Comment Text:
i0-001
COMMENT
CL-05320
From:
Sent:
To:
Subject:
Flora Anderson
Thursday, February 11, 2010 7:52 AM
secretary
Fw: Regulation of Retail Forex - Additional Comments
C/O: CFTC
Additionally,
There is actually no logic in having any type of governmental leverage regulation on retail customers.'
Here's the reason:
If for instance the leverage were an astronomical figure of say 1,000,000:1, then it would be impossible
mathematically to exist simply because, if using for an example the EUR/USD with a $1,000,000 position, each
pip would be worth
$100. If a client then had on deposit only $1, the spread that most firms charge for commission would be about 2
pips or $200.
And, usually even tiny fluctations in value would swing the EUR/USD relationship through 10,20,40 pip ranges.
The forex firms are in business to make a profit and would never allow such a miniscule balance held for
someone using a $1,000,000 EUR/USD position. But as the leverage is brought into a more reasonably
mathematically and business model speaking range of 1000:1, then a client with $1 in the account could control
$1000 of the EUR/USD pair. Here each pip would be worth $.10. So with the spread and a small price fluctuation,
that would be possible to do, but not feasible for either the client or the brokerage firm.
However as the leverage is brought further down to 400:1, then a $1 position would control $400 of he EUR/USD
pair. Each pip would be worth $.04 or 4 cents (US). That would leave enough room for both the spread and
volatility ranges of 25 pips before bringing the account to zero. When a clients' funds are brought to zero many
firms now use a no-margin call feature that removes said clients from the market before a negative balance is
incurred. But most people would prefer to have much wider safety zones than 25 pips, so even if this were
allowed by the firms, most people would use much less leverage, depending on their account size and trading
style.
Because of the liquidity in the forex markets and instantenous trading systems, using higher leverage is not only
feasible, but also a necessity. Both industry and the clients are interesting in making a profit and do not
need additional leverage limits because as shown above, the system has its own checks and balances.
Sincerely,
JA
..... Original Message .....
From: Flora Anderson
To:
[email protected]
Sent: Tuesday, February 09, 2010 11:42 AM
Subject: Regulation of Retail Forex
C/O: CFTCi0-001
COMMENT
CL-05320
I strongly advise against further regulation of the amount of leverage available to U.S. retail customers at this
time.
Last year a number of changes were implemented including a decrease in the amount of available leverage.
It is my opinion that further changes are not required for the following reasons:
1. In the first place, forex was not responsible for the decrease in stock values in U.S. and other markets.
The problem was tied to public perception as a result of cheap loans made available to unqualified homebuyers,
the loans then packaged and traded as complex derivatives. As the economy as a whole went through a
weakening cycle, the homeowners began to default on their loans. This in turn had an effect on the
aforementioned derivatives markets that in turn led to capitulation from the highest levels achieved in the
equity markets.
2. As an economy of hard working americans, we are an open and free society that benefits from free trade. By
imposing additional restrictions on the forex market, this freedom will be reduced substantially. Much tax
generating revenue will be lost as fewer entities will continue to trade, thus requiring fewer employees to provide
analysis, customer service, computer related services, accounting, legal, and so on. With this hole in the economy
created an extended economy will no longer exist as these employees will no longer be in existance within the
current capacities, resulting in a further expanding domino effect within an already weakened overall economy.
3. By imposing additional leverage limitations, less liquidity will exist within the forex markets, thus making it
possible for unscrupulous nations to manipulate currencies against the free world.
4. Among, the U.S. retail forex traders who remain in forex, many will be forced to trade overseas where these
restrictions are not as imposing. This will mean that money once held in U.S. banks and once generating taxable
interest to the U.S. treasury will no longer do so. Additionally, U.S. retail customers trading overseas may be more
apt to have funds sitting with firms that are not necessarily as safe as at home, though many of the foreign
dealers are substantial trustworthy firms.
Please do not impose any additional financial or leverage regulations on U.S. Retail Forex customers.
Sincerely,
James Anderson Jr
