Comment Text:
i0-001
COMMENT
CL-08730
From:
Sent:
To:
Subject:
Ryan O'Keefe
Sunday, March 21, 2010 1:58 AM
secretary
Regulation of Retail Forex
David Stawick
Secretary, Commodity Futures Trading Commission
1155 21^st Street, NW
Washington, DC 20581
Regarding: RIN 3038-AC61
Dear Mr. Stawick,
I am writing to voice my position on the CFTC's proposed regulations for
off-exchange retail foreign exchange transactions. The proposed
regulations offer many consumer protections, and represent a well
intentioned plan to regulate what has long been considered the "wild
west" of financial markets. Unfortunately I believe some of the proposed
regulations will have drastic consequences on the market, and ultimately
unravel every consumer protection the CFTC is trying to achieve.
Enclosed are my comments on each proposed regulation I believe should
not be adopted, or should be modified within Federal Register RIN 3038-AC61.
Regulation 5.8 - Aggregate Retail Forex Assets
The proposal to require RFEDs and FCMs to segregate the net credit
balance deposited by retail forex customers is well intentioned, but
falls short of truly protecting clients funds in a bankruptcy scenario.
Segregated accounts offer the only true protection for client funds, as
the CFTC points out in this proposed rule. I believe the bankruptcy code
should be modified to protect segregated accounts off-exchange as they
are on-exchange. Achieving a change in the bankruptcy code would allow
the CFTC to enforce real deposit protections by requiring RFEDs and FCMs
to segregate client funds. I believe the CFTC should adopt this proposed
rule as something is better than nothing, but I'm confident some
off-exchange retail clients will misinterpret disclosures related to
these capital balances as some form of guaranteed deposit protection.
Regulation 5.9 - Security Deposits for Retail Forex Transactions
I am _strongly opposed_ to the maximum 10:1 leverage limit. I understand
the CFTC's concern regarding the negative effects of high leverage
however; leverage is an essential tool for off-exchange retail currency
traders. Traders who understand how to manage the risks of leverage
through sound money management should not be limited to 10: 1. Limiting
leverage will reduce the professional trader's ability to maximize the
use of risk capital. On a matter of principal, I do not believe it is
the role of government to mandate which tool a professional should be
able to use.
The National Futures Association has set leverage limits at 100: 1, which
had already been adopted as standard operating leverage by most
off-exchange currency traders. I believe the 10:1 leverage limit is
unnecessary as the congressional record through the Farm Bill never
intended for the CFTC to regulate leverage. The intent of the Farm Bill
was to bring transparency and oversight to a traditionally unregulated
financial market, not to crush the future of the industry limiting its
leverage ability. Furthermore, the maximum loss in off-exchange currency
trading regardless of leverage is drastically less than the currency
futures market. I see little or no benefit to leverage restrictions from
a maximum loss perspective. I encourage the CFTC to address its concerns
about leverage through trader educational programs, or enhancedi0-001
COMMENT
CL-08730
disclosure documentation for off-exchange currency traders.
I also believe the adoption of this rule will invalidate every consumer
protection proposed by the CFTC. Many traders have already moved their
accounts offshore in response to the NFA's leverage and hedging actions.
If the CFTC adopts a 10:1 leverage restriction the majority of U.S.
based retail currency accounts will move overseas. Some overseas dealers
currently offer leverage higher than 100: 1, and operate outside the
CFTC's jurisdiction which renders useless any consumer protections
offered in the proposed regulations. I believe the adoption of
Regulation 5.9 will dramatically affect U.S. based currency dealers by
driving many out of business as clients move their accounts overseas.
What we are really talking about with Regulation 5.9 is crushing a $1
billion dollar industry that provides high paying jobs, and tax revenue,
for the sake of protecting some traders from their own ignorance.
Traders are already properly disclosed on the risks related to trading
on high margin. I stand alongside the Forex Dealers Coalition, the IB
Coalition and thousands of retail currency traders in staunch opposition
to Regulation 5.9.
I appreciate the opportunity to comment on these proposed regulations. I
sincerely hope the CFTC considers my comments, and the comments it has
already received from currency traders around the world opposing
Regulation 5.9
Kind Regards,
Ryan O'Keefe
Carnation, WA
March 20, 2010
