Comment Text:
i0-001
COMMENT
CL-04972
From:
Sent:
To:
Subject:
Edgar Cuevas
Thursday, February 4, 2010 10:40 AM
secretary
'Regulation of Retail Forex'
RIN 3038-AC61
What the CFTC is proposing
increases the retail trader's risk by a factor of 1000%.
The math goes this way:
At the current 1:100 leverage, for each $100.00 of his/her out of pocket Capital Investment
Risk Exposurethe
trader is entitled to trade $10,000.00 worth of currencies.
At the proposed 1:10 leverage, the trader is entitled to trade
the same $10,000.00
worth of currencies but
his/her out of pocket Capital Investment
Risk Exposure is $1,000.00
as opposed to $100.00.
The CRTC proposal 'increases' out of pocket Capital Investment Risk Exposure by 1000%.
Clearly something is wrong with the proposal; it is either terribly misguided or worse. How would the retail
trader's
exposure to risk be reduced with their proposal?
What is the common sense answer that is being
overlooked?
Reducing Leverage from 1:100 to 1:10 is not the answer. The proposal as it stands as a disaster-in- waiting for
retail traders.
The right solution is for the CFTC to tackle margin control.
In order to protect the new/naive/self destructive and or otherwise uneducated trader from him or
herself, account
margin limitations
should be revised so that the trader's out of pocket Capital Investment Risk
Exposure is never any greater than 5% or 10% or his/her trading account at any time.
Leave leverage alone; leverage is neither the problem nor the solution. The answer to risk exposure is not
leverage control. In fact,
leverage control would have the exact opposite effect by increasing risk - tenfold.
The answer is
margin control.
Apart from that, I would call on the CFTC to use whatever pro-active and aggressive steps necessary to keep
unscrupulous brokers/operators and get-rich-quick- and-easy 'fantasy' educational scams out of business.
Edgar Cuevas
7873901759
[email protected]
