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

so far no one answered my 3 questions, just a lot of generic opinions. Please address the issues I raised at the top of this page. Cheers.

Kiwi,

I'll be glad to answer:

1). Yes, the margin on the 6E will increase under the proposed rule. If you're currently using 100:1 , then your margin will increase ten-fold.

2). No, the volatility of your position won't change ( at least so far the range in pips go, that's determined by the market)

3). The CFTC is taking public comments until March 22 , I believe. Of course, there will be congressional hearings on the proposed rule.

Someone asked who benefits from this. The answer is commodity futures brokers. The proposed rule is basically an attempt to move forex trading over to futures brokers like Lind-Waldock or Ira Epstein.
In my last post, I mentioned the purpose of the proposed rule is to shift forex trading over to commodities brokers. I should explain why that's bad for us.

1) The drop in leverage , of course

2). The huge fees increase - futures brokers will then charge us a typical commision of $25 per round-turn ( depending on the broker) plus $1.50 for NFA fees. That's your up-front cost when you trade futures. If you decide to trade currency futures, then you'll also pay an exchange fee.

3). Loss of real-time data - this is a big one! I'm not sure about e-mini currency contracts, but I know the quotes for agricultural futures are BY LAW delayed 10 minutes from the exchange floor to the general public.
See what a rigged game futures are? No wonder I gladly closed my commodity account ( from Epstein) when forex became available to the public. At least I get real-time data!
Scarlett wrote:

"I am amazed at how many of you think that your broker should monitor you like some nanny-bureaucrat and slap you on the wrist when you are a bad boy/girl. Wake up people...that is not your broker's job! That is your job! Are you an adult? Do you need an outside entity telling you not to be stupid enough to do things that will blow your account? "


I totally agree - be an adult and accept responsibility for your trading. I wouldn't want a nanny-broker, neither do I want nor require a nanny-government to "protect" me from my own trading decisions.
Mcmillan,

Thanks for your posts, starting to clarify things. I wonder if we may be at cross purposes though.

1. A broker like globalfutures.com gives people very low margins which are not based on exchange regulations, but are low to entice customers. I don't see why they'd change this approach.
Therefore, will globalfutures (for example) continue to let traders day-trade the 6E at 500$ US IM, (or whatever it is at the moment)?
I don't used 500IM, but that's the industry standard.

3. How long will hearings take, and then implementation of new regs?

cheers again.
Quoting mcmillan
1). Yes, the margin on the 6E will increase under the proposed rule. If you're currently using 100:1 , then your margin will increase ten-fold.
This is completely false. There is nothing in the proposal text which affects the margin requirements for CME FX futures.

6E margin requirements will not be affected by this proposal.
Trader KGB is correct. So... you can take a look at various brokers, transaction costs, commissions, etc. if you are considering trading the Globex Euro or Mini Euro as an alternative. I just pray for a small victory -25:1 or better, I can probably live with that.... 10:1 is ridiculous. We shall see.
Quoting Intu
Trader KGB is correct. So... you can take a look at various brokers, transaction costs, commissions, etc. if you are considering trading the Globex Euro or Mini Euro as an alternative. I just pray for a small victory -25:1 or better, I can probably live with that.... 10:1 is ridiculous. We shall see.
bugger that..just wire your money into a retail forex broker based in the UK.
Quoting kiwi4Xtrader
I trade 6E, with margin around 1,000. I can put on quite a few contracts if I am extremely confident of a position, but usually play it safe using some contracts. Each contract is 12.5 US$ per tick.

If this rule passes, will it change the 6E margin?

If this rule passes, will the 6E change in volatility?

When is the rule likely to pass?

Thanks
100:1 is not risky...Trader is risky. It is trader's responsibility to take care of her/his trading...By opening account trader signed and acknowledged that....No one can regulate traders responsibility it by changing leverage...
The Market pays you to be disciplined
This is completely false. There is nothing in the proposal text which affects the margin requirements for CME FX futures.

