1:10 Leverage Limit? Keep Up the Fight
The debate over the CFTC 1:10 leverage proposal is hot. While some say it’s all over for the US forex industry, others think that this draconian proposal won’t be realized. I say – keep those letters coming. Here are some interesting thoughts. What do you think?
Michael Greenberg continues to bury the American forex industry. Apart from the 1:10 leverage which he thinks is already decided, Michael took the time to dive into all the 193 pages of regulation and sees more trouble for the American industry.
He sees that the proposed regulation will make it very hard for forex brokers to operate in the US. Here’s a quote:
The Proposal would further require certain entities other than RFEDs and FCMs that intermediate retail forex transactions to register with the Commission as introducing brokers (“IBs”), commodity trading advisors (“CTAs”), commodity pool operators (“CPOs”), or associated persons (“APs”) of such entities, as appropriate, and to be subject to the Act and regulations applicable to that registrant category. In addition, the Proposal would require any IB that introduces retail forex transactions to an RFED or FCM to be guaranteed by that RFED or FCM.
I’m not sure I understood it, but it is quite complicated.
On the other hand we have John Forman that doesn’t see this happening. In a post for the Currensee blog, Forman reminds us that the NFA imposed a 1:100 regulation rule just in November, and that the CFTC will collect data before moving on a 1:10 limitation and concludes his post with a calming message:
So everyone can relax. The odds of 10:1 leverage limits are extremely slim. By all means, though, take the opportunity to let the CFTC know what your thoughts are on the subject to make sure those odds remain low.
Also earnforex.com believes there’s hope. In a blog post reporting about the news we can see some optimism:
The good thing that it’s still just a proposal and that CFTC is expecting a feedback from the market participants to evaluate the necessity and possibility of such means.
I’ve already mentioned that apart from individuals, also brokers are fighting back. The Foreign Exchange Dealers Coalition (FXDC), a new body that consists of leading American brokers has united in a petition, quoted by Fransesc Riverola. They fight for their industry and put the focus on the real problem in their eyes:
The problem of Forex fraud will get worse absent legitimate dealers offering retail forex. Retail forex fraud is not something that is caused by the actions of retail forex dealers; rather it is caused by unlicensed con-men who masquerade as forex experts promising silly and unjustifiable returns before disappearing with customer funds. That is why the FXDC fully supports the CFTC’s rule requiring all introducing brokers be licensed. That rule will solve forex fraud, not 10 to 1 leverage.
Some people see the upside of this rule. Dr. S. Sivaraman at FXStreet sees something good for the economy:
Probably tightening using regulations might be an indirect measure to motivate the people to go in for job and earn their bread rather than speculation.
Ryan O’Keefe dives into other proposed regulations including capital requirements, and urges you to act:
I can’t stress the importance of letting your voice be heard. If you do not want your margin requirements to increase, if you prefer flexibility with leverage, I suggest you speak up now or be prepared to trade with 10:1 leverage in the near future. Your only other alternative will be to increase you capital, or go overseas.
And I also say: sending a letter to the CFTC is a small effort. Let’s keep up the fight!
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See what other traders are doing in real forex accounts. Check out Currensee. It's free..
It is amazing just how many, even the so called experts, utterly and completely miss the point. There is hope that CFTC will see the error of their ways? I THINK NOT!!! If they did, they would bring back hedging rather than ponder on 1:10 and then think of more crap to regulate. Sitting around writing letter and hoping for the best is UTTERLY ABSOLUTELY ABSURDLY COMPLETELY RETARDEDLY FOOLISH!!! Why do you think US forex firms have quietly been opening up UK and EU subsidiaries? Hmmm??? IBFX will be next to open up an offshore subsidiary. FXDD already also have Malta subsidiary. Why do you think this is? Because they knew after the anti-heding FIFO crap, something worse is on the way. The only hope brokers have is that wealthy investors and institutional investors also do not close their accounts in favor of UK firms. These US forex firms do not want to risk losing their accounts. Losing regular Joes and Janes $500 deposit may not be a big deal in the short-term but are you saying wealthy depositors also do not want 1:100 leverage? What an asinine assumption. Every successful trader wants 1:100 because that’s how they made their money precisely using that leverage advantage!!! Only option for US forex firms and traders is to go either to their subsidiary counterparts or find a nice UK or EU firm. If 1:10 becomes reality, it is an end to US forex business as we all know it. NFA and CFTC are deluding themselves!!!
Way to protect the investors by ruining the forex business model completely. Good job retards!!!
