | Status: superior senior member | 746 Posts
Quoting hamlet
this new leverage rule will wipe me out of the Forex market i trade only mini's through an USA broker and i won't risk $1000 to make $100 on a 100 pip move. i will not go to a broker outside of the USA because they will steal my money and i will have no power to stop them if they close shop. all the foreign brokers are bucket shops. so the retail trader like me only may have 2 months left to trade, i am very sad.
"all the foreign brokers are bucket shops"

U have no clue what u talking about

THAT is really sad! LOL
  • #95
  • Jan 20, 2010 11:02am Jan 20, 2010 11:02am
Quoting hamlet
this new leverage rule will wipe me out of the Forex market i trade only mini's through an USA broker and i won't risk $1000 to make $100 on a 100 pip move. i will not go to a broker outside of the USA because they will steal my money and i will have no power to stop them if they close shop. all the foreign brokers are bucket shops. so the retail trader like me only may have 2 months left to trade, i am very sad.

FXCM UK is pretty safe and should hold onto 200:1 margin for the time being, don't see them being forced to drop to 10:1, I could live with 100:1, maybe 50:1 if I had to, but 10:1 would SUCK!!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #96
  • Jan 20, 2010 11:16am Jan 20, 2010 11:16am
Quoting Turveyd
FXCM UK is pretty safe and should hold onto 200:1 margin for the time being, don't see them being forced to drop to 10:1, I could live with 100:1, maybe 50:1 if I had to, but 10:1 would SUCK!!!
if you have USD based account with FXCM UK then 200:1 is only for currencies such as USD/blah ... EUR/USD is about 200/1.4:1 = 142:1 and GBP/USD is about 200/1.6 : 1 => 125:1 so it's not that good after all ...

The NFA rule made almost all UK brokers to change to a variable margin instead of a fixed one that we had for all currencies...
  • #97
  • Jan 20, 2010 11:22am Jan 20, 2010 11:22am
I have read over the proposal a few times, and I'm a bit puzzled by the language. I have just one question...In the following statement,

"and require RFEDs or FCMs engaging in retail forex transactions to collect security deposits in a minimum amount in order to prudentially limit the leverage available to their retail customers on such transactions at 10:1"

what is meant by the term "prudentially" and how are they using the term? and how does that affect any of this?

Im wondering if what they're saying is they want the account holder to manage his account size so that any single trade does not overleverage the account. For example, with 100:1, if your account size is $10,000, and you place a trade with one standard lot, then your margin is $1,000 and your trade is controlling $100,000. In that case, the leverage in "the transaction", is $100,000:$1,000 or 100:1. But it is only $100,000:$10,000 or 10:1 within the account. But if you place a second trade of 1 standard lot, then the leverage within "the transaction" is again 100:1, but within the account is now 20:1.

Perhaps in this way, they would be able to prevent the trader from placing any additional trades and overleveraging his account, where the current limit of 100:1 imposed by NFA does not do that.

I don't know if this would address fraud, but I think it might have some impact on money laundering

This is just a question about the intent of the cftc. I hope this or something like this is their intent. Does anyone know?


Thanks.
  • #98
  • Jan 20, 2010 2:09pm Jan 20, 2010 2:09pm
Your comments are in the process of being added to the CFTC's website!!

Here is where you will find them:

http://www.cftc.gov/lawandregulation...10/10-001.html
  • #99
  • Edited 10:57pm Jan 20, 2010 10:40pm | Edited 10:57pm
Quoting pipnu2me
"and require RFEDs or FCMs engaging in retail forex transactions to collect security deposits in a minimum amount in order to prudentially limit the leverage available to their retail customers on such transactions at 10:1"

what is meant by the term "prudentially" and how are they using the term? and how does that affect any of this?

intent of the cftc. I hope this or something like this is their intent. Does anyone know?
Prudent is probably an inconsequential word, where the broker will have to demonstrate that the deposit taken for trading will be able to sustain appropriate margin requirements for the said 10:1 leverage.

Hence for 0.1 lot trade, you will need a minimum of $10000 margin in your account. Hence if using 0.1 lot as the smallest trade, you would have to have greater than $10000 as all trades experience a little bit of drawdown in their open position.

I believe it is this simple (correct me if I'm wrong)...
If you have $10,000 as a minimum in your account you will be allowed to trade 0.1 standard lot as a maximum.

In other words for the keen new trader it will protect them from themselves, but will make it impossible to start a reasonable trade size without $10000 or more in the account.

The $ are the minimum amount allowed for the trade size to the right.
$1000 = 0.01 standard lot maximum sum of all positions size --------10 cents per pip.
$5000 = 0.05 standard lot maximum sum of all positions size. -------50 cents per pip.
$70000 = 0.7 standard lot maximum sum of all positions size. ------- $7 per pip.
$100000 = 1.0 standard lot maximum sum of all positions size. ----- $10 per pip.
$1000000= 10 standard lot mximum sum of all positions size. ----- $100 per pip.

Maximum Leverage under Current Regulations
USD/CHF
100:1 leverage (one percent)
1 lot (100,000)
Margin requirement: $1,000

Maximum Leverage under Proposed CFTC Changes
USD/CHF
10:1 leverage (10 percent)
1 lot (100,000)
Margin requirement: $10,000
  • #100
  • Edited 11:02pm Jan 20, 2010 10:49pm | Edited 11:02pm
Quoting Trader KGB
The CFTC thinks their kickback pals at the CME will benefit from this, but they're sadly mistaken, it's the UK forex industry that's licking its chops...
Any well regulated country like the Brits, Australia, some Euro countries, New Zealand, they are the ones that will stand to benefit, in a big way...

I am now FXCM Australia and GoMarketsAUS.com because of the previous laws. 300:1 leverage is allowed at GoMarketsAUS.com and FXCM Australia 200:1.

I could easily see IBFX and other well sized USA brokers going international and not bothering with the NFA / CFTC.


I think that we could all stand behind the belief that you should be given the freedom and right to choose the amount of leverage that is appropriate for your individual desired risk, and that this basic principle of 'choice' is in jeopardy by the proposed CFTC regulations.
0 traders viewing now