Comment Text:
i0-001
COMMENT
CL-05741
From:
Sent:
To:
Subject:
Anlei Li
Wednesday, March 3, 2010 7"27 PM
secreta ry < secretary@ C FTC. g ov >
Regulation of Retail Forex
Attention: David Stawick Re:
RIN 3038-AC61
Dear Mr. Stawick:
Iam writing to advise you of my strong opposition of the CAP of Leverage to 10:1. Iam not sure
why this was proposed and what is the purpose of this proposal but I can assure you this proposal
will not only have a detrimental effect to the Retail Forex Industry which some day could become a
major financial contributor to theCFTC but also to the US economy in large. Passing of
this ineffective requirement will not benefit anybody. This isa Lose-Lose situation. I will explain
how this new proposal will impact negatively the individual Forex traders, the Forex market, the
Retail Forex Brokers and US economy in large.
1. If your aim for passing this requirement is to protect the so called small investors from losing
money, I can tell you this requirement will not be effective but will actually exacerbate the
problem. With the trading strategies in mind, with the larger leverage, he/she would only need to
invest smaller amount of money but with the newly capped leverage requirment, the investor
would need to put in more of their savings or alter an otherwise profitable trading strategies into a
riskier one which may require more frequent trading or in riskier positions and lose money
quicker.
2. For the Forex market in large, with the possibilities of investors trading more frequently and
taking on more positions to compensate for the new leverage rate, this increases volatility and
unwarranted movement unnecessarily and yet lower liquidity in the Forex market which is
counterproductive to all the parties involved. This seriously hinders the working of the Forex
market in general.
3. For the Retail Forex brokers in US, they will simply disappear. This happened to Retail short-
term stock trading industries after the raising of the mininum account size and it will happen again
to the Retail Forex Industry after this capping of leverage rate.
4. With the the Retail Forex industry simply disappearing or moved to elsewhere in the world, a
sizable portion of the US economy disappears with it. The average trading volume of the Retail
Forex is Six Trillion dollars. On average, the spread on each transaction is about4 basis points
that is 0.0004. 0.0004X6,000,000,000,000 *0.02 = $48,000,000,000 each day. That is the
approx, total raw revenue of Retail Forex brokers assuming that they only have 2% of the market
share in the US. That is $48,000,000 EACH DAY that you are kissing goodbye assuming that the
entire industry disappear. $48,000,000X220 business days = $ 10,560,000,000. This is how
much will be leaving US in one year. And this is not including the potential revenues from the
ripple effects of this figure. US economy needs all the money it can get out of this recession.
Think before you act. Please
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