Comment Text:
i0-001
COMMENT
CL-00873
From:
Sent:
To:
Subject:
Peter Panholzer
Tuesday, January 19, 2010 11:06 PM
secretary
Regulation of Retail Forex - - - RIN3038-AC61
RIN3038-AC61
Sir / Madam
As an observer (we do not trade retail forex for U.S. clients) but also as a veteran in the business (trading
currencies since 1974, interbank since 1985) we feel compelled to comment on the proposed 1:10 margin rule for
forex.
While we welcome measures to reduce fraud in retail forex, including regulating the margining of retail forex
positions, the proposed
fixed
limit on leverage of 1:10 is statistically and operationally unsound.
Certain currency pairs, by their mutual geographical and economical relationship, do not fluctuate as much as
others e.g. are not subject to the same volatility and risk. To illustrate, a (dollar-free) EURCHF rate fluctuates less
than a EURUSD rate.
In order not to hurt market participation and thus market liquidity, the underlying instrument should be covered
by margin deposits governed by volatility not size. In other words it would be unfair (and unwise) to impose the
same margin (proposed 1:10) on 100,000 EURCHF as on 100,000 EURUSD.
This has been recognized long time ago in the futures markets where the exchanges can set (and vary) the
minimum margin requirements according to the volatility of the futures contract.
We suggest the CFTC follows the same proven path. Let the same people who set individual currency futures
margins at the IMM based on market volatility, set the margins for individual forex currency pairs.
Sincerely
Peter Panholzer
DynexCorp
8, rue de la R6tisserie
CH-1204 Geneva, Switzerland
T: +41 (22) 317 8888
F: +41 (22) 594 8880
[email protected]