KGB,

I was referring to contracts on spot forex, not CME futures. If one is trading at 100:1 on the spot market, the new rule will increase margin by a factor of ten. My mistake for not specifying. That said though, the proposed CFTC rule doesn't change the leverage of CME FX futures to 10:1, so there is a double-standard in the proposed rule on OTC forex.
So the purpose of this rule change is what?
To save us from ourselves, to reduce catastophic losses, WHAT?
If anything it leaves you open to more loses, because your broker will close out your position if you don't, once it hits margin limits.
So there would be a much greater amount at risk at 100:1.
Quoting mima
100:1 is not risky...Trader is risky. It is trader's responsibility to take care of her/his trading...By opening account trader signed and acknowledged that....No one can regulate traders responsibility it by changing leverage...
yeah definitely.
Quoting mmont
So the purpose of this rule change is what?
To save us from ourselves, to reduce catastophic losses, WHAT?
In my opinion purpose is to eliminate traders with small account....
The Market pays you to be disciplined
Quoting mima
This 10:1 will have only for consequance to eliminate people with small account...nothing else...this doesnt protect me nor regulate brokers...
The other parts of the proposal do more broker regulating...
Hindsight is 20/20
Quoting mima
In my opinion purpose is to eliminate traders with small account....
Well if the minimums increase idle traders will have to close accounts or add. I think this will do two things it will decrease the amount of account with $12.38 because they will just close their accounts if they are not serious about trading. It will lower maintenace for the brokers. It lowers the amount of novice traders creating orders. Im just spit balling here.


People who trade the american stock exchange are serious traders or idiots with a ton of money. i think the american stock exchange trends well because it has a greater number of people who know what they are doing. Retail forex definatly has a greater precentage of novice traders due to the ease of entering (low spreads, high leverage, less regulation)

I just love forex because of the potential for greater profits with less money and no minimums for day trading. I dont have 25k laying around to day trade the american stock exchange.
Attached are the minimum that you will need, plus more for SL, plus more for broker padding, on these pairs. First pic is now in US, second is proposed US, third is UK standard and last is UK micro. The choice is clear, as there is really no choice.
Attached Image (click to enlarge)
Click to Enlarge Name: margin.jpg Size: 191 KB
Quoting altrader
bugger that..just wire your money into a retail forex broker based in the UK.
Bugger that. I've been in a regulated offshore broker for quite some time. Kinda nice to hide cash there and withdraw profits onto offshore debit cards and bank accounts. The Tax Man is none the wiser
Quoting mcmillan
KGB,

I was referring to contracts on spot forex, not CME futures.
"6E" is what kiwi had asked about, to which you replied. 6E is the ticker for the EuroFX futures contract at the CME.
Some interesting points to throw into the mix

From Jay Norris on trades that vanish

"This really is something...in my world I would have thought something like is is almost inconcievable...with a U.S. FCM every key sroke is recorded in your account, whether it was you or the house, or so I thought. I would go to war over that one...seriously. It's a shame they don't have a central exchange for forex like futures where the clearing cost for members is in nickels and dimes and everyone from the CEO down to the order clerks fears the compliance officer...


and some other related issues I've raised about the ICT factors in fx trading -

"There are several important issues in this for traders (other than trades that just vanish when you are not looking, haven't experienced that one myself but it is certainly alarming if that occurs)

- a sudden spike in bid/ask spreads for no apparent reason (wiping out an otherwise sound trade);
- broker obligations towards open trades when their server crashes;
- broker obligations when any other aspect of the internet network may crash, preventing traders from opening, closing or otherwise adjusting stops (that happened to me yesterday, "supposedly" some server in Aussie crashed meaning certain Aussie traders could not operate one particular account, still don't know whether the story they told is fact or fiction given that my other broker platforms were running just fine, the excuse given by this particular broker sounded like a huge pile of bullsh*t to me).
- broker obligations to use reliable servers in all parts of the network;
- broker obligations on slippage (learned this one the hard way early on - your stops don't always hit at the precise point they should, especially SL stops), so you learn to take profit and manage the trade manually (always use a SL regardless however), but then things happen like yesterday and I couldn't TP where I wanted to, had only just put the trades on when the server allegedly crashed. 4 hours later the problem still had not been fixed, while my other broker accounts were doing just fine. This morning I see my SL kicked in on the counter-trend move in this account... so not only was I not able to book the profit on the scalps, I also did not have access to trading the counter-trend move from this account as planned when London opened and had to wear the loss on my SL, none of which this broker accepts any responsibility for).
- broker obligations to reinstate any losses as a result of ICT failures.

