Comment Text:
i0-001
COMMENT
CL-08684
From:
Sent:
To:
Subject:
Harry Lee
Saturday, March 20, 2010 11:04 AM
secretary
Regulation of Retail Forex
David Stawick,
Secretary, Commodity Futures Trading Commission
1155 21st Street, NW.
Washington, DC 20581
RE: RIN 3038-AC61
Dear Mr. Stawick:
Thank you for accepting comments regarding the proposed rule changes that will affect retail forex trading.
I read most of the Background and Proposed Rules sections and would like to comment regarding two of the regulations.
Regarding the broker/dealer capital requirement:
The $20M minimum is excessive.
It diminishes competition from start-up or smaller broker/dealers---it was this competition that
drove down the spreads being charged by the retail broker/dealers. A better solution would be for broker/dealers to hold a
minimum
capital at one and one-half times the total amount of customer accounts,
and then manage the customer margin electronically
by closing open positions when customer margin falls below a certain amount, for example, less than 25 percent of margin.
Insomuch, as all retail forex trading is done electronically, this can be done, and is done (my forex broker does this).
Regarding the proposed reduction of leverage to 10:1:
Who is this regulation supposed to protect, the "...unsophisticated, elderly, low net worth, and other vulnerable individuals"? There
have been charmers and con artists, as well as people who are charmed and conned, since the beginning of history. Do you really
think you are going to stop that by imposing outrageous margin and leverage requirements on forex traders?
We all have heard the phrase "caveat emptor". This Latin phrase has its origin in Roman law, and it is as valid today as it was in
Roman times. The buyer has to be responsible, too.In the Background section, there is discussion of the Commission filing "114 forex-
related enforcement actions on behalf of 26,000 customers." There is a fine line between being a speculator (trader) and a gambler.
And to be a successful trader, you have to know that and know on what side of the line you are before you even open a position. In
the case of the 26,000 customers, I suspect that 100% of them did not understand the side of the line on which they were standing,
that 100% of them signed, or at least read and ignored, a Risk Disclosure Statement, and that 100% of them are losers. Are these
26,000 losers the only data point for reducing the leverage?
Every trader has heard this:
"95% of all
traders lose their money"
or "Only 5.0%
of traders are successful"---no
one ever cites their source for these
statistics, and I question their validity. However, for our discussion here, let us accept them as fact, and that 5 in 100 traders are
successful.
Here are some statistics you rarely hear, citations included:
The chance of a high school baseball player being drafted by the MLB is 0.5% (or 1 in 200). ~
www. hsbaseballweb, com/proba bility, htm
The chance of a high school athlete entering sports (basketball or football) and turning pro is 0.02% (or 1 in 5000).__h_~p__;~/l
www. bls.qov/o¢o/o¢os251, htm#outlook
The chance of becoming the next American
Idol is
0.001% (or
1 in 103,000) http://www.bookofodds.com/Dail¥-Life-Activities/
Entertain ment-Media/Articles/A0350-Odds-of-Becoming-the-Next-American-ldoli0-001
COMMENT
CL-08684
From the statistics I just cited, by comparison, trading offers the greatest chance for success.
Perhaps regulations
should be put in place to protect the poor souls (and their parents' bank accounts!) who consider sports
as their profession, and the wannabes who line up to become the next American Idol!
In regards to trading, I am an overnight success. It only took me 10 years of emotional and financial sacrifice to get
to that level: eight years trading futures, and two years trading forex. I began as one of those
"...unsophisticated...Iow net worth, and other vulnerable individuals" identified in CFTC proposal. But, it has been
only through trading the forex at 200:1 and 400:1 leverage have I realized this success, and subsequently, been
able to build a trading account. It should be obvious that my recommendation is
to not reduce leverage but
to increase it to 200:1 and 400:1.
A trader must be able to trade with real money, and having high leverage
provides the opportunity to become successful.
Thankyou.
Sincerely,
Har~ Lee
Overnightsuccess---lO yearsinthe making
Information from ESET NOD32 Antivirus, version of virus signature database 4960 (20100320)
The message was checked by ESET NOD32 Antivirus.
http://www.eset.com
