CFTC new Risk Disclosure

IBFX sent this to me now


As part of the recent CFTC rules and regulation changes with the forex market, all forex traders must read and agree to the updated risk disclosure document below by October 16, 2010. We are required by the CFTC to disable the account(s) of those who do not agree with the new disclosure by this date. Please take a moment to review the new disclosure below.

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CFTC RISK DISCLOSURE

CURRENCY TRANSACTIONS INVOLVE THE LEVERAGED TRADING OF CONTRACTS DENOMINATED IN FOREIGN CURRENCY CONDUCTED WITH A FUTURES COMMISSION MERCHANT OR A RETAIL FOREIGN EXCHANGE DEALER AS YOUR COUNTERPARTY. BECAUSE OF THE LEVERAGE AND THE OTHER RISKS DISCLOSED HERE, YOU CAN RAPIDLY LOSE ALL OF THE FUNDS YOU DEPOSIT FOR SUCH TRADING AND YOU MAY LOSE MORE THAN YOU DEPOSIT.

YOU SHOULD BE AWARE OF AND CAREFULLY CONSIDER THE FOLLOWING POINTS BEFORE DETERMINING WHETHER SUCH TRADING IS APPROPRIATE FOR YOU.

(1) TRADING IS NOT ON A REGULATED MARKET OR EXCHANGE—YOUR DEALER IS YOUR TRADING PARTNER WHICH IS A DIRECT CONFLICT OF INTEREST. BEFORE YOU ENGAGE IN ANY RETAIL FOREIGN EXCHANGE TRADING, YOU SHOULD CONFIRM THE REGISTRATION STATUS OF YOUR COUNTERPARTY.

The off-exchange foreign currency trading you are entering into is not conducted on an interbank market, nor is it conducted on a futures exchange subject to regulation as a designated contract market by the Commodity Futures Trading Commission. The foreign currency trades you transact are trades with the futures commission merchant or retail foreign exchange dealer as your counterparty. WHEN YOU SELL, THE DEALER IS THE BUYER. WHEN YOU BUY, THE DEALER IS THE SELLER. As a result, when you lose money trading, your dealer is making money on such trades, in addition to any fees, commissions, or spreads the dealer may charge.

(2) AN ELECTRONIC TRADING PLATFORM FOR RETAIL FOREIGN CURRENCY TRANSACTIONS IS NOT AN EXCHANGE. IT IS AN ELECTRONIC CONNECTION FOR ACCESSING YOUR DEALER. THE TERMS OF AVAILABILITY OF SUCH A PLATFORM ARE GOVERNED ONLY BY YOUR CONTRACT WITH YOUR DEALER.

Any trading platform that you may use to enter off-exchange foreign currency transactions is only connected to your futures commission merchant or retail foreign exchange dealer. You are accessing that trading platform only to transact with your dealer. You are not trading with any other entities or customers of the dealer by accessing such platform. The availability and operation of any such platform, including the consequences of the unavailability of the trading platform for any reason, is governed only by the terms of your account agreement with the dealer.

(3) YOUR DEPOSITS WITH THE DEALER HAVE NO REGULATORY PROTECTIONS.

All of your rights associated with your retail forex trading, including the manner and denomination of any payments made to you, are governed by the contract terms established in your account agreement with the futures commission merchant or retail foreign exchange dealer. Funds deposited by you with a futures commission merchant or retail foreign exchange dealer for trading off-exchange foreign currency transactions are not subject to the customer funds protections provided to customers trading on a contract market that is designated by the Commodity Futures Trading Commission. Your dealer may commingle your funds with its own operating funds or use them for other purposes. In the event your dealer becomes bankrupt, any funds the dealer is holding for you in addition to any amounts owed to you resulting from trading, whether or not any assets are maintained in separate deposit accounts by the dealer, may be treated as an unsecured creditor’s claim.

(4) YOU ARE LIMITED TO YOUR DEALER TO OFFSET OR LIQUIDATE ANY TRADING POSITIONS SINCE THE TRANSACTIONS ARE NOT MADE ON AN EXCHANGE OR MARKET, AND YOUR DEALER MAY SET ITS OWN PRICES.

