tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
The CTFC head used to work at Government Sachs, so i'm sure they'll get a good rub of the green.
Eliminate the competition and the nuisance small orders.
Small account speculators had nothing to do with the financial crisis and nor will they in the future.
The 'solutions' to the financial crisis have been nothing but smoke and mirrors. No accountability and no meaningful change to the Wall St culture which created this mess.
Eliminate the competition and the nuisance small orders.
Small account speculators had nothing to do with the financial crisis and nor will they in the future.
The 'solutions' to the financial crisis have been nothing but smoke and mirrors. No accountability and no meaningful change to the Wall St culture which created this mess.
Last edited:
Jason Rogers
Senior member
- Messages
- 2,772
- Likes
- 93
The proposal is intended to reduce leverage on individual traders to 10:1 from the current 100:1 level. That's why there was the statement from the Forex Dealer Coalition. FXCM (along with other brokers) is actively lobbying against the proposal.
Jason Rogers
Senior member
- Messages
- 2,772
- Likes
- 93
The CFTC has started posting traders comments. Here is where you can find them:
http://www.cftc.gov/lawandregulation/federalregister/federalregistercomments/2010/10-001.html
http://www.cftc.gov/lawandregulation/federalregister/federalregistercomments/2010/10-001.html
Jason Rogers
Senior member
- Messages
- 2,772
- Likes
- 93
The FXDC has issued another statement on fighting fraud in retail forex and the CFTC proposal's impact. Here it is:
Over the past decade the Commodity Futures Trading Commission (CFTC) has found itself engaged in a seemingly endless battle with con-men, ponzi schemers and hapless fund managers operating in the retail forex arena. The difficulty for the CFTC lay in the fact that 90% of the people engaged in this criminal activity were not registered or licensed with any regulatory body and in many cases were simply common criminals who never actually engaged in any trading but simply misappropriated customer funds for their own use. The CFTC’s answer to fighting this problem has been to propose dramatic new regulations that would require anyone soliciting customers to trade retail forex get a license and be registered with the CFTC. This new licensing regime would go a long way towards ending the problem of forex fraud in the
United States.
However, all of this potential progress will be wiped away due to another CFTC proposed rule which would require customers post a 10% margin deposit in place of the current 1% margin rule recently adopted by the primary regulator of retail forex over the past ten years, the National Futures Association (NFA). Here is why the 10% margin rule will make forex fraud worse than it has ever been:
The key to solving forex fraud resides within the CFTC’s own proposed rules (absent the 10% margin rule). Over the last several years the NFA has aggressively tightened up its rules regulating retail forex by raising the minimum capital requirement to $20 million (which doesn’t include additional capital requirements on net positions), conducting more aggressive audits of firms (NFA registered forex dealers must submit monthly reports to CFTC and weekly reports to NFA), imposing tough marketing standards, and raising the bar in general for admission to the Association. As a result, the days of the small time forex dealer with just a few thousand dollars in capital opening a forex firm have long since ended. These tougher regulations have cleared out the worst elements in the dealer community, leaving only the unregulated forex referring broker community to be cleaned up next. These rules will do exactly that.
But by requiring customers post 10% margin and wiping out all forex dealers (who are not engaged in fraud and who want to see an industry where the only people employed in it are licensed and on the level) the trading public will be left with no one but the ponzi schemers to do business with inside the United States. The fact is the overwhelming majority of customers who trade in the retail forex industry are not victims of fraud. They are investors who enjoy trading currency online. They should not be punished for the sins of criminals. And they won’t be in a well-regulated domestic forex industry that works with the CFTC to report on those solicitors who are not going by the new letter of the law. But first there has to be a healthy industry to regulate in order to finally put an end to fraud. If the 10% margin rule is withdrawn
that’s precisely what we will have.
Statement taken from here http://blogs.fxstreet.com/francesc/files/2010/02/fighting-fraud-in-retail-forex.pdf
Fighting Fraud in Retail Forex
Over the past decade the Commodity Futures Trading Commission (CFTC) has found itself engaged in a seemingly endless battle with con-men, ponzi schemers and hapless fund managers operating in the retail forex arena. The difficulty for the CFTC lay in the fact that 90% of the people engaged in this criminal activity were not registered or licensed with any regulatory body and in many cases were simply common criminals who never actually engaged in any trading but simply misappropriated customer funds for their own use. The CFTC’s answer to fighting this problem has been to propose dramatic new regulations that would require anyone soliciting customers to trade retail forex get a license and be registered with the CFTC. This new licensing regime would go a long way towards ending the problem of forex fraud in the
United States.
However, all of this potential progress will be wiped away due to another CFTC proposed rule which would require customers post a 10% margin deposit in place of the current 1% margin rule recently adopted by the primary regulator of retail forex over the past ten years, the National Futures Association (NFA). Here is why the 10% margin rule will make forex fraud worse than it has ever been:
- - The adoption of the 10% margin rule will make it impossible for U.S. based forex dealers to compete with competitors from the United Kingdom. UK dealers are regulated by the FSA, which has no leverage restrictions whatsoever. The U.S. retail forex industry simply won’t be able to compete and will be decimated, leaving no legitimate forex dealers left for customers to trade with. In this environment fraud will flourish.
