Comment Text:
i0-001
COMMENT
CL-01081
From:
Sent:
To:
Cc:
Subject:
ITEX Global
Wednesday, January 20, 2010 5:57 PM
secretary
Stawick, David ; Smith, Thomas J.
; Bauer, Jennifer ; Penner,
William ; Cummings, Christopher W.
; Sanchez, Peter
Re: STRONGLY OBJECT TO 10-1 LEVERAGE LIMIT IN REGULATION
OF RETAIL FOREX PROPOSAL RIN 3038-AC61
Attn ¯ David Stawick, Secretary and ALL CFTC policymakers re: RIN 3038-AC61
As a non-affiliated US-based Retail FX trader, please note for the record that I am STRONGLY OPPOSED to
the 10-1 leverage limit as proposed in RIN 3038-AC61 relating to the Regulation of Retail Forex. (100-1 is the
correct level.)
Counter-productive effects
This senseless limit would in NO way protect, aid or benefit me but rather would greatly harm me since this
restriction, if passed,
1. would require that I submit substantially more margin-funds into non-protected, non-FDIC insured, non-
SIPC eligible accounts, actually exposing me to increased risk in the event of bankruptcy of my Forex
Broker.
2. would NOT divert my business into regulated-Futures trading (as the CFTC is probably hoping), but
rather would cause me to seek an unreliable, higher-risk offshore FX broker to trade through, whose
practices might be questionable.
3. would HARM & DIMINISH my ability to diversify & protect my entire investment portfolio. If I need to
use more margin-funds for Forex, I will have LESS money to allocate to other instruments (stocks,
bonds, commodities (gold, oil) cash, Real Estate, etc..), I will be LESS well-diversified and therefore I
will have even more risk.
Social Utility - Nanny not needed
I do not want the CFTC to treat me like a child and dictate how I should trade. While 100-1 leverage is
available to me - should I choose it - I am never forced to use it.
Automobile speed limits are socially beneficial because they may reduce or prevent property damage &
physical harm to the driver, passengers and many others all around. THIS pointless limitation, however,
addresses only a victimless, non-existent, voluntarily self-imposed "phantom" risk.
Slippery-Slope Absurdity
If client loss-prevention is your aim, then consistency dictates that you also ban trend-following trading
strategies since a strong argument can be made that this will prevent more customer losses than your 10-1
leverage-limitation proposal. Is the absurdity of your proposal obvious yet?
Lower FX vols require far greater leverage
FX volatilities are generally substantially lower than in the Equities or Futures market. Therefore, substantially
more leverage is required simply to capture equivalent trading opportunities.
I am very concerned because ever since Congress empowered the CFTC to policy-make in Forex via the
Farm-Bill, it's as though you've been given a huge ray gun with no idea how to use it so you're all just shooting
anything & everything in sight... To the man with a hammer, everything looks like a nail.i0-001
COMMENT
CL-01081
The bottom line is that OTC Retail Forex trading is NOT Futures trading. Please do not try to treat it as such!
PLEASE IMMEDIATELY STRIKE YOUR PROPOSED 10-1 LEVERAGE LIMITATIONS. Leave 100-1
leverage intact. Please remain focused ONLY on pursuing anti-fraud provisions and crime prevention, as per
your congressional mandate.
Don't let proposal RIN 3038-AC61 become an expensive lesson in unintended consequences ....
Thank you.
Michael Farmer
Itex Global
Vermont
