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

You've apparently jumped to the conclusion that I think that reducing leverage is a good thing. I never said that. In fact, I'm not disagreeing with you. Like I said, if a trader wants to scalp, or hold multiple positions, 10:1 leverage is unlikely to be enough.

exactly, they had the balls to take on Microsoft, nevermind a few brokers.

game over...these are just birth pains, a pre cursor of whats to come for freedom is hard bargain these days...better off slap-n this money into a franchise with my bro, lil more work but good returns!! GL All!!

OK, peace, you are right...if it were only 10 to 1...that is only the beginning...just like what the NASD did to daytraders with the limit of 3 day trades within 7 days...it's coming...did you see the link that I posted about the SEC investigating traders that traded CDS? lol, what do traders have to do with the fraud? it was Gensler's Goldman Sachs that structured the deal to hide Greece's real debt...why is Goldman off the hook? Bullshit at it's greatest.
And this is the same SEC that was given information the Madoff claimed to be trading options in volumes higher than the actually traded and did they investigate that? What good are they for?
When are people going to realize what these regulatory agencies are about, that they do nothing to help them, but in reality hinder their trading by throwing smoke screen pretenting to regulate, they waste their resources in unimportant things with no purpose, and the crooks laugh at us and take their 15 million yearly bonus after fraudulently hiding greece's debt.
Human stupidty never ceases to amaze me.

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It happens over and over again and few people do anything about it... hundreds of thousadns of traders and only 5k comments? Pathetic

all the us brokers seem to be going ballistic over this and rightfully so. theres definitely some grey areas with this.. people like forex because of the high leverage and flexibility but low margin requirements also what keeps futures tradinga nd forex in the none mainstream for better or for worse due to perceived risk to investors.

Wouldn't the proposal have to pass congress as well? My understanding is that the Farm bill gave the CFTC control over current registered brokers so by saying that anyone who offers FX trading must register is illegal, no? They have no power to create laws, just regulation for current registered brokers. Thus they can only impose the 10:1 rule on FXCM, IB, etc. but if a new broker were to pop up they simply don't have to register with them as there is no law that says so, even if this does pass its just regulation and not law, and no matter how much the CFTC complain said broker would still be able to operate until a law is passed. At least that my understanding of the Farm bill.

Well in my understanding brokers are looking forward that this regulation take place in may 2010 because it will force those who wants to trade to have more money on their account...so this is just game of CFTC and brokers against retail traders with small account and to draw more money...

Finally someone with the gonads to mention the real criminals in all of this mess....



http://www.nytimes.com/2010/02/26/bu...LcPBaHxZ3ESQeg

In Greece’s Crisis, Fed Studies Wall St.’s Activities
http://graphics8.nytimes.com/images/...ticleLarge.jpg Petros Giannakouris/Associated Press
Greece's economic troubles have transfixed markets for weeks, and recently, workers there went on strike to protest budget cuts.


By NELSON D. SCHWARTZ and SEWELL CHAN
Published: February 25, 2010
Greece’s problems deepened on both sides of the Atlantic as the Federal Reserve disclosed it was investigating Goldman Sachs and other banks that helped the country mask its debts, and investors grew increasingly leery of lending any more money to a nation flirting with default.

Skip to next paragraph Related

Banks Bet Greece Defaults on Debt They Helped Hide (February 25, 2010)


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http://graphics8.nytimes.com/images/...icleInline.jpg Mary F. Calvert for The New York Times
Ben Bernanke of the Federal Reserve is looking at derivatives.

Enlarge This Image
http://graphics8.nytimes.com/images/...icleInline.jpg Michael Reynolds/European Pressphoto Agency
Senators Christopher Dodd, left, and Richard Shelby. Mr. Dodd has taken aim at credit-default swaps.



