Speak Out Against Proposed CFTC Leverage Change to 10-1 for all US Brokers. | Forex Factory

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Speak Out Against Proposed CFTC Leverage Change to 10-1 for all US Brokers.

  • #1
  • First Post: Edited 9:44am Jan 19, 2010 9:24am | Edited 9:44am
Just received this e-mail from GFT, let your opinion be heard and stop this new rule change from happening. Even if it does not affect you, they soon may enact a policy that will. SPEAK OUT now!

------------------------------

Dear Valued Trader,

The U.S. Commodity Futures Trading Commission (CFTC) announced on January 13, 2010 that it is seeking public comment on proposed regulations concerning retail forex trading.

As part of the proposed regulations, "leverage in retail forex customer accounts would be subject to a 10-to-1 limitation," which means 10:1 leverage would be the maximum amount allowed for forex traders in the U.S.

An example of how the proposed regulatory restrictions would affect a major currency pair appears below:

Maximum Leverage under

Current Regulations Maximum Leverage under Proposed Changes
USD/JPY USD/JPY
100:1 leverage (one percent) 10:1 leverage (10 percent)
1 lot (100,000) 1 lot (100,000)
Margin requirement: $1,000 Margin requirement: $10,000

We believe that all traders should have the right to choose the amount of leverage that is appropriate for his/her risk appetite, and that this basic principle of 'choice' is being threatened by the proposed CFTC regulations.

Should you feel strongly about the proposal, there is still time for you to help determine the outcome of these proposed regulations. You can make an impact by sending comments directly to the CFTC at: [email protected].

Please include 'Regulation of Retail Forex' in the subject line of your message and the identification number
****** in the body of the message.

You can also submit your comments by any of the following methods (include above ID number):

* Fax: (202) 418-5521
* Mail: David Stawick, Secretary
Commodity Futures Trading Commission
1155 21st Street, N.W.,
Washington, DC 20581
* Courier: Use the same as mail above.

In the next few days, GFT and the rest of the U.S. forex industry will be releasing a more formal opinion about the proposed changes. If you wish, you can read further details about the regulation on the CFTC website by clicking here.

In the meantime, we encourage you to voice your opinions to the CFTC and your local U.S. representative.

As always, we thank you for your business.

Best Regards,

GFT
  • #2
  • Jan 19, 2010 9:39am Jan 19, 2010 9:39am
Quote
First they came for the communists, and I did not speak out—because I was not a communist;

Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist;

Then they came for the Jews, and I did not speak out—because I was not a Jew;

Then they came for me—and there was no one left to speak out.

~Martin Niemöller (1892–1984)
  • #3
  • Jan 19, 2010 11:23am Jan 19, 2010 11:23am
This should be pinned at the top of Forex Factory; I just wrote my state rep and the secretary of the CFTC. This is utter and complete nonsense and it must stop.
  • #4
  • Jan 19, 2010 11:37am Jan 19, 2010 11:37am
I believe this is a done deal and this period of public disclosure and comment is just a formality.

I suggest to all US traders to get out of your US dealer accounts and scramble to find an offshore account, if you feel comfortable with it. There will be a run on IBFX unless they establish offshore operations...its better you get out now while you can.

This systematic elimination of Spot Forex Trading in the USA has been going on for quite sometime now and this is just the beginning. Yields will fall on larger trader accounts because of this. you see...all this leverage is what got the USA in trouble in the first place...and your in denial if you think that large leverage will be allowed in the USA. It is just the sign of the times and trader you cannot do much about it.

ES

P.S. These are just personal opinions from a veteran trader and take it as such.

Quoting drebin
This should be pinned at the top of Forex Factory; I just wrote my state rep and the secretary of the CFTC. This is utter and complete nonsense and it must stop.
  • #5
  • Jan 19, 2010 12:01pm Jan 19, 2010 12:01pm
Quoting ElectricSavant
ES

P.S. These are just personal opinions from a veteran trader and take it as such.

hey es..... you made an absolutely excellent point in another thread earlier..... after writing out a response, i deleted it as is my usual habit..... over 95% of my posts will be strictly in helping others in code..... very few will ever contain my personal views..... while i do write out many responses, i seldom post them.....

part of the post was to ask your opinion on something...... if you don't mind, what do you feel is a realistic amount of risk per trade for a somewhat new trader, or a poorly capitalized trader if i might use your words.....

in other words, if using the common lotsoptimised function, what percent risk would you suggest a poorly capitalized trader use...... if you have the time...... thanks......h
to trade and code, keep both simple... no call to impress....h
  • #6
  • Jan 19, 2010 12:12pm Jan 19, 2010 12:12pm
Well, I appreciate your integrity hayseed. I hope my posts do not insight anything other than a thoughtful process.

