Comment Text:
i0-001
COMMENT
CL-00658
From:
Sent:
To:
Subject:
Tom Kroo
Tuesday, January 19, 2010 3:06 PM
secretary
Re: Regulation of Retail Forex
]D ~:
RIN 3038-AC61
Sir:
I am of the strong opinion that the proposed reform of retail forex margin requirements to a
limit of 10:1 is unnecessary and potentially harmful for the U.S. forex market.
The motivations of such a change are specious. It will neither reduce market volatility nor the
risk taken by the retail market. Position liquidations are what prevent traders from extending
losses beyond what they can afford, and reducing the potential volatility brought on by
excessive movement in the markets, not the level of margin in their accounts. With higher
margin requirements, the only difference from a retail trader's perspective would be to
increase their exposure to their open positions (i.e. use more of their private capital to
compensate, maintain open positions for longer periods of time, and be more willing to
engage in strategies such as the carry trade).
The harmful element comes from the business that would be lost to overseas institutions
providing the same services (usually over the internet), but without the proposed U.S.
regulations. I can speak for many fellow investors who engage in retail forex trading, that
should a change be implemented, we would simply close our U.S. accounts, and transfer
funds to other accounts overseas. Whilst it cannot be said for everyone to have multiple
residences around the world, surely those with the resources to be market movers are the
most significant to global forex trading.
This would then be indeed a zero-sum decision by the CFTC, with the U.S. losing business to
overseas institutions, and potentially even threatening the locomotive currency status the U.S.
still dollar enjoys.
I sincerely hope a decision like this is not influenced by politics or the current regulatory
environment and that the needs of American investors such as myself are more diligently
considered.
Respectfully,
Anonymous investor
