Comment Text:
i0-001
COMMENT
CL-06708
From:
Sent:
To:
Subject:
Michael De Carlo
Tuesday, March 9, 2010 11:38 PM
secretary < secretary@ C FTC. g ov >
Regulation of Retail Forex
Dear Mr. Secretary Stawick and Chairman Gensler,
I agree with the "Farm Bill" amendments to the Commodity Exchange Act to strengthen our
nations RFEDs, their minimum capital standards, financial reporting, risk disclosure statements
to retail account holders, reduce fraudulent activity among retail forex dealers, and help to
improve counterpartyand intermediary disclosures. However, I adamantly disagree with the
change to limit retail forex customer accounts to a 10-to-1 limitation. Many dealers currently allow
retail customers to set the amount of leverage they are willing to risk. And more importantly, many
currencies move in a 1000th of a currency's rate point (PIP), and therefore the leverage of 100-to-
1 is adequate for the minimum change in a currency's nominal rate.
I believe that the proposed regulation of limiting the leverage factor to 10-to-1 will effectively
eliminate the forex trading opportunity for individual traders. It will regulate them out of the
market and could prevent access to the retailforex market entirely. In fact, this proposed
regulation will, in effect, most likely raise the level of risk for the individual trader because you will
effectively require 10 times the amount of a retail trader's risk capital to participate. (i.e. 100-to-1
leverage ratio requires $1,000 per contract margin verses, 10-to-1 leverage ratio requiring
$10,000 per contract margin.) This has the effect of requiring a higher percentage of an
individual's net worth to hedge against their international investment exposure or to speculate on
currency movements related to international economic events and trends.
Another, negative externality of this regulation is that it could motivate retail forex customers to
deal with alternative dealers outside the US with lower financial and operational standards, thus
negating the intent of most of the proposed regulation-- which Idoagree with. The 10-to-1
limitation is poor regulation. Let the markets decide the leverage allowed-- don't
regulate/mandate it.
Respectfully,
Mike De Carlo
801-631-2305