Desperate times require desperate measures..thus my personal post.

4:1 to 5:1 leverage should be the max utilized ...with a max of 15% relative DD tolerated. This would be a professionals guideline for accredited investors trading within a fund.

Spot Forex is retail and attracts traders and such dressed in their boxer shorts in their living rooms. They do not follow the guidelines I just posted above and I suppose we need them too! Now IBFX has penny/pip at currently 100:1 leverage...you do the math.

ElectricSavant over and out

Quoting hayseed
hey es..... you made an absolutely excellent point in another thread earlier..... after writing out a response, i deleted it as is my usual habit..... over 95% of my posts will be strictly in helping others in code..... very few will ever contain my personal views..... while i do write out many responses, i seldom post them.....

part of the post was to ask your opinion on something...... if you don't mind, what do you feel is a realistic amount of risk per trade for a somewhat new trader, or a poorly capitalized trader if i might use your...
  • #7
  • Jan 19, 2010 12:28pm Jan 19, 2010 12:28pm
hey es..... thanks for the reply..... i assure you this has a purpose....

making sure i understand, the CFTC's is seeking comments on it's proposal is to limit leverage to 10:1 leverage and your thoughts are 4:1 to 5:1 leverage should be the max utilized ...... i'm guessing by max utilized you mean it might be wise to limit ourselves to 4:1 to 5:1 whether or not we have more at our disposal...... correct.....h
to trade and code, keep both simple... no call to impress....h
  • #8
  • Jan 19, 2010 12:53pm Jan 19, 2010 12:53pm
Well...we are not fund traders and well....retail traders can go over it a little bit...but I would never admit publically the kind of leverage and drawdowns I tolerate...I am neither retail or a fund trader....I am a gambler! (not really)

ES

Quoting hayseed
hey es..... thanks for the reply..... i assure you this has a purpose....

making sure i understand, the CFTC's is seeking comments on it's proposal is to limit leverage to 10:1 leverage and your thoughts are 4:1 to 5:1 leverage should be the max utilized ...... i'm guessing by max utilized you mean it might be wise to limit ourselves to 4:1 to 5:1 whether or not we have more at our disposal...... correct.....h
  • #9
  • Jan 19, 2010 2:15pm Jan 19, 2010 2:15pm
Quoting hayseed
making sure i understand, the CFTC's is seeking comments on it's proposal is to limit leverage to 10:1 leverage and your thoughts are 4:1 to 5:1 leverage should be the max utilized ...... i'm guessing by max utilized you mean it might be wise to limit ourselves to 4:1 to 5:1 whether or not we have more at our disposal...... correct.....h
If you do the math, you would see that under a 10% margin rule, you couldn't even use 7:1 or 8:1 leverage without being in serious danger of a margin call right from the get-go.

10:1 maximum leverage doesn't PRACTICALLY mean you can actually leverage your account equity to even close to that much.
  • #10
  • Jan 19, 2010 2:39pm Jan 19, 2010 2:39pm
Good point. Also I would like to add that even though one may be using less than 10:1 on any one trade, one may have a few positions open based on their system and that would generally exceed 10:1.

Quoting kibescorp
If you do the math, you would see that under a 10% margin rule, you couldn't even use 7:1 or 8:1 leverage without being in serious danger of a margin call right from the get-go.

10:1 maximum leverage doesn't PRACTICALLY mean you can actually leverage your account equity to even close to that much.
  • #11
  • Jan 19, 2010 6:34pm Jan 19, 2010 6:34pm
I wish all the traders out there will stop with the "i dont need anything above 10:1 leverage" nonsense and stand united with the rest of us.
Please please realise that this is about the competitiveness of US brokers and that even though you may not use much risk per trade......account leverage is used legitimately by many many traders who either wish to open a number of trades all at low risk or simply do not wish to have the majority of their funds with their broker (the remainder of my funds sit in my equities account and mortgage)
Bottom line ... stand together or lose your industry.

The answer in my opinion is mandatory education for new traders on risk management, make it a requirement for new traders to complete an online course ..... education is required from the broker to hammer home the mathematical certainty of failure for trader taking on a too large risk per trade and trading with faulty R/R etc.

