How the NFA/CFTC Impacts Traders Worldwide | Forex Factory

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How the NFA/CFTC Impacts Traders Worldwide

  • #1
  • First Post: Edited 2:16pm Mar 4, 2015 2:03pm | Edited 2:16pm
Some may have read my posts in other threads regarding the ridiculous restrictions US regulators impose on US traders/brokers.

Most everyone is aware, unlike the rest of the free world, US traders leverage is limited to 50:1, now 33:1 on AUD and JPY, 20:1 on CHF (after the fact, makes as much sense as everything else they've done), no hedging, FIFO. Most intelligent traders know leverage is not the issue, leverage only allows you to make more money when used correctly. If I want to risk $200 on a trade, why do I need to put up $3,000 in margin? Risk is risk, leverage is simply the margin required to open a trade. One has nothing to do with the other. If I have $10,000 to trade with and I want to risk 2% ($200), once again why does my broker need more than that, especially since there is no protection of funds.

What most are not aware of, however, is the fact this is impacting trading forex worldwide. Remember when the New York afternoon was tradable, there was still volatility. Now it's like watching paint dry. The trading day is over at London close. This is directly due to the fact the NFA has forced all but 5-6 brokers to exit the US market, coupled with the fact nobody really wants to trade under such ridiculous restrictions and this is the result.

Why is it that everywhere else in the world, with the exception of North Korea and Iraq, can trade basically restriction free AND the regulatory bodies allow segregation of funds and insurance to protect clients monies.

Please share your thoughts and opinions
  • #2
  • Mar 4, 2015 3:33pm Mar 4, 2015 3:33pm
Another example of how the NFA/CFTC rules make no sense is in the equities market. If I want to day-trade (more than 3 round turns in 5 days) an equity, I'm required to keep a minimum of $25K in my account at all times. So if I day-trade 100 shares of a $5 stock my total risk is $500 and yet I need $25K in my account?
  • #3
  • Mar 4, 2015 3:49pm Mar 4, 2015 3:49pm
Good to see you start this Profit. As I mentioned in our PM, it will fall on deaf ears in "other" threads.
Ghost Rider - WWTBMD?
  • #4
  • Mar 4, 2015 3:58pm Mar 4, 2015 3:58pm
Quoting albchr
Good to see you start this Profit. As I mentioned in our PM, it will fall on deaf ears in "other" threads.
Yeah, I figured it deserved it's own thread.
  • #5
  • Mar 4, 2015 4:25pm Mar 4, 2015 4:25pm
Quoting Profit Daily
{quote} Yeah, I figured it deserved it's own thread.
I think this should be the most important thread on this forum. If nothing is done, this forum just wont exist. I feel what you have explained or tried to explain ad nauseam is the only solution to forex traders. The only fear I have is we are down to only a few offshore brokers. How long before the few that are left stop taking US clients?
  • #6
  • Mar 4, 2015 4:56pm Mar 4, 2015 4:56pm
Profit daily : You have put forward all my thoughts so eloquently. The real culprit is NFA who wants to shut down all spot forex trading in USA and steer all the business to futures market. When they came up with this idea of protecting small traders, why did they not think about segregating client funds? If they did, MF Global could not have made bad bets with clients money. Unless there is a strong association of retail traders with enough political clout, things are going to get worse and there will be no retail fx trading in USA.
  • #7
  • Edited Mar 5, 2015 12:09am Mar 4, 2015 7:36pm | Edited Mar 5, 2015 12:09am
Quoting Profit Daily
What most are not aware of, however, is the fact this is impacting trading forex worldwide. Remember when the New York afternoon was tradable, there was still volatility. Now it's like watching paint dry. The trading day is over at London close. This is directly due to the fact the NFA has forced all but 5-6 brokers to exit the US market, coupled with the fact nobody really wants to trade under such ridiculous restrictions and this is the result.
I'm not sure if the highlighted bit is true. The retail FX market is relatively a very small segment of the entire global FX market. i.e. US retail FX traders couldn't move the markets even if they tried.

If anything, it merely piggybacks on or mirrors the movements caused by interbank players. If it really is like watching paint dry during NY noon hours, then I think it's just that interbank players are not in the markets at the time coincidentally for whatever reason.

