Comment Text:
i0-001
COMMENT
CL-01391
From:
Sent:
To:
Subject:
Gerald Tan
Wednesday, January 20, 2010 11:56 PM
secretary
Regulation of Retail Forex
Dear Sir or Madam,
I am writing with regard to the proposed CFTC regulation of retail forex, identification number RIN
3038-AC61. I am an individual retail forex trader and have been so for the past two years. Trading
foreign currencies is risky business and the learning curve needs to be a steep one. Thus I am fortunate
that my broker (IBFX) provides a leverage of 100:1. Let me explain why, in my opinion, the risk will
increase with a decreased leverage, contrary to popular belief.
I started my trading account with US$7,000, which given today's leverage represents US$700,000. A
retail trader, such as myself, might be able to eke out a small income given this leverage based on one
contract every month (2%-5% of the contract). It's not much but one can get by. During my first two
years of learning, I saw that amount being whittled down to under US$1,000 as the business of forex
trading is a difficult one to learn. Here's my point: a decreased leverage to 10:1 instantly creates barriers
to entry to hundreds of thousands of beginner traders seeking to enter the business, after all how many
have US$70,000 to start this? Assuming that they do, and if they go through a similar learning process,
the loss will be much more than the US$6,000 that I endured. Not all beginners succeed in trading.
Secondly, the protection for the retail consumer (if that really is the primary concern of this CFTC
regulation) should be in the funding of the account. I understand my maximum risk is the US$7,000 I
have funded my broker with. If it hits that, all my trades are automatically closed and I will not lose
anything beyond that. I think this safety measure is in place and is a necessary one.
In closing, I would like to say that the risks for a forex retail trader are acceptable in its current state.
The decrease in the leverage will only seek to limit the number of new entrants into the business, and
thus decrease the amount of taxes in this area, but will also widen the income gap as only high net-worth
individuals will be able to participate.
Thank you for your time, sincerely
Gerald Tan
