Comment Text:
i0-001
COMMENT
CL-01294
From:
Sent:
To:
Subject:
Jobin Jose
Wednesday, January 20, 2010 10:20 PM
secretary < secretary@ C FTC. g ov >
Regulation of Retail Forex
Dear Sir ! Madam,
Sub: RIN 3038-AC61
I trade currencies through retail forex brokers and I would like to comment on the proposed 10:1
limitation on leverage.
1) Leverage by itself does not cause financial problems. It is lack of collateral that causes a crisis.
As long as retail brokers have strict margin requirements, which they do, 100:1 leverage will not
lead to counter party risk.
2) A limitation on leverage will require people to keep more money at their broker.
Customers of many retail forex brokers don't have higher priority over lenders in a bankruptcy.
Therefore they are unwilling to risk too much of their money ata retailforex broker. Iand a
majority of traders would stop forex trading using US brokers altogether if this limitation becomes
law because most traders don't want to expose themselves to that level of risk.
3) With respect to the stock market, movements in the forex markets are so little that with small
leverage it doesn't even make sense to trade in forex instruments.
4) Forex is the only instrument that I have been able to make money consistently because I can
execute a wide variety of strategies with very little money. I don't have to set aside too much
money to enter a trade, if I am not entirely sure. I can start with as little as $10 in such cases. If
the market moves in an different direction than what I initially anticipated, I can make adjustments
without too much damage. Incremental trading strategies works best with high leverage.
5) Finally, choice of leverage should be left to the investor. All investors should be able to choose
the leverage they want to trade with. I chose 100:1 even when 400:1 was also available. That is
because with higher leverage, rollover interest rates are also high. Traders know this and will
choose their leverage wisely.
Thank you
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