Comment Text:
i0-001
COMMENT
CL-03475
From:
Sent:
To:
Subject:
Eric Kahiga
Sunday, January 24, 2010 8:55 AM
secretary
Regulation of Retail Forex
Dear Sir.
r am writing about the proposal to control retail forex in the USA. Some of the proposed regulations are
good and timely namely;
1. All forex brokerages in the USA will have to be registered somewhere.
2. All forex account managers in the USA will have to be registered.
3. All US based investment pools claiming to be trading forex will have to be registered.
4. All IBs to registered brokerages will have to be registered.
This is a good measure and will protect the industry from numerous forex scams.
However, some of the proposals will kill the industry and take jobs away from the USA because traders
like me will prefer to trade with a company registered elsewhere. The proposals are namely;
1. FCMs and RFEDs would need to maintain a net capital of at least $20 million, plus 5% of any amount
of retail customer liabilities that exceed $10 million.
(This will make competition really hard for the upcoming start ups and it is bound to only benefit the
more established companies. Another problem is that this could easily make smaller and otherwise well
regulated companies move offshore. Some of these will set up shop in places with little or no regulation.
This moves both j obs and money out of the USA. It will also make traders in the USA exposed to scams
originating in other countries with less regulations. Regulators should have a scaled in capital
requirement for start up brokerages while having those below the final minimum be under higher levels
of scrutiny.)
2. The plan to set the
maximum
leverage for US retail forex to 10:1.
This is by far the worst of the regulations. While it is important to protect naive first time traders who
might out their life savings by using too much leverage, this will affect everyone else who uses sensible
money management. It will only make traders look out for other countries that have favourable leverage
limits. One of the attractiveness of forex trading is the leverage offered and one of the most important
forex lessons is money management and using leverage wisely. Leverage is a very important tool and
albeit dangerous tool. What the Government should is educate the public instead of punishing the traders
who know how to effectively use the tools. New traders should be advised to get educated about the
forex market before starting to trade.
Kind regards.
Eric.
