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Could 10:1 be the new leverage in US Forex?

  • #481
  • Feb 2, 2010 11:52pm Feb 2, 2010 11:52pm
Quoting wwwin
OK, let's say your math is right, as I don't want to look up the figures. Then what is the purpose of the rule???...Think about this..

Just about 2 years ago it used to be that CME only had standard contracts of 125,000 euros as in EURUSD...then they introduced E-mini which is half or 62,500....and now they introduced the E-micro, which is 1/10 of the standard or 12,500, the most liquid pair is EURUSD and today this most liquid pair just traded 81 contracts as of now, and I don't see any trades going thru watching for a while...now what business...
It might make some difference, but I just don't know how much because it is 33billion spread across 24 hours, across multiple types of contracts, and across multiple currency pairs.
  • #482
  • Feb 3, 2010 12:02am Feb 3, 2010 12:02am
Quoting endroute
It might make some difference, but I just don't know how much because it is 33billion spread across 24 hours, across multiple types of contracts, and across multiple currency pairs.
Ok, so then what is the purpose of the rule?... b/c if it is to protect retail traders then the margin on these e-micros should also be 10 to 1 intraday, overnight and from here until the cows come marching home.
  • #483
  • Feb 3, 2010 12:20am Feb 3, 2010 12:20am
Quoting wwwin
Ok, so then what is the purpose of the rule?... b/c if it is to protect retail traders then the margin on these e-micros should also be 10 to 1 intraday, overnight and from here until the cows come marching home.
you are absolutely right and I think that is the million dollar question.
  • #484
  • Feb 3, 2010 3:43am Feb 3, 2010 3:43am
Quoting wwwin
Ok, so then what is the purpose of the rule?... b/c if it is to protect retail traders then the margin on these e-micros should also be 10 to 1 intraday, overnight and from here until the cows come marching home.
when someone playing POKER change rules Only the time when he is losing, we call that guy CHEATER. Same apply for almost everything in the life.

since 2007/2008 all markets are in OB levels, and unwinding, or correction, or another leg [as you will] is near.. The big Banks, Funds, brokers, Institutional traders used the full leverage to prop the market to those levels using unlimited amount of money supplied from Gov. press.. now.. when correction is here... they are trying to protect the markets from another collapse... so that's why all those ideas.. ban on Short SELL, breaking the banks, limiting the bank leverage, brokers.. from 1:400 to 1:100 then probably to 1:50 as a compromise solution...

why only USA.. - because it is the largest retail industry sector.
why retail - not only retail, they are talking about a regulation and leverage limitation on Banks at the same time..
is it retail sector that BIG and dangerous? - it is .. and with leverage of 1:400 or 1:500 can do a lot of damage..

YES, I agree with some of you , it is not b/c they want to protect the customer base, and trading [gambling] with clients money..

It is all about the saving the market.. and saving the "work" they done last 10 months, bailing, printing.. speculation with gov. HELP.

[my 2 pips]
  • #485
  • Feb 3, 2010 9:20am Feb 3, 2010 9:20am
Quoting wwwin
OK, Jason thanks...I have a question, FXCM, except FXCM Micro, is supposed to be a no dealing desk broker, just passing thru the quotes and just adding the spread...therefore it is not a counterparty...and the Farm Bill...states something similar to, "one is the counterparty and the other side is retail"...so if FXCM spins off a US separate entity just as a pass thru non-dealing desk no counterparty broker, why should they have to register and where would CFTC's jurisdiction come from?
A broker is the counterparty to your trade regardless of whether the broker is using a dealing desk, no dealing desk, STP, etc. Where each differs is in how that risk is offset. A dealing desk can keep the risk and manage it themselves; whereas, an NDD/STP/ECN-like broker offsets that risk immediately by entering into a back to back transaction with a bank.

