Final CFTC Forex regs for US brokers & Traders

[wackypete2]

Check here:
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/forexfinalrule_qa.pdf


As of October 18, 2010:
- 50:1 max leverage on all "majors"
- 20:1 max leverage on all other pairs

No clear list of what the CFTC considers "Majors", but most likely does not include AUDUSD, NZDUSD, and any non USD pair.

CFTC can adjust leverage requirements at will if volitility increases.

Only US Financial instutions may act as counterparty. Unclear whether US brokers with foreign branches can trade US accounts from the foreign branch.

It's becomming extremely difficult to make money at any of the financial markets in the US. The gov't is clearly making it a "big boys" only club.

Peter

 

[Rhody Trader]

No clear list of what the CFTC considers "Majors", but most likely does not include AUDUSD, NZDUSD, and any non USD pair.

I believe the "majors" list is the same as when the NFA came out an put a 100:1 cap on leverage last year. That means USD, EUR, JPY, CAD, CHF, AUD, NZD, SEK, NOK, and DKK. It also means any cross including any of those currencies, so the likes of USD/MXN would come under the 50:1 rule.[/QUOTE]

CFTC can adjust leverage requirements at will if volitility increases.

Actually, it's the NFA that can make the adjustments.

Only US Financial instutions may act as counterparty. Unclear whether US brokers with foreign branches can trade US accounts from the foreign branch.

There's some debate about this.

It's becomming extremely difficult to make money at any of the financial markets in the US. The gov't is clearly making it a "big boys" only club.

How so?

 

[wackypete2]

Hi Rhody,

It's becomming extremely difficult to make money at any of the financial markets in the US. The gov't is clearly making it a "big boys" only club.

How so?

The first line of the reg says it all. If an individal or instiutution has more than $10 million in assets then these regs don't apply. This is all under the Wall St Reform and Consumer Protection ACT. Those companies that are able to bring down the entire economy by massively overleveraging are still able to do that. All this does is keep little guys out. Even if small retail traders blow up their accounts it won't affect the economy. Protecting individuals from their own stupidity is not the government's role.

The US markets are so overregulated and the playing field extremely tilted (ie: HFT trading) that it's difficult to get ahead. Some regulation is necessary, but to what extent?

Peter

 

[Rhody Trader]

All this does is keep little guys out.

I'm still waiting for an answer to how the little guys are kept out. Oanda is one of the biggest retail forex brokers out there (top 2 or 3, I think). They've had a 50:1 leverage limit all along. Clearly hasn't hurt them at all.

 

[wackypete2]

If Oanda is doing well, good for them. They opposed the proposed limit of 10:1 and were ok with the limit of 100:1 even though they use only 50:1
Many brokers advertise opening a mini/micro account for only $250 or similar amount. You wouldn't even be able to trade 1 mini lot with that anymore. There are a lot of those traders around. Most of us wouldn't recommend this type of trading but it exists. I would guess the average retail forex trader account is around $1000.

Peter

ADDED: I also meant that stocks in US are overregulated. I traded better before rule pattern daytrading rule 2520 went into affect. Prior to that I survived very well.

 

[Rhody Trader]

If Oanda is doing well, good for them. They opposed the proposed limit of 10:1 and were ok with the limit of 100:1 even though they use only 50:1
Many brokers advertise opening a mini/micro account for only $250 or similar amount. You wouldn't even be able to trade 1 mini lot with that anymore. There are a lot of those traders around. Most of us wouldn't recommend this type of trading but it exists. I would guess the average retail forex trader account is around $1000.

Peter

ADDED: I also meant that stocks in US are overregulated. I traded better before rule pattern daytrading rule 2520 went into affect. Prior to that I survived very well.

I won't disagree with you on the day trader rule. What's to say something with $25k is any smarter about their trading than someone with less?

As for the micro/mini accounts, $250 would let you trade up to $12,500 in position size, so depending on the pair that's enough for a mini contract. Someone that size, though, should be sticking to micros.