HUMAN without HEART = MONSTER.How many people on this planet EARTH today can raise $2000;00 to trade forex,in order to meet the INSENSITIVE 1:10,this amount of money can be somebody’s annual salary in some countries,and you CFTC want these class of people to invest this amount of money in a trade like FOREX?Tell me is there anybody who does not know about LEVERAGE before trading FOREX?The answer is NO.Each trader decides the LEVERAGES they want & faces the consequence,we’re not force by the BROKERS so what’s your business CFTC?.Is it really concern for traders?NO. Please remember the saying ”WHAT SOEVER A MAN SOWETH THAT SHALL HE REAP MANY TIMES OVER”This your new policy shall close the DOOR to so many aspiring traders THINK about it.The CHOICE is YOURS…The CONSEQUENCES YOURS
Like I said, if NFA and CFTC want to go down in history as having ruined US forex business model, let them. Also, let them face the anger of US Senate/Congress years later when US forex business is nonexistent in hearings explaining themselves after instituting this retarded 1:10 leverage requirement in the name of protecting the investors. They must be truly dumb as hell and beyond mentally retarded to think that this will flourish the forex market in US. They must just be as dumb as hell beyond reason. I want to see CFTC bring 1:10 on and face the consequence of their retard actions. People already have exited en masse after the first wave of anti-hedge rule. And more are exiting now to UK and EU firms. If 1:10 becomes reality, US forex firms may start closing down their offices in US. What then? CFTC will levy fines on them and threaten to seize their assets if they leave? Huh? Don’t scoff at it… the retards at our government will and can do anything to justify their retard positions rather than admit that they are retards and made mistakes. If US forex firms try to close business in US, will then CFTC come in to seize their assets? I don’t want to sit around and hope for the best like a moron… I am already in UK and Malta right now as we speak.
Uh, with all due respect to the Dr. successful traders do not see forex as “speculation”. Go get a job rather than speculate?
ARE YOU KIDDING US WITH SUCH ELEMENTARY INSULTING NONSENSE COMMENT???
“So everyone can relax. The odds of 10:1 leverage limits are extremely slim. By all means, though, take the opportunity to let the CFTC know what your thoughts are on the subject to make sure those odds remain low.”
Again, with all due respect, above advice is foolish. “slim”? “low”? I believe they said the same of anti-hedge rule. Chances and low and slim? What kind of odds is that really? Now, hoping for that is GAMBLING… that is SPECULATING. Closing your US forex account and going to UK or EU now THAT is being smart not sitting around and hoping and hoping and hoping that the rejects at CFTC will do the right thing.
I know that most successful traders are not that dumb so I scratch my head when I read posts praising the 1:10 leverage. It is a disaster for small depositors but it is a horrid nightmare if your current balance is over $200,000 and you have successful trades going on using 1:100 leverage. And especially more so if you have made decent income using it and using your earned equity. Why? Because 1:10 leverage raises the margin requirement that’s why. Just look at USD/JPY here for a minute. At 1:100, margin requirement is $1,000. At 1:10, margin requirement is $10,000. Uh, hello…??? I guess a lot of these people either do not know or didn’t think of this important equation. Guess what? Let’s say you have two minutes warning and 1:10 will kick in two minutes from now… how many traders do you think will get liquidated due to margin call? Hmmmmm??? And how many will be able to deposit current 10 times their current balance to meet that new margin requirement? As you can see, it is $1,000 VS $10,000 !!! Even wealthy traders are now using 1:100 leverage to trade even if their balance is way over $500,000. Trust me, they would rather close all floaters, take the loss, and close their US forex accounts rather than deposit more just to meet the margin requirement and face full liquidation of a margin call. Now, this is the most important aspect of 1:10 one, NOT PROTECTING THE TRADERS OR THE INTEGRITY OF THE BUSINESS MODEL.
Man, there must be some real useless pricks at NFA and CFTC.
It looks like the big stores are trying to push the mom-and-pop shops out of business. Just a precaution, I already moved my account outside the US. Also, planning to move out the country and avoid all of these headaches that these regulators do.
I make a living in Forex and Stocks, and I don’t have any other skills, other than flip burgers in McDonalds.
Good luck to all!
Can somebody get me in touch with Simmons? [last post 1/19/10] I am also considering moving out of the states. I would like to start a discussion group.
I would be surprised if 10:1 leverage goes through, however I wouldn’t be surprised if 40 or 50:1 goes through. I trade off 50:1 but I realise this doesn’t suit many. In any case I’m not going to take the risk so I’m moving my account to Singapore.