Proposed CFTC Regulation to Further Limit Margin

[sark_anZas]

I woke up this morning and almost spit my coffee all over the screen when I read this email IBFX sent me.


Dear Valued Customer,

As many of you are aware, the U.S. Commodity Futures Trading Commission (CFTC) announced on January 13, 2010 that it is seeking public comment on proposed regulations concerning retail Forex trading.

As part of the proposed regulations, it is stated: "leverage in retail forex customer accounts would be subject to a 10-to-1 limitation," which means 10:1 leverage would be the maximum amount allowed for all Forex traders in the U.S.

An example of how the proposed regulatory restrictions would affect a major currency pair appears below:

Maximum Leverage under Current Regulations Maximum Leverage under Proposed CFTC Changes
USD/CHF USD/CHF
100:1 leverage (one percent) 10:1 leverage (10 percent)
1 lot (100,000) 1 lot (100,000)
Margin requirement: $1,000 Margin requirement: $10,000
We stand behind the belief that you should be given the freedom and right to choose the amount of leverage that is appropriate for your individual desired risk, and that this basic principle of 'choice' is in jeopardy by the proposed CFTC regulations.

If you feel strongly about the proposal, we encourage you to help determine the outcome of these proposed regulations. You can help make an impact by sending comments directly to the CFTC at: [email protected].

Please include 'Regulation of Retail Forex' in the subject line of your message and the identification number RIN 3038-AC61 in the body of the message.

You can also submit your comments by any of the following methods (include above ID number):

Fax: (202) 418-5521
Mail: David Stawick, Secretary Commodity
Futures Trading Commision 1155 21st Street, N.W.,
Washington, DC 20581
Courier: Use the same as mail above.
In the upcoming days, Interbank FX and the rest of the U.S. Forex Dealer Coalition will be releasing a more formal opinion about the proposed changes. Please feel free to read further details about the regulation on the CFTC website by clicking here. In the interim, we encourage you to voice your opinions to the CFTC and your local U.S. representative.

As always, we want the best for our traders. We hope you’ll join forces with us to prohibit the proposed leverage requirements.

The Interbank FX Team

 

[Ingot54]

http://www.trade2win.com/boards/gen...dustry-brokers-s-worse-than-you-expected.html

 

[sark_anZas]

here's the letter than i am constructing to send them.. it's not finished yet. feel free to criticize or plagiarize at will.

Dear Mr. Starwick,

I am writing this letter regarding the recent proposal RIN 3038-AC61, which would further limit the ability of common people to participate in the financial markets by creating economic barriers to entry. The reality of the country that was celebrated as the birthplace of free-enterprise and social mobility is increasing becoming the land where "You have to already be rich to make money."

Although I have been involved in the markets for 14 years, I am of the group that supports government policies and regulations that stabilize our economy, limit monopolies, facilitate social mobility and free enterprise, and promote individual empowerment through financial independence.

When I opened my e-mail today and read about the proposed modification of the margin requirements for retail forex, I was not pleased. The proposed regulation does not facilitate any of the things I mentioned. Instead it is contrary to every single one of the values that I hold close. Beyond my personal _ with the proposed legistlation, it is argued that such regulations enforced against the common people (the victims) rather than the financial institutions responsible (the perpretrators) only further entrenches us in a samsara of financial instability.

The proposed regulation Increases financial instability of the global economy

by:

•Increasing our dependence on a disconnected professional class to manage our money, who don't share the interests of the people or it's government.

Explanation: the risk/reward profile of a financial service professional is inherently different from that of his client. It is up to the educated investor to monitor and assess the performance of his delegate.

The proposed regulation Increases financial instability of the global economy

by:

•limiting the number of eyes that view and make decisions regarding the price of instruments in the financial market.

•creating a disincentive for education.

•Stopping the those of the common population who have the time, the energy, and the capacity from actively participating in the financial markets. Th

Explanation: As you can see with trade2win, baby-pips, thelion, stocktwits, bullsonwallst, and SeekingAlpha; communities of educated investors are thriving on the internet; many of whom depend on the contributions of (once) small investors who used margin to move up. Without catching ordinary people while they are young and giving them an incentive to educate themselves, there is little to stop them later from being careless with their mutual and pension fund investments. If hundreds of millions of people are careless with their investments and fail to see the warning signs of a shaky financial climate, we could..

[to be finished]



Scraps: (stuffthat didn't fit but is worth remembering and reintegrating)
Creates Barriers for Common people to a profit-generating vehicle

Hampers Social Mobility

Takes away the incentive for people to educate themse

by*further limiting the number of eyes watching and determining the price, increasing the chances of an information cascade.