That is an interesting idea Jay re an exchange exclusively for forex, minimal clearing costs and a compliance officer on the beat.


both comments posted on this commercial news thread from Yohay
http://www.forexfactory.com/news.php?do=news&id=221497
  • Post #599
  • Quote
  • Edited Feb 20, 2010 12:26am Feb 19, 2010 10:49pm | Edited Feb 20, 2010 12:26am
Quoting Jade Gate
Some interesting points to throw into the mix

From Jay Norris on trades that vanish

[i]"This really is something...in my world I would have thought something like is is almost inconcievable...with a U.S. FCM every key sroke is recorded in your account, whether it was you or the house, or so I thought. I would go to war over that one...seriously. It's a shame they don't have a central exchange for forex like futures where the clearing cost for members is in nickels and dimes and everyone from the CEO down to the order clerks fears the compliance...
Nah, by definition OTC cannot be traded on an exchange as it would not longer be OTC...which is much better...unregulated is better, remember what Pirrong said.."the trader's have voted with their pocket book".

Stop rationalizing that maybe is not so bad...you are becoming victims of the Stockholm Syndrone.

Before you people fall for the regulated is not so bad crap....I advise you to do some forex futures trading. The medicine is far worse than the disease, which you can avoid by living a healthy life style... i.e. choose a good broker and put the bad ones out of business.

Believe it or not, exchanged traded is more subject to manipulation, as there is only one feed to manipulate. EVERYONE who can control price would know where your SL is, not only your broker. So instead of one BAD broker doing stop hunting ot its clients EVERYONE WOULD BE HUNTED. You are going to have Goldman and the other market makers trying to fool you all the time with head fakes, they are professional manipulators. In OTC you have a lot of businesses trying to buy or sell for other than speculative reasons but for their purchases in a foreign currency or because repatriating profits, these businesses are not speculating and trying to phuck u, as Goldman would surely do...OTC is a truer price than what an exchange market maker would give you....They can pass by your TP or SL w/o hitting your actual bid and ask and you are still in b/c it has not traded at your bid and ask as they can control where sales take place. Don't be penny wise and pound foolish.

Only you know what is best for you and only you can protect you...don't rely on big brother to do it b/c big brother is not your friend. Big brother is controlled by politicians not Mother Theresa. Don't be lazy and take control of your trading and who you use as a broker.
Sometimes, when confronted with a dilemma, the best solution is to think outside the box. Don't think any of us want the nanny-state to babysit us, but that doesn't mean there might not be new solutions for the OTC market that meet everyone's agendas, including traders.

Re Goldman et al, one of the benefits of trading a highly liquid market that turns over $4 trillion a day is the reduced likelihood of individual players manipulating price.

The provisions for exchange transactions wouldn't necessarily have to be translated wholus bollus to a new kind of OTC exchange. Maybe they just need to invent a whole new modus operandi that delivers the same benefits and freedoms of the present OTC situation but with adequate (not excessive) safeguards.

That said, it is probably moot in any event... don't think this proposal is about consumer protections at all. I read IBFX's comment paper, they made some excellent points, particularly in regard to the manner in which the CFTC's proposal is "inconsistent with the intent of Congress", anti-competitive and designed in such a way as to deliver a commercial advantage to the futures market.

http://cftc.gov/ucm/groups/public/@l...10-001c095.pdf
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