Comment Text:
i0-001
COMMENT
CL-05255
From:
Sent:
To:
Subject:
Ismail Akmuradov
Tuesday, February 9, 2010 1:17 AM
secretary
Regulation of Retail Forex
DearCFTC[],[]
[] [] [] [] [] [] [] [] [] [] [] The proposal to reduce the leverage assumes that traders are not using leverage
properly. Having leveraging capabilities isn't tantamount to over-leveraging one's positions, and this is
what the []proposal is failing to recognize; instead, leverage merely allows a trader to exercise exact risk
management in relation to the size of their positions. For instance, if a trader wished to risk only 1% of
their total capital per position, they would use leverage to determine the amount that they are willing to
risk per pip, based on the size of their stop loss. Having leveraging capabilities allows a trader to
dynamically adjust the size of their stop, so as to accommodate the current volatility levels of the
market, while still maintaining a fixed position risk, regardless of whether they are risking 10 pips or
1000 pips.
Conversely, not having such leverage available will likely negatively impact traders who are using
appropriate risk management. Reducing the leverage means that you will have less available margin for
active positions, even if you are risking the same amount in both scenarios. This means that such traders
are more likely to experience a margin call, assuming a consistent position risk, if the leveraging
allowances were to be reduced
The most unpalatable part is that the proposal suggests not only to limit the leverage - they evidently
intend to practically eliminate it Anyone who trades the forex markets knows that this would effectively
put an end to US-based retail forex trading, since very few people would be able to properly trade under
such a mandate. US-based FCMs would go out of business, and US-based traders would invest their
money with oversees brokers.
The [] proposal sadly appeals to the lowest common denominator: the people who over-leverage
positions with inappropriate stop-losses. In doing so, they consequently hurt all of the traders who trade
with appropriate risk management, and merely use leverage as a necessary and responsible tool.