Many would argue that it was because of a general lack of financial understanding by the general population that caused the recent problem.

*This leads to more incorrect prices for a longer period of time, and, consequently, larger and more fierce corrections
Many would argue that The larger and more complex our financial markets, the smarter the prices, and the more stable the overall trend.*

 

[Ingot54]

here's the letter than i am constructing to send them.. it's not finished yet. feel free to criticize or plagiarize at will.

Dear Mr. Starwick,

I am writing this letter regarding the recent proposal RIN 3038-AC61, which would further limit the ability of common people to participate in the financial markets by creating economic barriers to entry. The reality of the country that was celebrated as the birthplace of free-enterprise and social mobility is increasing becoming the land where "You have to already be rich to make money."

Although I have been involved in the markets for 14 years, I am of the group that supports government policies and regulations that stabilize our economy, limit monopolies, facilitate social mobility and free enterprise, and promote individual empowerment through financial independence.

When I opened my e-mail today and read about the proposed modification of the margin requirements for retail forex, I was not pleased. The proposed regulation does not facilitate any of the things I mentioned. Instead it is contrary to every single one of the values that I hold close. Beyond my personal _ with the proposed legistlation, it is argued that such regulations enforced against the common people (the victims) rather than the financial institutions responsible (the perpretrators) only further entrenches us in a samsara of financial instability.

The proposed regulation Increases financial instability of the global economy

by:

•Increasing our dependence on a disconnected professional class to manage our money, who don't share the interests of the people or it's government.

Explanation: the risk/reward profile of a financial service professional is inherently different from that of his client. It is up to the educated investor to monitor and assess the performance of his delegate.

The proposed regulation Increases financial instability of the global economy

by:

•limiting the number of eyes that view and make decisions regarding the price of instruments in the financial market.

•creating a disincentive for education.

•Stopping the those of the common population who have the time, the energy, and the capacity from actively participating in the financial markets. Th

Explanation: As you can see with trade2win, baby-pips, thelion, stocktwits, bullsonwallst, and SeekingAlpha; communities of educated investors are thriving on the internet; many of whom depend on the contributions of (once) small investors who used margin to move up. Without catching ordinary people while they are young and giving them an incentive to educate themselves, there is little to stop them later from being careless with their mutual and pension fund investments. If hundreds of millions of people are careless with their investments and fail to see the warning signs of a shaky financial climate, we could..

[to be finished]



Scraps: (stuffthat didn't fit but is worth remembering and reintegrating)
Creates Barriers for Common people to a profit-generating vehicle

Hampers Social Mobility

Takes away the incentive for people to educate themse

by*further limiting the number of eyes watching and determining the price, increasing the chances of an information cascade.


Many would argue that it was because of a general lack of financial understanding by the general population that caused the recent problem.

*This leads to more incorrect prices for a longer period of time, and, consequently, larger and more fierce corrections
Many would argue that The larger and more complex our financial markets, the smarter the prices, and the more stable the overall trend.*

Good job, Sark_anZas.

Hopefully people will follow your lead and send of a personal email.

It is best to keep it as you have - no abiuse at all, and with good reasoning and reasons for your point of view.

Yesterday I sent mine off.

This is what I sent to them:

Dear Secretary CFTC,

I am concerned that the proposal to limit the use of leverage to 10:1 will severely reduce the ability to continue to profit from Retail Currency Trading.

I would rather see Retail Forex companies commit a portion of their assets to ensure potential traders can prove they have the understanding required to trade using leverage of 100:1 and so on.

I think the onus should be on the trader, not the Regulator, to show that they are competent to handle the risks.

Here in Australia, the Commonwealth Bank Trading Arm, "Commsec" requires traders to prove that they understand the terminology and the mechanisms of trading before using their trading platform. The test is rigid, and requires traders to do research before answering the questionnaire.

Further, Commsec requires another test before it allows traders to use and set Stop Loss orders.

That is not difficult, and it works.

The onus is on the traders, and the benefit of this is that traders actually become better traders through studying for the test.

Rather than pursue an expensive regulatory pathway, which would require policing, why not help traders to improve their skills, and require Retail Forex companies to require proof of traders ability to handle the risk involved in the use of higher leverage?

This would protect the new traders who jump into these markets to get rich quickly, as well as preserve the ability of more experienced traders to continue to profit as they currently do.

I think my suggestion may put the responsibility back onto Retail Forex as well as clients, and allow the Regulator to continue in the role of overseeing fair trading.

Yours faithfully

XXXX XXXXXX