Comment Text:
i0-001
COMMENT
CL-03858
From:
Sent:
To:
Subject:
John Bingaman
Monday, January 25, 2010 5:37 PM
secretary
Regulation of Retail Forex
Secretary, CFTC:
The reasoning of the Commission's proposed regulation of the retail forex market place appears to be
that retail forex customers need protection. On the one hand, the rules seem to imply, they need
protection from dishonest or under-capitalized FCMs and RFEDs. That may be true and several of the
proposed rules attend to that.
On the other hand, the proposed 10:1 margin rule seems intended to protect the retail investor from
himself. Such protection is not possible if the market remains open. Eventually, an investor is going to
lose more or risk more than the commission believes is prudent and the intent of the 10:1 rule will have
been violated.
If a rule mandating 10:1 margin is instituted there will be very few retail forex customers to protect. The
retail forex "industry" is largely dependent upon high leverage that allows small retail investors to enter
the market place with their small stakes. (In one sense, then, the high leverage serves the Commission's
purposes of protecting the consumer.) Eliminate the possibility of entry with a small stake, and retail
forex will move offshore, where the US investor will have even less protection. The other rules then
become irrelevant.
Proper risk management protects the prudent investor in all retail investment markets. Imprudent
investors will always find ways to lose money. We can protect retail stock investors from stock market
losses by preventing them from buying stocks. We can protect bond investors by preventing them from
buying bonds. The same argument can be made for collectibles and real estate.
Perhaps the Commission has sound reasons for the other proposed regulation of the FCMs and RFEDs.
These proposals are highly technical -- I leave them to you. However, I strongly object to the idea of
reducing the leverage of the retail forex market. Please continue to warn investors, cajole them, scare
them. But don't handcuff them in the name of protection.
John Bingaman
1522 Cleveland Avenue
Wyomissing, PA 19610
