Forex Broker Profitability Rules Change

Remember that one broker had much higher profitability than others? Well, this was probably due to passive accounts that paid interest. The calculation is going to change – meaning that we’ll see significant changes.

The new CFTC rules introduced in October included a requirement to include the number of accounts and the percentage of profitability. Oanda stood out from the rest, and even had a positive rate in Q3. The main reason seems to be the passive accounts – those were no trade is made. If such an account receives interest, it becomes “profitable.

A clarification by the NFA makes a changes:

The calculation, including determining the total number of non-discretionary retail forex customer accounts maintained by the RFED and FCM that quarter, should include only accounts that executed any trades during the quarter and/or had an open position at any time during the quarter. Any account that did not execute any trades or have an open position during the quarter should not be included in the calculation regardless of whether the account maintained a cash balance and/or was paid interest or charged any fees during the quarter.

So, we’ll probably see big shifts in numbers in Q1, and Oanda won’t necessarily stand out.

Michael Greenberg already updated the figures for Q4, we already see a squeeze in Oanda’s profitability rate for Q4 – 43.5% instead of over 46% in the first report. They still leave all the rest behind. I’m waiting eagerly for Q1 2011.