On the topic of why a broker would have to register with the CFTC or simply rejecting CFTC and NFA registration to shun oversight, as mentioned in my previous post http://www.forexfactory.com/showthre...14#post3406414, the passage of the proposal will end the loophole. The CFTC's intention in writing the proposal is to require any broker operating in retail forex to go through registration requirements.
  • #486
  • Feb 3, 2010 10:00am Feb 3, 2010 10:00am
Quoting wwwin
Well the FXDC is either naive or a kissing arse pushover...the purpose of the 10 to 1 proposed rule is not to weed out fraud...the purpose is to help to bring liquidity to forex futures, which the CFTC favors, and to destroy spot fx trading, which the CFTC disfavors.
I think I agree with your reasoning. My only comment on this is that in presenting a case in your comments to the CFTC, arguments must be made with regard to the wording in their proposal. Outright comment regarding their purpose would I think be considered speculative, and give them good reason to dismiss the comment and perhaps the entire response.

On the other hand, a carefully worded response which does not specifically state their believed purpose, but crafts the statement in such a way as to consider this as one possible consideration of the CFTC, may not be discarded as easily.

Politicians and beaurocrats are the same everywhere I believe. They have to continually justify their existence and greater budgets. The challenge for them is to find wording that is acceptable. Even if 10:1 gets put down in this proposal, I think it will show up again later with different wording. And will continue to show up until it goes through. Our job as traders, who are concerned about our future as traders, is to continue to argue against their proposals on the basis of their proposals.

My two cents. Hope I dont sound like a ranting lunatic.
  • #487
  • Feb 3, 2010 10:16am Feb 3, 2010 10:16am
Quoting Jason Rogers
A broker is the counterparty to your trade regardless of whether the broker is using a dealing desk, no dealing desk, STP, etc. Where each differs is in how that risk is offset. A dealing desk can keep the risk and manage it themselves; whereas, an NDD/STP/ECN-like broker offsets that risk immediately by entering into a back to back transaction with a bank.

On the topic of why a broker would have to register with the CFTC or simply rejecting CFTC and NFA registration to shun oversight, as mentioned in my previous post http://www.forexfactory.com/showthre...14#post3406414,...
I see. I guess I was confused by the way FXCM states in their website that the stardard account and Micro accounts differ in the way the execution is handled
"
*The above educational video(s) are for FXCM Micro, FXCM Mini and Standard accounts. However, execution-specific references apply to FXCM Mini and Standard accounts only. Execution details differ for FXCM Micro as it acts as counterparty to all transactions.
at bottom of page
http://www.forexmicrolot.com/live-st...rex-quotes.jsp

*The above educational video(s) are for FXCM Micro, FXCM Mini and Standard accounts. However, execution-specific references apply to FXCM Mini and Standard accounts only. Execution details differ for FXCM Micro as it acts as counterparty to all transactions.
The impression that fXCM gives is that it is only the counterparty in Micro accounts. I am glad that it is clear that it is the counterparty in all accounts.
  • #488
  • Feb 3, 2010 11:33am Feb 3, 2010 11:33am
Quoting Jason Rogers
On the topic of why a broker would have to register with the CFTC or simply rejecting CFTC and NFA registration to shun oversight, as mentioned in my previous post http://www.forexfactory.com/showthre...14#post3406414, the passage of the proposal will end the loophole. The CFTC's intention in writing the proposal is to require any broker operating in retail forex to go through registration requirements.
Jason, If I'm understanding your comments and all of those preceding, including those suggesting that if this proposal passes, the CFTC would likely extend its reach through powers of persuasion to other countries completing its total control over legitimate retail forex. Am I understanding that correctly? That sounds extreme.
  • #489
  • Feb 3, 2010 11:36am Feb 3, 2010 11:36am
Quoting pipnu2me
Jason, If I'm understanding your comments and all of those preceding, including those suggesting that if this proposal passes, the CFTC would likely extend its reach through powers of persuasion to other countries completing its total control over legitimate retail forex. Am I understanding that correctly?