Your ability to close your transactions or offset positions is limited to what your dealer will offer to you, as there is no other market for these transactions. Your dealer may offer any prices it wishes, and it may offer prices derived from outside sources or not in its discretion. Your dealer may establish its prices by offering spreads from third party prices, but it is under no obligation to do so or to continue to do so. Your dealer may offer different prices to different customers at any point in time on its own terms. The terms of your account agreement alone govern the obligations your dealer has to you to offer prices and offer offset or liquidating transactions in your account and make any payments to you. The prices offered by your dealer may or may not reflect prices available elsewhere at any exchange, interbank, or other market for foreign currency.


(5) PAID SOLICITORS MAY HAVE UNDISCLOSED CONFLICTS

The futures commission merchant or retail foreign exchange dealer may compensate introducing brokers for introducing your account in ways which are not disclosed to you. Such paid solicitors are not required to have, and may not have, any special expertise in trading, and may have conflicts of interest based on the method by which they are compensated. Solicitors working on behalf of futures commission merchants and retail foreign exchange dealers are required to register. You should confirm that they are, in fact registered. You should thoroughly investigate the manner in which all such solicitors are compensated and be very cautious in granting any person or entity authority to trade on your behalf. You should always consider obtaining dated written confirmation of any information you are relying on from your dealer or a solicitor in making any trading or account decisions.

FINALLY, YOU SHOULD THOROUGHLY INVESTIGATE ANY STATEMENTS BY ANY DEALERS OR SALES REPRESENTATIVES WHICH MINIMIZE THE IMPORTANCE OF, OR CONTRADICT, ANY OF THE TERMS OF THIS RISK DISCLOSURE. SUCH STATEMENTS MAY INDICATE POTENTIAL SALES FRAUD.


THIS BRIEF STATEMENT CANNOT, OF COURSE, DISCLOSE ALL THE RISKS AND OTHER ASPECTS OF TRADING OFF-EXCHANGE FOREIGN CURRENCY TRANSACTIONS WITH A FUTURES COMMISSION MERCHANT OR RETAIL FOREIGN EXCHANGE DEALER.

Interbank FX Account Profitability –

Quarterly Report //// % Profitable //// % Unprofitable //// Total Non-Discretionary Accounts
Sep - Dec, 2009 //// 33% //// 67% //// 17,940
Jan - March, 2009 //// 28% //// 72% //// 17,442
April - June, 2009 //// 27% //// 73% //// 16,122
July - Sep, 2009 /// 28% //// 72% //// 18,597


Past performance is not indicative of future results. (lol)



I think it's time to migrate to cme fx futures to make some volumes for them

Well, this can apply to all market makers.

And how is this possible?
Aren't they heard for margin call?

C'mon. That line has been in every NFA brokers account application for probably close to a decade. The cool thing here is this is foricng fcms to disclose how many accounts they have in their US branches, and how many of them make money. Im actually surprised how high IBFX is - I would have expected around 90% losers.

Important changes to your IG Markets account



From October 18th 2010, important new rules on retail forex transactions will affect your IG Markets account.



The Commodity Futures Trading Commission (“CFTC”) issued final rules which include a requirement that, in order to act as a counterparty to US Retail FX Transactions, a firm must be registered with CFTC as either a Forex Dealer Member or Registered Foreign Exchange Dealer.

As such, IG Markets clients who are currently contracting retail FX with IG Markets Ltd in London will be repatriated to the US and will begin doing business with IG Markets Inc, a registered Futures Commission Merchant and Forex Dealer Member (NFA ID#342337). IG Markets Ltd will cease acting as the counterparty to retail FX trades in the US and IG Markets Inc will begin acting as the counterparty to US retail FX trades.

Your account will be transferred from IG Markets Ltd to IG Markets Inc after close of business on Friday, October 15th. Your account will therefore be subject to the CFTC final rules regarding retail forex transactions with effect from the evening of Sunday, October 17th, 2010.