Wall Street’s role in the run-up to the debt crisis has generated criticism and calls for an inquiry from European leaders. The Fed examination is the first time American regulators will examine the highly profitable if little-known business of supplying custom-made financial instruments to strapped countries on the Continent.
While Greece’s economic troubles have transfixed world markets for weeks, its problems have snowballed in recent days as workers went to the picket lines to protest budget cuts and the government struggled to raise cash to cover what is Europe’s largest budget deficit. Last year, Greece’s deficit equaled 12.7 percent of gross domestic product.
On Thursday, the Moody’s ratings agency joined Standard & Poor’s in warning that it might downgrade Greek government bonds, a move that would increase the premium Athens must pay to borrow. The move comes at a precarious time for Greece, which must raise 25 billion euros ($34 billion) over the next few months to avoid a sovereign default that officials fear could cause the finances of other weak European economies to collapse.
In a sign of the challenges their nation faces, Greek officials also called off a planned trip to the United States and Asia aimed at interesting new investors in its bonds because of a lack of demand, according to an investment banker who was briefed on the government’s fund-raising strategy.
The European Union has said it would come to Greece’s aid only if it develops a plan to reduce its deficit by March 16, further ratcheting up the pressure.
“Even if they bring the deficit to zero, with interest rates at 6.5 percent and a growth rate of zero at best, Greece’s debt ratio remains on an explosive path,” said Miranda Xafa, a former executive board member at the International Monetary Fund. “I just don’t think they can raise funds from the market now.”
Greece has suffered from large deficits for years, and until now it seemed as if big banks would always be there to bail it out. As far back as 2000 and 2001, Goldman helped Athens quietly borrow billions to mask its poor finances by creating derivatives that essentially transformed loans into currency trades that Greece did not have to disclose under European rules.
Ben S. Bernanke, the Federal Reserve chairman, told Congress Thursday that the Fed was “looking into a number of questions relating to Goldman Sachs and other companies and their derivatives arrangements with Greece.”
Mr. Bernanke said the Securities and Exchange Commission was also concerned about how derivatives — financial instruments that are largely unregulated and do not trade on public exchanges — have contributed to Greece’s problems. “Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive,” he said.
The S.E.C., in a statement, said that it could “neither confirm nor deny the existence of an investigation,” but added that it was cooperating with United States and international regulators in examining “potential abuses and destabilizing effects related to the use of credit-default swaps and other opaque financial products and practices.”
Goldman declined to comment, citing its policy of not addressing legal or regulatory matters. But in a Feb. 21 presentation, Goldman said, “The Greek government has stated (and we agree) that these transactions were consistent with the Eurostat principles governing their use and application at the time.” Eurostat is the European Union’s statistics agency.
Goldman is not the only bank that supplied derivatives designed to lower deficits. In the late 1990s, JPMorgan Chase helped Italy reduce its budget gap by swapping currency at a favorable exchange rate. In return, Italy committed to future payments that were not booked as liabilities.
A spokeswoman for JPMorgan said that Italy disclosed all of the deals to Eurostat.
Senator Christopher J. Dodd, Democrat of Connecticut and the chairman of the Senate Banking Committee, also took aim at credit-default swaps, which allow banks and hedge funds to wager on whether a company or country might default.
Critics say the swaps have contributed to Greece’s problems and increased the odds of a financial collapse.
“We have a situation in which major financial institutions are amplifying a public crisis for private gain,” he said.
The Fed inquiry was begun about three weeks ago, according to an official involved in the investigation who was not authorized to comment publicly. Fed examiners are focusing on whether Goldman and other banks complied with guidance the Fed issued in 2007 outlining how to manage the risk of complex financial vehicles. The investigation is still in its early stages, he added, as officials sift through records detailing how the derivatives were created, what compliance procedures were followed and what internal analysis was performed. The Fed is also looking at whether Wall Street made additional financial arrangements for Greece that have not been disclosed.
Growing concern over these transactions have made investors more doubtful than ever about the government’s ability to quickly secure tens of billions of euros in new financing it needs to avert default. Greece faces a critical test next week, when it will try to raise about 3 billion euros ($4 billion), through an issue of 10-year bonds.
But with threats of a downgrade to its sovereign debt looming, investors say Greece would need to pay a whopping 7 percent interest rate just to get people to buy. That is almost a percentage point more than the rate investors received in the previous Greek bond sale, in January, and a full 3 percentage points more than Greece’s borrowing cost before the current crisis.
A spokeswoman for the Greek Finance Ministry did not respond to a request for a comment.
The rise in investor skepticism has led Greece to adopt a new financing strategy. Instead of selling debt through public auctions, where the danger of a failed offering could further unnerve markets, it has gone directly to institutional investors, sounding them out in one-on-one meetings, mostly in London.
Bankers and analysts in Athens say there is a debate within the Finance Ministry as to whether the government should go to the market now, or wait until a new menu of changes — like more taxes and further public sector wage cuts — is announced, in the hope that such measures will result in lower financing costs.
But a more dire view is already taking hold, according to some bankers, as investors fret that Greece may simply not be able to cover 20 billion euros of debt coming due in April and May, and 53 billion euros for all of the year. It seems unlikely that such a quantity can be raised from investors — many of them conservative pension funds and insurance companies that are already nursing losses from the 8-billion-euro Greek bond issue in January that was hit by the recent market downturn.
Landon Thomas Jr. contributed reporting.

