Comment Text:
i0-001
COMMENT
CL-01585
From:
Sent:
To:
Subject:
Michael Griffin
Thursday, January 21, 2010 7:04 AM
secretary
Regulation of Retail Forex
RE: RIN 3038-AC61
Mr. David Stawick and The U.S. Commodity Futures Trading Commission,
This letter is from Michael Griffin; I am writing to you in response to the proposed leverage
limitations on retail forex accounts that are part of RIN 3038-AC61.
As a United States citizen, I greatly appreciate the public protection efforts of the CFTC. However,
if public protection is the intended goal, the proposed leverage limitations of 10 to 1 on retail forex
accounts are a step in the wrong direction. These limitations will simply remove the typical retail
forex investor from the currency markets. Education is the most appropriate answer to the
problems the CFTC is aiming to correct.
Significant losses occur to retail forex traders that have not been educated on how to integrate
stop loss orders and/or standard money management practices. There is an overwhelming amount
of information available that all agree on a maximum exposure per trade that equals two percent of
the investor[]s total account size. Consider this statement deeply. Implementing stop loss orders
combined with the maximum two percent exposure rule will limit a trader[]s losses. If a retail forex
trader adheres to these practices, catastrophic losses are impossible.
These maximum risk guidelines and stop loss practices are accepted norms among traders of all
financial instruments. Limiting the leverage and consequently increasing the account size required
to yield meaningful gains from 10 to 1 leverage only serves to remove most retail traders from the
forex market. I trust that this outcome is not theCFTC's intended goal.
While our government can never ensure an investor will behave responsibly with their own money
and exercise good money management rules, they can promote education as means to help the
public help themselves. There are many resources available that promote responsible and
disciplined retail forex trading. The resources I~ve encountered make it clear that the forex market
is not a way to become a millionaire overnight. It,s likely that investors who have suffered
significant capital losses have not made an effort to learn how to preserve their capital. Leverage
limits on the order of 10 to 1 will not cure this outcome.
In addition to promoting forex broker integrity, the CFTC can best serve the public by promoting
education as a means to preserve their capital. Please keep the current 100 to 1 leverage limits
imposed on currency ~majors~ in place. The current leverage rules combined with education will
facilitate the pursuit of the public[]s economic freedoms and consequently promote liquidity that
institutional and corporate investors will benefit from as well.
Regards,
Michael Griffin
