Comment Text:
i0-001
COMMENT
CL-02413
From:
Sent:
To:
Subject:
Raj a.N
Friday, January 22, 2010 1:48 AM
secretary
Regulation of Retail Forex
Greetings Dear Secretary,
Ref: identification number
RIN 3038-AC61
I am a full time retail forex trader.
We understand CFTC is proposing to reduce leverage for the retail
forex to 10"1.
Currently, the Forex playing field favours large players like
banks/Multinational companies/Hedge Funds.
Banks have many advantages (as I understand)'-
1.They have access to large capital for proprietary trading, and hence
able to withstand large market swings against their position.
2.They have privy info on ->when and how much currency their large
corporate multinational clients wish to bring in or transfer out of the
country. The banks can time the clients transaction and/or front run
their own trades to benefit them.
3.They work closely with Central Banks/Fed and may have access to
insider info on interest rate changes etc.
4.They have dedicated resources such as ->analysts
(fundamental/technical) ,risk managers, traders(buy side/sell
side), powerfull computers & software for number crunching and
automated trading.i0-001
COMMENT
CL-02413
5.Their trading cost (spread) is minimum since forex transactions are
cleared at the Interbank network level.
6.The bank also earns the spread (their main income in forex
business)
The retail forex trader only has a few advantages:-
1.High leverage allows him to participate in the market with small
capital.
2.His "total operating cost" is small (spread + internet + electricity
for computer etc)
3.He can be nimble and small pip gains can offset the operating costs
and produce net profit for the month end.
If the leverage is reduced for the retail player :-
1.Many retailers may not have adequate initial capital to participate
and as a result have to exit the market.
2.There will be decrease in " returns on capital invested".
3.It will decrease the risk involved (for the remaining retail players)
4.It will drive away retail traders to non CFTC regulated brokers
The retail forex industry will shrink to a levell where many retail forex
brokers and traders have to close/exit.
CFTC should consider limiting the leverage for retail forex to 50:1
rather than a drastic reduction to 10:1
I would request and like to know what is the current and proposedi0-001
COIMMENT
CL-02413
leverage for Banks and Hedge Funds.
Thank You & Have a Great day.
Best Regards
Nadaraja.C (Raja)
