Comment Text:
i0-001
COMMENT
CL-07853
From:
Sent:
To:
Cc:
Subject:
Jack Gammon
Tuesday, March 16, 2010 12:29 PM
secretary
[email protected]
RE: Regulation of Retail Forex
To the CFTC:
OPINION
Your recent proposal to reduce the maximum leverage for retail Forex
trading in US accounts raises cause for concern. While reasonable
regulation is appropriate, *RIN 3038-AC61 *effectively proposes to end
retail trading within the scope of US regulated trading. The movement
in Forex issues makes 10:1 leverage a dead market that will not be
competitive for trained traders.
If your goal is to stop retail trading in the US, then this proposal
will succeed. If you goal is to add some safety to this market, then
this proposal will fail, since knowledgeable traders will simply move to
accounts in countries that understand the practical and useful nature of
Forex trading. This will result in a flight of capital out of the US.
If pushing capital offshore is the goal, then *RIN 3038-AC61 * will succeed.
Personally I already have established an offshore account to protect
myself against such dictatorial moves in the US. There are multiple
civilized countries that work in the financial markets to provide well
regulated opportunities for educated traders. These markets are
appropriately supervised as well as the brokers that service them. I
have hoped to be able to continue to trade domestically within the
background of freedom to operate a business in the US. However,
increasingly that seems to be at cross purposes with this regime in
Washington.
Long ago determined that having employees and providing jobs in the US
was an irrational approach to doing business. Fortunately not every
country has these aggressively anti-employer attitudes toward businesses.
DISCUSSION
Every market needs some form of regulation. The US Supreme Court has
noted that the power to tax is the power to kill. Regulation possesses
the same powers, although not directly as a monetary medium. Every
regulating body must recognize the power that they wield and use
appropriate discretion to avoid over stepping from needed regulation
into the realm of killing markets. Appropriate regulation will restrain
the irresponsible without harming the freedom of the responsible. The
dishonest participants will be punished without removing the
opportunities for the decent and honest practitioners.
Leverage in the Forex market is essential simply because the day to day
movement in pricing is too small to allow reasonable expectation of
profit for traders without direct access to very large sums. The effect
of *RIN 3038-AC61 * is to forbid retail Forex trading in the US and force
it offshore.i0-001
COMMENT
CL-07853
PROPOSED ALTERNATIVES
If safety is the expectation, then require training of traders and allow
appropriate leverage. Another reasonable approach would be to have
brokers use a stepped method of allowing traders access to leverage.
First prove you can trade by either by submitting past results or
passing a reasonable barrier of profit in a 'paper trade' account. Next
allow 10:1 trading in a live account, followed by increasingly higher
leverage up to a reasonable maximum of 200:1 or 400:1, whatever is
similar to regulated foreign Forex markets.
There do exist competent trainers for trading technicals in markets that
provide accurate charting. There exist many more charlatans who call
themselves trainers and provide either tools that guarantee failure in a
market or employ methods that fail to work in many markets.
A needed reform is to require those who present trading packages for
sale to prove that an average user can consistently make a reasonable
return using them in most market conditions (up, down, and sideways
markets for example), or specify which markets they do work in. Like
trainers there are groups providing packages that are useful in the
hands of those that accept training. Such groups should not be
penalized for the actions of the irresponsible.
CONCLUSION
As in any market,/caveat emptor/should remain the basis of conduct.
Those that are irresponsible should be subject to recovery from those
they take advantage of as customers as well as punitive judgments by the
regulator. Likewise the user, or retail trader, that fails to heed
reasonable warnings should be held responsible for their personal
results. BUT appropriate regulation never prevents those who learn and
practice from using their skills, nor does it prevent the competent from
passing on their skills and tools to new users.
Please consider these remarks as intent to assist in moving the
reasonable regulation of Forex in the US toward a useful and profitable
result that is fair to all.
Best Regards,
Jack Gammon, Jr.
