Comment Text:
i0-001
COMMENT
CL-01992
From:
Sent:
To:
Subject:
Adam Macy
Thursday, January 21, 2010 4:56 PM
secretary
Regulation of Retail Forex
Dear Secretary of the CFTC,
I am writing to express my dismay at the proposed regulation contained in the Food, Conservation, and Energy Act of 2008,
also know as the "Farm Bill" to limit leverage on retail forex accounts to a 10:1 maximum level. I strongly urge you NOT
TO IMPOSE these new stringent regulations on currency futures brokers located in the United States.
I understand that the intent of the new regulations is to protect the average retail forex trader from themselves as well as to
send a strong message to Forex brokers that unscrupulous and unfair practices will not be tolerated. I applaud the spirit in
which these regulations were written. The small, individual retail trader is at the mercy of the broker. There have been many
documented instances of fraud and abuse.
The new rule that requires FCMs (Futures Commodity Merchants) and RFEDs (Retail Foreign Exchange Dealers) to
maintain a net capital of $20 million plus 5% of outstanding trade liabilities is, on the surface a good thing. This rule will
have the effect though of limiting open competition by requiring new brokers to raise $20 million to begin to solicit new
customers. Many innovations toward clarity and openness by some of the newest brokers would be stifled. As an example,
tight spreads and straight through order processing would not be allowed to come to market. I would propose instead a form
of scaling in of the capital requirements as a new firm's client base expands.
The proposed new leverage rule of 10:1 is misguided and VERY DAMAGING to the average small trader. In now maxing
out 10:1 on the broker side will, I worry, subject me to margin calls much more readily and result in quicker losses and make
it more difficult for me to make a living trading. A more generous 100:1 leverage limit allows for temporary draw downs
necessary to see a trade through to its successful conclusion. The educated trader knows the impact of margin and can use it
to his/her advantage and not let it destroy one's trading account.
The likely effect of this new regulation will be that U.S. traders will find offshore brokers to trade with that are not subject to
these regulations. We have already seen this happening with the NFA's anti-hedging rule and FIFO rules implemented last
summer. Moving capital away from our shores surely has the effect of costing jobs in the U.S. as well as adding to the current
destructive trade imbalance.
Please do NOT pass this bill to limit leverage on retail forex accounts.
Sincerely,
Adam Macy
303 -459-4220