- - With no widely recognized brand names left in the United States it will become harder for the trading public to screen out the con-men. Last year the major forex dealers of this industry spent over $100 million building up their brand names precisely to separate themselves from the rabble. When a customer clicks on the website of a brand name in the retail forex industry they can quickly find links directing them to the CFTC or NFA do conduct a background check. But when the brand names disappear it will then fall upon forex traders themselves to sort through the rabble and this will be much more difficult and leave traders much more vulnerable since fraudsters are highly unlikely to give customers an option to do background checks with regulators.
- - Adding to this vulnerability is a worrying trend of traders who are developing an “antiregulatory” attitude when it comes to forex regulation. Traders are going from valuing the consumer protection offered by regulators to being hostile towards regulation since they are starting to see regulation as something that smothers consumer choice in the name of nanny statism. This attitude will harden should the 10% margin rule pass thus turning the CFTC into the bad guys in the minds of many traders. Once again, in this environment fraud will flourish.
- - Furthermore, a lot forex fraud involves boiler rooms that peddle so called “foreign currency options,” which require customers to make a deposit in order to purchase an over-priced premium. By increasing margin requirements these con-men can make even bolder requests of their customers and charge even more ridiculous amounts for premiums before they run off with a client’s funds.
- - Perhaps most troubling of all is that unregulated dealers from around the world will be the biggest beneficiaries of the 10% margin rule. These unregulated forex dealers don’t have to worry about capital requirements, risk management models, marketing ethics, dealing practices or even returning a customer’s funds. These dealers will be out of the reach of the CFTC and they will thrive.
- - At the end of the day, fraud will become impossible to police. Background checks are impossible to do for unregulated offshore forex dealers. Some of these con-men simply setup a website, put up a phony address in a foreign locale and claim to be a large and mainstream forex dealer when in reality there is just some lone hustler, sipping tea in a cramped apartment running the whole show. In the aftermath of the shutdown of the U.S. retail forex industry U.S. traders will be bombarded by offshore forex boiler rooms and many will be taken advantage of unnecessarily. There is no cop on the beat in the world of the unregulated, overseas retail forex dealer. Therefore, it makes no sense that CFTC would encourage people to open accounts at these offshore dealers instead of trading at a perfectly compliant and regulated domestic forex dealer.
A Healthy, Regulated Industry with a Cop on the Beat
The key to solving forex fraud resides within the CFTC’s own proposed rules (absent the 10% margin rule). Over the last several years the NFA has aggressively tightened up its rules regulating retail forex by raising the minimum capital requirement to $20 million (which doesn’t include additional capital requirements on net positions), conducting more aggressive audits of firms (NFA registered forex dealers must submit monthly reports to CFTC and weekly reports to NFA), imposing tough marketing standards, and raising the bar in general for admission to the Association. As a result, the days of the small time forex dealer with just a few thousand dollars in capital opening a forex firm have long since ended. These tougher regulations have cleared out the worst elements in the dealer community, leaving only the unregulated forex referring broker community to be cleaned up next. These rules will do exactly that.
But by requiring customers post 10% margin and wiping out all forex dealers (who are not engaged in fraud and who want to see an industry where the only people employed in it are licensed and on the level) the trading public will be left with no one but the ponzi schemers to do business with inside the United States. The fact is the overwhelming majority of customers who trade in the retail forex industry are not victims of fraud. They are investors who enjoy trading currency online. They should not be punished for the sins of criminals. And they won’t be in a well-regulated domestic forex industry that works with the CFTC to report on those solicitors who are not going by the new letter of the law. But first there has to be a healthy industry to regulate in order to finally put an end to fraud. If the 10% margin rule is withdrawn
that’s precisely what we will have.
Statement taken from here http://blogs.fxstreet.com/francesc/files/2010/02/fighting-fraud-in-retail-forex.pdf
10:1 is the average leverage used by most retail traders at large forex brokers such as fxcm, oanda, etc.
If you're a swing trader, then its probably too much leverage anyway. If you day trade and use tighter stops then you can afford it.
Offering 400:1, 200:1 and even 100:1 is a non-sense in my opinion.
If you're a swing trader, then its probably too much leverage anyway. If you day trade and use tighter stops then you can afford it.
Offering 400:1, 200:1 and even 100:1 is a non-sense in my opinion.
TraderNumber7
Well-known member
- Messages
- 376
- Likes
- 45
In air combat, the old saying is that "speed kills." For the combat pilot, speed is leverage. You would not remove speed from the trained and skilled combat pilot, no more than you would remove leverage from the trained and skilled trader or money manager. In trading and/or money management, leverage fuels optimized geometric revenue growth.
The problem is not leverage. The problem is education or the lack thereof. The problem is too many people trading into naked positions leaving themselves exposed to a single point of failure. Any good systems engineer will tell you that one of the primary architectural elements of a good system is, Fault Tolerance. Yet, so many traders out there engage in SOP (Single Point of Failure) methodologies, that it has now caused the CFTC to make knee jerk reactionary decisions that are not based on a correct understanding of the underlying problem.
Basic aircraft design 101: Make the Aircraft Fault Tolerant in as many areas of design as possible. This is why some of the better aircraft designs have dual ignition systems, duel power-plants, flight control redundancy, avionics redundancy, fuel system delivery redundancy, etc.
The vast majority of our flights are uneventful and profitable. The vast majority of our trades can be uneventful and profitable, when we start taking seriously the design of our trading methodologies and include at least some degree of fault tolerant trading into our daily lives.
Most highly successful traders and money managers already know and implement this into their routines.
