Comment Text:
i0-001
COMMENT
CL-03490
From:
Sent:
To:
Subject:
Yves Wang
Sunday, January 24, 2010 10:10 AM
secretary
Regulation of Retail Forex
*RIN 3038-AC61
Dear CFTC officials,
Before I lay out my opinion, I would like to tell a very short story.
When I was at 10th grade in China, one day the school was organizing a
spring outing event. All students were very excited about it. But on the
day when we were about to set out, we were informed that the event was
canceled. The reason? It turned out, at a meeting, the Mayor of Beijing
asked the chief official of education in Beijing to guarantee the
general safety of students at schools. Then, to "guarantee" the safety,
for the next 2 years, no out event was ever had for Beijing's middle
schools. You could imagine how disappointed and angry the students were.
Well, my opinion is that: to control the risk does not mean to
completely eliminate the risk. There exist various ways to achieve the
goal of controlling risk and better protecting people like us,
non-institutional traders (investors).
First, I agree with the CFTC that changes need to be made to the current
condition of retail forex. However, just like it is wrong to have a
single high leverage 100:1 for everybody, it is also unreasonable to
have a single low leverage of 10:1. Instead, I propose that the CFTC
require every retail forex provider offer multiple levels of leverage,
ranging from 10:1 to 200:1. (10:1 is even lower than the forex leverage
in China)
Second, to help people make the right choice of leverage ratio, to help
people find a leverage ratio that suits best to their risk taking
ability, I propose the CFTC require the forex retailers provide detailed
information and education about risk management, explain clearly the
need and method to choose an appropriate leverage ratio. This should
not
be very hard to attain as I have seen similar evaluation of risk taking
ability in stock brokerages.
Third, on the customer's side, the CFTC should mandate all individual
forex traders go through several classes (or online webinars) about the
risk levels and leverage ratios. Yes, just make underlying math clear to
everyone. Even after understanding the risks, the choice of leverage
ratio is still subjected to the control from the retailer. It is just
like what TD-Ameritrade did to me for my stock options trading: the
evaluation showed that my risk taking ability is not suitable to deal
uncovered options, even if I chose to do uncovered options, they still
would not allow me to.
In conclusion, I propose that the CFTC make improvement of retail forex
regulation, by requiring the retailer to provide flexible leverage ratio
and better, comprehensive education, and by requiring the trader to
learn the necessity of selecting a suitable risk level. I believe thisi0-001
COMMENT
CL-03490
would make everyone happy.
Thank you very much for reading my e-mail.
Best regards,
Yi(Yves) Wang
Department of Biochemistry
Structural Biology & Biophysics Program
Duke University
BS: University of Science and Technology of China
School of Life Sciences, National Laboratory for Physical Sciences
at Microscale
Tel: +1-919-236-3307 (Cell)
+1-919-684-0235 (Lab 1)
+1-919-660-1634 (Lab 2)
Office: A20 LSRC / 5301 FFSC
E-Mail: [email protected]
Mail: Box 90317, Chemistry Department
