New NFA Compliance Rule 2-43 Forex

[marlintrdg]

Any thoughts on this?

Dear Customers:

Interbank FX, along with all FCM's, has received information from the NFA that we wanted to pass along to our customers.

All registered FCM's have received a new Compliance Rule 2-43 regarding forex trading. On May 15, 2009, forex customers will no longer be allowed open "hedged" positions in their accounts. Please see an excerpt from the new NFA rule below. If you are currently using Hedging as a trading strategy, we would encourage you to use the Interbank FX Demo accounts over the next month to help modify your trading strategy.

Also, for those of you who utilize hedging strategy with your "Expert Advisors", we would encourage you modify your code and test your advisor on the Interbank FX Demo servers as well.

In order to assure a smooth transition for our customers to the new NFA Compliance Rule, Interbank FX has set May 8, 2009 as the last date that customers will be able to Hedge open positions.

https://secure.ibfx.com/promotions/nfa_I0910.aspx

 

[wackypete2]

Any thoughts on this?

Dear Customers:

Interbank FX, along with all FCM's, has received information from the NFA that we wanted to pass along to our customers.

All registered FCM's have received a new Compliance Rule 2-43 regarding forex trading. On May 15, 2009, forex customers will no longer be allowed open "hedged" positions in their accounts. Please see an excerpt from the new NFA rule below. If you are currently using Hedging as a trading strategy, we would encourage you to use the Interbank FX Demo accounts over the next month to help modify your trading strategy.

Also, for those of you who utilize hedging strategy with your "Expert Advisors", we would encourage you modify your code and test your advisor on the Interbank FX Demo servers as well.

In order to assure a smooth transition for our customers to the new NFA Compliance Rule, Interbank FX has set May 8, 2009 as the last date that customers will be able to Hedge open positions.

I don't agree with the NFA on this at all. I don't use hedging as a strategy, but occassionally I do open a hedge position either to lock in profits or capture a few pips going in the opposite direction or to stop the losses while I figure out an exit strategy. All in all I can do without but it does remove a useful tool for traders.
I don't want to be overly critical of the NFA because I think they are moving in the right direction in getting forex brokers under control but I just don't agree with every action they are taking.

Peter

 

[wackypete2]

On a side note I was already updating my scripts and indicators because IBFX is going to a 5th digit fractional pip quote system. grrr...

Peter

 

[everyonerich]

i dont get it. how does open both buy and sell consider illegal?

 

[Rhody Trader]

It's not "illegal". The NFA is just standardizing the accounting. Since going long and short the same instrument means you're net flat, they are making forex brokers treat it exactly the same way futures brokers (and those in every other market) do.

 

[4xis2ez]

All you need now is 2 accounts. One to go long and the other short for hedge strategy.

 

[tar]

http://www.trade2win.com/boards/forex-news-analysis/58534-new-rules-regarding-forex-orders.html

 

[wildpips]

Any known reason?

I'm still puzzled, what triggers NFA to exercise such a ruling now?
Does anyone here have a clue or two?

 

[Rhody Trader]

NFA oversight of forex hasn't been going on very long. I'm sure it's just a matter of them having finally gotten around to it after looking at other things like capitalization.

 

[sheyne]

This will hurt NFA regulated brokers. There are many other brokers that are under a different regulatory body that will allow hedging.

 

[marlintrdg]

LEVERAGE – Pending NFA Rule Change

NFA oversight of forex hasn't been going on very long. I'm sure it's just a matter of them having finally gotten around to it after looking at other things like capitalization.

Funny you should say that, I got this today:
LEVERAGE – Pending NFA Rule Change

NFA Financial Requirements Section 12 currently requires clearing firms to collect a security deposit of 1% of the notional value for specified (major) currencies and 4% of the notional value of all other transactions. This rule is what allows firms to offer clients 100:1 leverage on their FX trading accounts. Section 12 further allows firms with certain financial conditions to offer leverage of up to 400:1 in certain cases.

The NFA has taken the first steps towards reducing the leverage available to retail FX traders.

The NFA has proposed an amendment that will eliminate leverage that exceeds 100:1 on any trade. This amendment is awaiting CFTC approval before implementation.

In addition, XXXXX_FX has been advised by multiple independent sources that the NFA is proposing to further decrease leverage by reducing the amount of leverage available on certain “non-major” currencies.

The proposal that is being reviewed would put a cap of 25:1 leverage on any traded pair that contains a non-major currency.

The NFA’s non-major currencies are said to include: New Zealand Dollars, Canadian Dollars, Australian Dollars, and Norwegian Krone.

Hows That!!??