A comment on the CDS article was pretty spot-on IMO:

"Nothing wrong with the concept and responsible implementation of Credit Default Swaps. Why should an equity investor get to hedge their longs/shorts with options but a bond investor is SOL should a default happen? Its a perfectly viable security in theory. However, the complete lack of structure and regulation of the CDS market (no reserve ratios/margins for writers, questionable price discovery rather than being exchange traded) is the problem. Once these problems are addressed you start to bring sanity back to the financial innovation that has (arguably) helped spur growth in the developed world."

I live in New Zealand. The regulations haven't yet reached the brokers that I use in this part of the world. However, I share your concerns about erosion of personal freedoms through excessive regulation, and not only in the forex arena. I'm definitely interested in what's being said in this thread, but I'm neither bold nor knowledgeable enough to reply with intelligent political comment.

The futures lobby could be driving this as well.
It's much cheaper to trade futures then FX,
except for the margin requirements.
If the 10:1 goes into effect it should drive a number of FX traders to Futures.

I could be mistaken, but my understanding was the opposite, that it closes the loophole that allows US-domiciled brokers to simply not register and operate freely.

What is driving it is all the scams... ponzi, CDS, bankbailout, too big to fail etc.

Words from the previous president "This sucker could go down." This is the aftermath of running a financial system with a bunch of incompetant morons at the helm with friends of big banks thrown into the mix.

Madoff was handed to the SEC on a platter nearly a decade before the implosion of the scheme, none of them had the brains to figure it out--even with the information staring them in the face.

So now we have the incompetent morons trying to cover their "arse". But once an incompetent moron --- always...a .....

The government is now in regulation overload to try to prevent any and all scams, schemes etc. However they are treating the banks to the smorgasboard because "they are too big to fail."

Even though they were the ones who got us into this mess by lending money to people with no ability to pay, trading CDS to the point of taking down financial institutions and then getting the government to pick up the tab so they can go off and do it again.

Hopefully with Ben Bernanke looking into Goldman Sachs and others the insanity will come to an end...

On the other end of this regulation overload competitors of the FX industry IE the futures market have their eyes on the billion dollar U.S. FX market... All of this plays into their hand because they are a friend of a friend to the CFTC / NFA.

They obviously got together with one another with a few morons from the SEC thrown in for good measure... rather than look for the real criminals and stopping the real crimes they come out with rediculous regulation that does nothing to stop fraud, scams etc.

Meanwhile the banks are throwing a billion $ bonus bonanza at the U.S. Taxpayer expense for saving the insurance giant / another bank or whatever that was deemed by the government as "To big to Fail." that would have ended up causing the whole system to come crashing to the ground.

There you have it in a nutshell.....

