Comment Text:
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COMMENT
CL-00267
From:
Sent:
To:
Subject:
Paul
Sunday, January 17, 2010 7:32 PM
secretary
Regulation of Retail Forex
Public Comment on Proposed Regulations Regarding Retail FOREX Transactions
To Whom It May Concern:
I'm opposed to a new proposed rule that will lower leverage requirement for
retail FOREX transactions. This type of restriction will not protect
customers
in any way and will do the opposite - will endanger them and in some cases
incriminate them. This type of restriction will increase significantly cost
of
doing business and make US less competitive comparing to other countries.
Here is why:
1. Drastic differences in the leverage requirement for retail FOREX
transactions
in different national markets will attract broker companies and their
customers to
look for best ~'solution".
This "solution" will be migration to different jurisdictions based on the
most
favorable leverage requirements. This in turn will create many situations
where
companies and customers will not have appropriate knowledge of chosen niche
market
and it's regulations (if any).
Massive exodus of customers from US market to many different niche markets
will
endanger them personally and financially. There will be many unscrupulous
entities
that will try to capitalize on this situation and they will use any tool
available
to exploit retail customers just because the niche market they operate in
will not
offer adequate protections for customers and US regulators will not have any
jurisdiction.
The goal of US regulators should be not to extensively and unreasonably
restrict
participation in the US market, but rather make sure that retail customers
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protected from unfair practices, have easy access to financial markets, that
services and products are competitively priced and investors are ~vell
educated.
Education not restriction.
2. Lowering the leverage of retail FOREX in the U.S. would do nothing but
limit drastically ability and conditions in which participants conduct
business
in US market.
Lower number of customers will limit number of companies that will do
business
in US and even those companies that will survive will not be able to offer
the kind of level of services they are offer today.
This in turn will increase the cost of doing business for retail customers
and lower it's quality. Many well-paid jobs will be exported overseas and
tax revenue lost.
Making it more expensive to participate in the US market will only encourage
exodus to "cheaper" jurisdictions.
3. Argument that lower leverage will increase staying power (decrease
ability to lose money) is not exactly correct - investors loose money for
many reasons; because they are not disciplined, sometimes they act like
compulsive gamblers or they are simply uneducated about market they are
participate in.
Market participants are always driven by powerful emotions of greed and
fear.
The only thing that will allow them to control emotions and increase
investor
chances to make money in any market is education.
Fair broker practices and transparency in doing business, enforced by
sensible
oversight by regulators will ensure that customers are protected from the
opposite side.
In conclusion
When we look at history, we see that restrictions are not the best tools in
hands of sensible and reasonable regulators. If we want to develop and grow
financial markets in US we have to encourage participation not only from
large companies, but also from small and medium investors and from foreign
investors too. We have to make our financial markets easy accessible and
affordable for all participants.
Education, sensible and reasonable regulation, competitiveness - not
prohibitive restrictions, protectionism and recklessness should motivatei0-001
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our regulators.
It's easy to close the door and pretend that problem doesn't exist.
Problem will still be there, will grow in time and will assume different
forms.
Best Regards
Paul Orlowski
