Comment Text:
i0-001
COMMENT
CL-00544
From:
Sent:
To:
Subject:
Marc Ilgen
Tuesday, January 19, 2010 12:56 PM
secretary
Regulation of Retail Forex - my objections
Regarding: RIN
3038-AC61
To Whom It May Concern:
I wish to voice my objections to several of the proposed rule changes regarding regulation of the
FOREX industry. My main concerns are with the proposed 10:1 leverage and with the requirements that
all introducing brokers be guaranteed by their respective FCMs.
Leverage Requirements:
The proposed 10:1 maximum leverage requirement rule change is highly counterproductive and will
essentially destroy the US forex industry. Live the poorly conceived change to the rules to disallow
hedging (hedging does indeed serve a valuable purpose in forex trading!) the 10:1 leverage rule will
simply have the effect of driving all US accounts overseas, removing money from the US economy at a
time when economic conditions make this quite undesirable. While I understand the concern regarding
the use of too much leverage, there are legitimate situations where a trader may want to use more than
10:1 leverage in certain situations. Forex trading is not a long term "buy and hold" type of investment -
instead it involves taking profits on much smaller moves. No reasonable trader will continue to put up
with ridiculous regulations like this that serve no purpose other than to give the trader an overwhelming
incentive to simple move his/her money to a UK or European-based FCM. If your intention is simply to
kill the business of US based FCM' s, you could not have done more to achieve that than to enact the no-
hedging and 10:1 margin rule changes.
I13 Guarantees
Furthermore, by requiring all US based Introducing Brokers to be guaranteed by their FCMs, you will
have effectively killed the business of small boutique IBs. Any reasonable FCM will only be willing to
guarantee their largest most established Introducing Broker firms, due to the large capital and paperwork
requirements for these guarantees. Unfortunately, the US economy over the past several decades has
been taken over by large corporations who use political and economic clout to rewrite government
regulations in their favor and destroy any competition from smaller competitors. This regulation simply
continues the tradition of large firms using government regulations to squeeze smaller firms out of the
market, thereby securing profits for large corporations but destroying the ability of small business (the
lifeblood of the US economy) to compete. Wealthy executives at large IB s get wealthier but thousands
of small business entrepreneurs and their employees get left out in the cold. The purpose of government
is supposed to be to foster a healthy economy where all firms can compete, but the proposed regulations
do the very opposite by destroying competition and furthering the divide between the haves and the
have-nots.
It would be much more beneficial to at the very least provide some sort of exemptions for small IBs to
allow them to stay in business. No FCM will go through the cost or hassle of guaranteeing an IB unless
that IB has at least 100 clients with many millions of investment capital. Small IBs with a few clients
have no chance of getting guaranteed. Why cannot the CFTC allow some provision for small IBs to be
exempt from these regulations? The CFTC already has regulations that exempt CTAs who manage
fewer than 15 clients. Why not do the same with IBs? It is fine if you also require any non-guaranteed
IB to explicitly state that they are not guaranteed on their marketing materials. Small IBs can live withi0-001
COMMENT
CL-00544
that. What small IBs cannot live with is the guarantee requirement - that will simply put them out of
business.
I look forward to seeing changes in the proposed regulations to address these concerns.
Regards
Marc Ilgen
Marc Ilgen, Ph.D.
President, FXMultitrader LLC
12526 High Bluff Drive
Suite 300
San Diego, CA 92130
[email protected]
(760) 828-8123 (voice/cell)
(815) 461-0140 (fax)