How will this affect my IG Markets account?
Your existing username, account number and password will remain the same.
You will no longer be permitted to maintain offsetting long and short positions in the same currency. If you have offsetting positions at close of business on October 15th, they will be netted off.
Orders will no longer be attached to positions. Therefore any Limit Orders or Stop Orders (including Trailing Stops) attached to current positions will become unattached working orders at their last level as of close of business Friday October 15th, 2010.
Guaranteed Stops will no longer be offered. If you have any open positions with Guaranteed Stops at close of business on October 15th, the stops will become non-guaranteed Stops and you will be issued a credit for the Guaranteed Stop premium paid during the opening of the position. Note that the resulting non-guaranteed Stops will be unattached working orders.
Please note that unattached working orders will not be automatically closed or amended when the underlying position is closed or part-closed. From October 17th, if you use Stops and Limits to manage the risk on your underlying positions you will need to explicitly cancel or amend any unattached orders whenever you change the size of those underlying positions.
Margin requirements are increasing on October 17th. The margin required for major currency pairs will be 2%. The margin required for all other pairs will be 5%. If you have open positions at close of business on October 15th which would cause your account to be over-margined due to the new requirements, those positions will be closed in part or whole to satisfy your margin requirements.
Contingent Stops and Limits attached to existing working orders at close of business on October 15th will be removed; however the working orders will remain.
Mobile trading and L2 trading will no longer be available.
What do I need to do?
In order to continue trading your account, you must log on to the platform and agree that you have read and understood the new Forex Risk Disclosure Statement. This disclosure will pop up when you log in to your account. You MUST click on “I agree” in order to continue trading your account. You will not be able to access your account until you have agreed to the new disclosure.
From October 18th, 2010 a new Customer Agreement will apply to your account. Please read this document carefully. By continuing to trade through your IG Markets account, you will be deemed to have accepted the terms of the new Customer Agreement, which can be found on the customer agreement page.
You are not required to accept this proposed transfer. However, please note that if you do not wish for your forex relationship to be assigned to IG Markets Inc, you must contact us before October 14th via the contact details set out below. We can then close any open positions you may have and close your account. If you do not contact us before October 14th, your account will be transferred back to IG Markets Inc and your account will change as detailed above.






Additional Questions?
If you have any questions regarding the upcoming changes to your account, please do not hesitate to contact our Client Services department.

U.S. Toll Free: 866 748 1340
International: 312 981 8010
Email: [email protected]

To read the new Forex Risk Disclosure now, please visit IG Markets and log in to your account.

Kind regards,
IG Markets

Anyone know if these rules only apply to US Citizens or are they for US Residents as well?

If you are signing up with your US social security number and the US address listed on your US government issued ID, it applies to you, whether citizen or resident. If you have an ID and address in another country, then you have a choice on whether this can apply to you or not.

Thanks for that info! I don't know nearly enough about US laws but it just seems like what is going on is against the constitution. I bet smart people will be working together to challenge all this.

I have talked to three tax investment attorney's that deal with forex traders about challenging this in a court of law and they told me that they would not consider it. The only chance is to have congress change the laws.

Regards,
Jeff

I have to admit I'm disappointed with what is going on. I promised my wife to move to the US, but we could still just live 5 months and 29 days there and 6 months and one day in our country to avoid this. Just means I need to pay taxes in my country instead of the US, which is no big deal really.

It is not just the usa doing this to traders. Japan just lowered the leverage in their country as well. The socialists in the western govt's want to restrict traders for some reason. You would think they would want to tax it more so they would get more revenue for them to spend but that does not seem to be their objective.

Regards,
Jeff

How can CFTC allow this to happen?
->Your dealer may offer any prices it wishes, and it may offer prices derived from outside sources or not in its discretion.

IBFX advertised themself as Non Dealing Desk?
->when you lose money trading, your dealer is making money on such trades, in addition to any fees, commissions, or spreads the dealer may charge.

The policy seems very unfair to retail trader. They can legally run our stop loss order, as they wish, no need to follow market price anymore. How can this become legal?

This is nothing new, it has been like that for years. And most of it was always in the fine print that most do not bother reading.

I just wonder if it has anything to do with some force trying to get traders to run back to the stock markets.

There is no surprise here. This is what all market makers do. they "make" the market or make their own prices. No regulator in history has ever objected to market makers doing it.

Forex is decentralised so there is no central authority on what the price should be. Each and every broker can give you whatever price they like and the regulator will not stop them.

I got the same email from IBFX. I particularly liked the table showing account profitability. There's always the anecdotal discussion about "95% of traders fail" going around. Here's proof that the odds are against the average individual.

I'd say they added all the inactive accounts to -> Profitable. Otherwise the number of unprofitable would be much higher.

That's quite possible. Plus the stats are number of accounts, not dollars. So the piker with a $100 account is lumped in with a hedge fund manager with a $1,000,000 account.

Still, interesting stats.

anyone have the latest data of such kind ofa/c profitability ,not only ibfx , thank you