My two cents.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #8
  • Mar 4, 2015 7:50pm Mar 4, 2015 7:50pm
Quoting skenobi
{quote} I'm not sure if the highlighted bit is true. The retail FX market is relatively a very small segment of the entire global FX market. i.e. US retail FX traders couldn't move the markets even they tried. If anything, it merely piggybacks on or mirrors the movements caused by interbank players. If it really is like watching paint dry during NY noon hours, then I think it's just that interbank players are not in the markets at the time coincidentally for whatever reason. My two cents.
That's a very valid point. However, I do recall the NY afternoon having much more volatility in recent years than currently. Do you have any other explanations as to why?
  • #9
  • Mar 4, 2015 8:04pm Mar 4, 2015 8:04pm
I agree with everything you are saying and share in your frustration. I've been around long enough to have seen the now long gone afternoon NY volatility, or at least a trade-able amount of volume, dwindling leverage, FIFO, hedging, and it just keeps getting worse. The question is what do we do about it? Do we have a chance as a unified voice to make ourselves heard? Not sure if we can make change, but I'd be wiling to listen to anyone with ideas, because I do see the end coming for the average retail trader who doesn't have tens or hundreds of thousands to start trading.
  • #10
  • Mar 4, 2015 8:22pm Mar 4, 2015 8:22pm
The FIFO and hedging rules make no sense at all.
  • #11
  • Mar 4, 2015 8:49pm Mar 4, 2015 8:49pm
Quoting TheDirtySerb
I agree with everything you are saying and share in your frustration. I've been around long enough to have seen the now long gone afternoon NY volatility, or at least a trade-able amount of volume, dwindling leverage, FIFO, hedging, and it just keeps getting worse. The question is what do we do about it? Do we have a chance as a unified voice to make ourselves heard? Not sure if we can make change, but I'd be wiling to listen to anyone with ideas, because I do see the end coming for the average retail trader who doesn't have tens or hundreds of...
Well I trade offshore, and I know quite a few traders doing so as well. But the point is, we shouldn't have to. I'm not only offshore to avoid the restrictions, but the spreads, commission and execution are much better as well. In addition to choking the trader, they have also driven all but 5-6 brokers out of US market and the conditions are horrible. Two market makers, an almost bankrupt NDD that's been fined over and over, an ECN with spreads wider than all of them, IB and Citi. The choices are garbage. I would really like to see someone from the NFA/CFTC post here as to exactly how any of this benefits or protects us as they claim. How is depositing up to 15x more than other brokers worldwide and then not protecting those funds via any type of insurance protecting us? Someone please explain it.
  • #12
  • Mar 5, 2015 12:07am Mar 5, 2015 12:07am
Quoting Profit Daily
{quote} That's a very valid point. However, I do recall the NY afternoon having much more volatility in recent years than currently. Do you have any other explanations as to why?
My guess is that many First World institutional trading crews have been pared down especially in light of regulator-led investigations into their activities i.e. the Banks in the US centers just want to keep their noses clean in the meantime.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #13
  • Mar 5, 2015 1:51am Mar 5, 2015 1:51am
Hoodwinked

This is very simple to me >>>>
When a US company (brokers) makes lots of money, nobody wants to pay decent/appropriate tax.
When a US company is located in the US they have to abide by the US tax laws and will pay the amount of tax.
When a US company is located in another country, (I don't want to bother with the details) simply put >>> they will pay ridiculously small tax compared if they are on US grounds.

That's how America has done it for centuries (and not just with business but also political). They go into another country pretending to be the white knight in shinning armor and then screw that country 10x over.

And they know this.... they pay less (at times close to zero) Tax from another country and they haul in those money back to the US.
  • #14
  • Last Post: Mar 5, 2015 9:57am Mar 5, 2015 9:57am
Quoting Profit Daily
{quote} Well I trade offshore, and I know quite a few traders doing so as well. But the point is, we shouldn't have to. I'm not only offshore to avoid the restrictions, but the spreads, commission and execution are much better as well. In addition to choking the trader, they have also driven all but 5-6 brokers out of US market and the conditions are horrible. Two market makers, an almost bankrupt NDD that's been fined over and over, an ECN with spreads wider than all of them, IB and Citi. The choices are garbage. I would really like to see someone...
Out of the offshore brokers you are using, does one stand out? Do you have a personal preference?
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