I agree with most of the points made here regarding our recent flirt with near disaster. But that is not what this thread is about. We have less than a month to provide enough information in response to the cftc and to our representatives in congress in order to derail this proposal.

Like many of you, I am exploring other possibilities in the event the proposal does go through. But that's not what this is about either.

There is a need for regulation in some areas. If a snake oil salesman is selling snake oil, then perhaps there is a need for a regulatory body to make sure there is basis for his claims. If a ponzi operator is bilking investors, then perhaps there is a need to take him to court for scamming.

In each case, one is selling something to another, and taking advantage of the other's ignorance in the process. Happens in spot forex also. And that is what needs to be regulated if any regulation is necessary at all. I'm not in favor of that since the very same thing happens nearly every time a car is sold. Or a house. Or a mortgage. The way you protect yourself is by educating yourself about the seller, the seller's employer, the manufacturer and the product itself. If you don't educate yourself, then you should be prepared to have someone else do it for you...in that case you need to educate yourself about the person you hire for that purpose.

But the part of the proposal we object to is the requirement to have sufficient deposits on hand to have 10:1 leverage or lower at the time the order is placed. If I'm a broker, 10:1 looks as if it will drive a lot of my business somewhere else. Those who stay will either pony up the additional deposits or satisfy themselves with lower expectations.

But if a compromise is reached at say 50:1, the broker is not affected to nearly the same extent. Most of his business may even stay at home. If so, then the additional deposits may be to his benefit if segregation of accounts is not required.

So, if you're a broker, your best bet is to protest to the cftc, and hopefully buy enough time to open at least one office in a foreign country. If you're a broker, your best bet is not to stay at home and fight to the death as some of your customers must.

my 2 cents.

Haa? Where are you getting this from?
My spread is better in spot... and no exchange fee, and no commissions in spot.

The IRS has no "power" to levy and collect taxes.
The Federal Reserve has no "power" to control the money supply or interest rates.
Congress has no "power" to piss away its constitutional responsibilities to private, or even, foreign entities.

'Political power comes from the barrel of a gun.'
Mao

Yes, this regulation is to close the loop hole, but the CFTC doesnt have the power to close it only congress does. The farm bill gave the CFTC control over current brokers and not the FX industry as a whole the can only regulate those brokers that are registered.

I think a lot of us are missing that point. CFTC only controls brokers that are registered. It does not control the market nor overseas fx activites. In the event the ruling pass, I do believe registered brokers will move operations overseas or "un-register", allowing themselves to be free of any regulatory bodies. The problems with brokers that aren't registered, no one will stop them from unfair acts ... which is the reason most brokers register, to show their potential clients that they are on the level.

At this point and time, there is nothing more for us to do. If you following instructions and sent them your letter of opposing the deal, then that's all we can do. Anything else is nothing more than a desperate plea for big bad mommy/daddy from taking our toy away from us. Plea's don't work, it all business. So if you've done what was asked by the fx community, you've done your part. Now is a time for waiting.

For those that will not except what is, and feel there is more that could be don should except the fact we traders have done all that we could and start questioning the brokers. There were only 4 brokers willing to talk to CFTC Chairman, why only four when there are over 30 registered brokers with the CFTC. Some of us need to start emailing and sending letters to our broker's president, find out what are they doing to ensure their presence in the U.S.? Simple fact is that those brokers that have not voiced concerns to the CFTC chairman, have already packed up ready to move. If this is true then we have our answer for March 22. The brokers voice will weight much heavier than the people's

You can trade any futures contract for < $4.00 per RT.
Even if you limit your FX trading to the major 2~3 it's about $10.00.
Are you saying you trade for < $4.00?

http://www.rollingstone.com/politics..._machine/print#

BTW, if you are curious as to how Gensler spends his time when he is not trying to bust up the "mom and pop" entrepreneurial efforts of retail fx traders, please see below:

"Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary GENSLER, both former Goldmanites. (Gensler was the firm's co-head of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion- dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade. The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance."