Comment Text:
i0-001
COMMENT
CL-00324
From:
Sent:
To:
Subject:
dianne@kendiacorp, com
Monday, January 18, 2010 12:49 PM
secretary
Regulation of Retail Forex (R1N 3038-AC61)
I
am writing to object to the proposed regulation of retail Forex traders
(RII~I 3038-AC61).
Specifically, I object to the provision that states, "Leverage in retail £orex customer accounts would
be subject to a 104o-1 limitation."
While I understand you see increasing margin requirements as increasing consumer protection, the
result will be the opposite of what you intend because this provision would drive small retail traders
to offshore brokers who are not subject to any regulation. As a result, they may be in danger of
losing all their money, regardless of any specific trading decisions they make, because of unethical
brokers.
In addition, the retail Forex market is comprised of many different levels of individuals. Your
proposed rule does not allow for this. For example, I have passed the three exam series from the
Market Technician Association and have been awarded my Chartered Market Technician (CMT)
letters. I also have five years of trading experience as an independent trader. I should not be
subject to a 10-to-1 limitation and have no idea why you think this would be protective of me. It
will prevent me from moving profits out of my trading account on a regular basis because I would
need additional capital to maintain margin requirements. The result would be that I would have
more money, not less, at risk at any given time.
Finally, it is tempting to say that the small retail trader is most at risk in trading because they're
uninformed. This, however, is a questionable statement based on various studies. Research has
found that mutual fund managers, newsletter writers, Wall Street strategists, and investment
advisors make the same behavioral errors in the financial marketplace as the "uninformed public"
does. One only has to look at the behavior that led to the financial crisis of 2008 to know this is
true as regards risk. While the response might be that these people can afford it, I remind you that
it was the public's money used to bail out the financial institutions.
Rather than a blanket requirement of 10-to-1 leverage, it would be more appropriate to require
some sort of training for those who intend to trade, even if this was only confined to risk
management issues as opposed to a more general how to trade approach. Traders who could not
show sufficient training or experience could be required to pass an online exam that would show
they understand risk and money management. The individuals could be assessed a fee for this so
that the cost would be borne by those who wished to trade. Brokers could not open an account
unless the individual could show proof of passing this exam. This would do more to limit risk than
to have a blanket provision such as 10-to-1 margin requirements. This is no different from
requiring a driver's license for someone who wishes to drive.
Dianne Fecteau
PO Box 942
Crystal Beach, FL 34681
727.366.1392
