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Comment for Proposed Rule 75 FR 3281

  • From: Bill Mcmahon
    Organization(s):

    Comment No: 1933
    Date: 1/21/2010

    Comment Text:

    i0-001
    COMMENT
    CL-01933
    From:
    Sent:
    To:
    Cc:
    Subject:
    [email protected]
    Thursday, January 21, 2010 3:23 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
    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. wouM 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. wouM NOT divert my business into regulated-Futures trading (as the CFTC is probably hoping),
    but rather wouM cause me to seek an unreliable, higher-risk offshore FX broker to trade through,
    whose practices might be questionable.
    3. wouM HARM & DIMINISH my abifity to adequately diversify & protect my entire investment
    portfofio. If I need to use substantially more margin-funds for Forex, I will have less money to
    allocate into 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.
    Socially Useless [] 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 innocent others all around. THIS pointless limitation,
    however, addresses only a victimless, non-existent, voluntarily self-imposed []phantom [] risk.i0-001
    COMMENT
    CL-01933
    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.
    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?
    I am very concerned because ever since Congress empowered the CFTC to rule-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 just
    shooting anything & everything in sight... To the man with a hammer, everything looks like a nail.
    Worse even is the fact that, to my understanding, none of you even actually trade Forex or have ever
    done so. How can you undertake to regulate what you don [] t even understand or appreciate?
    Unfortunately, with this (and other ill-conceived proposals) you have greatly damaged the very
    credibility of the CFTC.
    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 R1N 3038-AC61 become an expensive lesson in unintended consequences [].
    Thank you.
    Bill Mcmahon
    New Jersey