US Brokers Only
  • #490
  • Feb 3, 2010 1:06pm Feb 3, 2010 1:06pm
are you contacting your congressman and senators? I have, and my local congressman knows of the bill cause someone else has. I plan on calling the next 92 US Senators to put it in their ear on why I don't like it.

It's worth the try between trades.
A woman drove me to drink, and I forgot to thank her
  • #491
  • Edited Feb 4, 2010 10:12am Feb 3, 2010 4:47pm | Edited Feb 4, 2010 10:12am
nm
Hindsight is 20/20
  • #492
  • Feb 3, 2010 5:35pm Feb 3, 2010 5:35pm
Quoting simpleguy
are you contacting your congressman and senators? I have, and my local congressman knows of the bill cause someone else has. I plan on calling the next 92 US Senators to put it in their ear on why I don't like it.

It's worth the try between trades.
Great to hear! Considering the number of people opposed to this, if everybody does exactly what you are doing, we can really get this travesty of a proposal into the spotlight, and hopefully get it shot down.
  • #493
  • Feb 4, 2010 3:24am Feb 4, 2010 3:24am
The FXDC members need to do something sooner rather than later to shore up their market share / provide traders with certainty regarding immediate easy access to off-shore facilities (judging by the number of EU regulated banks / UK based dealers that appear to have found a sudden need to increase their advertising/marketing profiles).
  • #494
  • Feb 4, 2010 8:48am Feb 4, 2010 8:48am
Quoting Jade Gate
The FXDC members need to do something sooner rather than later to shore up their market share / provide traders with certainty regarding immediate easy access to off-shore facilities (judging by the number of EU regulated banks / UK based dealers that appear to have found a sudden need to increase their advertising/marketing profiles).
I contacted UK Alpri about what it would take to go over there and they had a HUGE list of requirements for me to do business over there while residing in the US. I think it was something like $5 million in assets or trading acct for an individual. Crazy numbers.
A woman drove me to drink, and I forgot to thank her
  • #495
  • Feb 4, 2010 9:43am Feb 4, 2010 9:43am
Quoting simpleguy
I contacted UK Alpri about what it would take to go over there and they had a HUGE list of requirements for me to do business over there while residing in the US. I think it was something like $5 million in assets or trading acct for an individual. Crazy numbers.
Thats because they only want to deal with what the US regulations call accredited investors. They have high net worth and therefore I presume have enough money they're allowed to lose it at will The US regulations are a lot more lenient if they only take those types, they probably are like FXPro and can't be bothered with everything they have to do to allow "normal" US people in.
  • #496
  • Feb 4, 2010 9:52am Feb 4, 2010 9:52am
Quoting pipnu2me
Jason, If I'm understanding your comments and all of those preceding, including those suggesting that if this proposal passes, the CFTC would likely extend its reach through powers of persuasion to other countries completing its total control over legitimate retail forex. Am I understanding that correctly? That sounds extreme.
I agree this sounds like an extreme case, and the CFTC hasn't placed any restrictions on a US citizen's FX trading outside of the US. I also imagine the FSA would have a problem (and possibly taking offense) with the CFTC thinking they know best when the FSA has a longer track record of regulation in the forex market. My 2 cents.
  • #497
  • Edited 10:36am Feb 4, 2010 10:02am | Edited 10:36am
Quoting Jade Gate
The FXDC members need to do something sooner rather than later to shore up their market share / provide traders with certainty regarding immediate easy access to off-shore facilities (judging by the number of EU regulated banks / UK based dealers that appear to have found a sudden need to increase their advertising/marketing profiles).
The exodus will began soon...fxcm already posted the easy transfer to uk form, you only need to input acct number, name and email address and it is seamlessly transferred
http://www.fxcm.com/std10k-transfer-form.jsp

Done!. I would not want to be one of the last ones out of US entity. Who knows what can happen to the unsegregated funds if the flood gates of transferring flood with 90% of traders transferring. Margin of 200 to 1 available in Standard account and 400 to 1 in Micro, who needs this drama here.
I did my part, sent letter to CFTC, and to senators, but I doubt that anything good is going to happen other than not 10 to 1 but maybe 30 to 1. But the trend to kill US retail is too strong to ignore. I am done with this. Soon the account will be out of here. Good luck to those who wait to the end. Remember that unsegregated funds can be used to pay creditors during a bankruptcy or institutional failure situation. Good luck also to the pros that stay because 10 to 1 is good for them, hope there are enough of you around to allow your broker to stay in business.