If this law passes i and almost everyone i know will be moving our accounts offshore.......... i use 1% and less risk per trade.
  • #12
  • Jan 19, 2010 8:09pm Jan 19, 2010 8:09pm
Quoting ElectricSavant
I believe this is a done deal and this period of public disclosure and comment is just a formality.
Or it is quite possible that their real target is say, 50-1 leverage and after this period of 'consultation' they decide on 50-1 and pass it as a win for traders after having listened to everybody's concerns. Even if it ends up at 50-1 there may well be another step down next time around. Doesn't it all look like a conspiracy to drive away retail traders from the forex industry?
  • #13
  • Jan 20, 2010 1:41pm Jan 20, 2010 1:41pm
This bull lol...they do this and they will start destroying trading . Lets say your a short term trader mostly 15 min and down you are preety much done lol. How do you loose 1-2 percent of your account in a 15 pip stop loss if your trading very small timeframes?

you cant lol
  • #14
  • Jan 20, 2010 2:12pm Jan 20, 2010 2:12pm
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
  • #15
  • Jan 20, 2010 3:20pm Jan 20, 2010 3:20pm
Jason,

I am pleased, and I hope FXCM is please as well, to see the trading public speak out against the CFTC's proposals. The CFTC has posted only one day of comments, hopefully the comments continue to flood in and the voice of the trader is heard.
  • #16
  • Jan 25, 2010 5:42pm Jan 25, 2010 5:42pm
Quoting kibescorp
If you do the math, you would see that under a 10% margin rule, you couldn't even use 7:1 or 8:1 leverage without being in serious danger of a margin call right from the get-go.

10:1 maximum leverage doesn't PRACTICALLY mean you can actually leverage your account equity to even close to that much.
That depends on what conditions your broker uses to issue a margin call.

Those of us who have been trading 100:1, understand that our brokers usually issue a margin call based on Margin Level. And under those same conditions, you would be right. But some brokers who provide 10:1 leverage and lower base a margin call on account value. Under that condition, and if your broker issues the margin call at 50% of account value, then you dont receive the margin call until your account has dropped to half of its original value.
  • #17
  • Jan 25, 2010 5:50pm Jan 25, 2010 5:50pm
but...that gives new meaning to the word "averaging in" or "pyramiding" or "dollar cost averaging"...and just forget martingale...


Quoting pipnu2me
That depends on what conditions your broker uses to issue a margin call.

Those of us who have been trading 100:1, understand that our brokers usually issue a margin call based on Margin Level. And under those same conditions, you would be right. But some brokers who provide 10:1 leverage and lower base a margin call on account value. Under that condition, and if your broker issues the margin call at 50% of account value, then you dont receive the margin call until your account has dropped to half of its original value.
  • #18
  • Jan 27, 2010 2:50pm Jan 27, 2010 2:50pm
The FXDC website is now live: www.fxdc.org.

If you have not already done so, there is a form submission on the FXDC website you can use to send your comments to the CFTC.
  • #19
  • Mar 1, 2010 1:28pm Mar 1, 2010 1:28pm
I received this link for anyone interested in signing an electronic petition against the CFTC's leverage involvement on retail forex. Pass it on to the right locations so the message can be sent to these characters

http://www.petitiononline.com/stopcftc/petition.html
  • #20
  • Mar 9, 2010 6:28am Mar 9, 2010 6:28am
Why is everybody confusing leverage with lot sizes? Even the comments to the main article on forex factory indicate that most traders are unaware of what the proposal will affect: http://www.forexfactory.com/news.php?do=news&id=215919

If traders are submitting comments to the CFTC about "freedom" to risk their own capital, it's damaging for the case against the new proposal as it only shows ignorance amongst the very traders they believe are naive.
As it's not about freedom, it's about minimum account sizes of $20,000 USD would shut down US retail forex industry.

Leverage is simply the money you have to put up as margin. 10:1 leverage means you must put up 10 times more money to trade as 100:1, meaning it's much more expensive to trade, and more likely you'll receive a margin call.
It is not equivalent to reducing profit to $10 per pip...

If the rule passes, you will be required to put up $10,000 USD to trade just 1 lot!! (That's $1 per pip, standard lots).
Minimum account sizes must be greater than $10,000 USD, thus most of us could only afford micro accounts, seriously reducing the profit potential for all but millionaires.
It will kill the industry, simply put.
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