The debate over the CFTC 1:10 leverage proposal is hot. While some say it’s all over for the US forex industry, others think that this draconian proposal won’t be realized. I say – keep those letters coming. Here are some interesting thoughts. What do you think?
Michael Greenberg continues to bury the American forex industry. Apart from the 1:10 leverage which he thinks is already decided, Michael took the time to dive into all the 193 pages of regulation and sees more trouble for the American industry.
He sees that the proposed regulation will make it very hard for forex brokers to operate in the US. Here’s a quote:
The Proposal would further require certain entities other than RFEDs and FCMs that intermediate retail forex transactions to register with the Commission as introducing brokers (“IBsâ€), commodity trading advisors (“CTAsâ€), commodity pool operators (“CPOsâ€), or associated persons (“APsâ€) of such entities, as appropriate, and to be subject to the Act and regulations applicable to that registrant category. In addition, the Proposal would require any IB that introduces retail forex transactions to an RFED or FCM to be guaranteed by that RFED or FCM.
I’m not sure I understood it, but it is quite complicated.
On the other hand we have John Forman that doesn’t see this happening. In a post for the Currensee blog, Forman reminds us that the NFA imposed a 1:100 regulation rule just in November and that the CFTC will collect data before moving on a 1:10 limitation and concludes his post with a calming message:
So everyone can relax. The odds of 10:1 leverage limits are extremely slim. By all means, though, take the opportunity to let the CFTC know what your thoughts are on the subject to make sure those odds remain low.
Also earnforex.com believes there’s hope. In a blog post reporting about the news we can see some optimism:
The good thing that it’s still just a proposal and that CFTC is expecting a feedback from the market participants to evaluate the necessity and possibility of such means.
I’ve already mentioned that apart from individuals, also brokers are fighting back. The Foreign Exchange Dealers Coalition (FXDC), a new body that consists of leading American brokers has united in a petition, quoted by Fransesc Riverola. They fight for their industry and put the focus on the real problem in their eyes:
The problem of Forex fraud will get worse absent legitimate dealers offering retail forex. Retail forex fraud is not something that is caused by the actions of retail forex dealers; rather it is caused by unlicensed con-men who masquerade as forex experts promising silly and unjustifiable returns before disappearing with customer funds. That is why the FXDC fully supports the CFTC’s rule requiring all introducing brokers be licensed. That rule will solve forex fraud, not 10 to 1 leverage.
Some people see the upside of this rule. Dr. S. Sivaraman at FXStreet sees something good for the economy:
Probably tightening using regulations  might be an indirect  measure to motivate the people to go in for job and earn their bread rather than speculation.
Ryan O’Keefe dives into other proposed regulations including capital requirements,  and urges you to act:
I can’t stress the importance of letting your voice be heard. If you do not want your margin requirements to increase, if you prefer flexibility with leverage, I suggest you speak up now or be prepared to trade with 10:1 leverage in the near future. Your only other alternative will be to increase you capital, or go overseas.
And I also say: sending a letter to the CFTC is a small effort. Let’s keep up the fight!
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