The FXDC has taken the position of beggars ("Being regulated by you is so good, but please please don't change the marging requirements)" so I don't expect much good to happen. Begging is not going to change the agenda.
  • #498
  • Feb 4, 2010 12:07pm Feb 4, 2010 12:07pm
Received this From my broker the other day.
Followed up on their advice.
Perhaps you all should?


View this email as a web page.



http://www.gftforex.com/solo/2010/20...-header_03.png

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 RegulationsMaximum Leverage under


Proposed Changes USD/JPY USD/JPY100:1 leverage (one percent)10:1 leverage (10 percent)1 lot (100,000)1 lot (100,000)Margin requirement: $1,000Margin 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
RIN 3038-AC61 in the body of the message.



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

  1. Fax: (202) 418-5521
  2. Mail: David Stawick, Secretary
    Commodity Futures Trading Commission
    1155 21st Street, N.W.,
    Washington, DC 20581
  3. 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

616 956 9273
US MAIN
http://www.gftforex.com/solo/2008092...mages/line.gif800 465 4373
TOLL FREE
IMPORTANT NOTE: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results. 2010 Global Futures & Forex, Ltd. All rights reserved. CD05U.504.011810

This email was sent by:
GFT | 4760 East Fulton Road, Suite 201| Ada, MI 49301 | USA

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  • #499
  • Feb 5, 2010 2:24am Feb 5, 2010 2:24am
Quoting wwwin
But the trend to kill US retail is too strong to ignore. I am done with this. Soon the account will be out of here. Good luck to those who wait to the end.
The FXDC has taken the position of beggars ("Being regulated by you is so good, but please please don't change the marging requirements)" so I don't expect much good to happen. Begging is not going to change the agenda.
All rather bizarre isn't it? Off-shore, you can hedge, have no FIFO, run accounts with leverage ranging between 200:1 and 400:1, have the pleasure of the FSA having their act together (what is not to love about having these freedoms?) but the US regulators seem hell bent on killing the US industry. Why on earth do this? Does the NFA seriously think business will fall into their laps if Retail Forex has its wings clipped even further? It's all quite suffocating for traders.

As with most things in life (real estate, life partners, work, markets)..... your first choice is always determined by your second choice.

Why have baked beans every day when you can have a gourmet smorgasboard at your ready disposal? Does that mean you eat everything on offer? Not necessarily but it sure is lovely having the capacity to choose from an exquisite menu to suit your particular appetite.
  • #500
  • Feb 6, 2010 2:37am Feb 6, 2010 2:37am
From Craig Pirrong, Professor of Finance, and Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business of the University of Houston, speaking on the parrallel CFTC proposal for tightening in energy futures -

"On the one hand, Congress clearly expected action; indeed, I strongly suspect that Gensler had to promise that he would act on energy position limits to get the job in the face of skepticism from Bernie Sanders and some others in the Senate. On the other hand, it eventually dawned on the Commissioners that overly restrictive limits would just drive business to OTC, and perhaps overseas; given that Gensler in particular wants to rein in the OTC markets, this would be an extremely perverse outcome."

http://seekingalpha.com/article/1829...ng-otc-markets

Congress has perhaps, simply over-stretched its hand in seeking to redress the balance. Or the CFTC has, in proposing 10:1 for Retail Forex, seeking to please political masters.

There has never been a better time to close the gaps between policy makers and the constituents to whom they give account. Consumers of industry services need to be given a seat at both the industry and policy tables so their voices can be directly heard.
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