Comment Text:
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COMMENT
CL-08799
From:
Sent:
To:
Subject:
The Snapp's
Sunday, March 21, 2010 10:26 PM
secretary
Regulation of Retail Forex
To: David Stawick, Secretary, and CFTC Policy Makers,
From: Deborah Snapp
Re:
Regulation of Retail Forex - RIN 3038-AC61
Subject:
Opposition to 10:1 leverage. Leave leverage maximum at 100:1 or
greater.
Dear CFTC,
These comments are in response to your proposed rule changes in the Regulation
of Retail Forex, RIN 3038-AC61. Although, many of your proposed changes are
very well thought out and will be helpful in reducing fraud in the Retail Forex
Market(examples: broker registration, regulation of marketing standards, and
increased dealer capital requirements), there is one area of the proposed changes
that I oppose. That is the area of reducing leverage to 10:1. I believe in regulation
and the enforcement of that regulation, but I also believe that consideration of
regulation changes and their unintended consequences must be seriously
considered.
I have traded Retail Forex for six years and spent several of those years in
research, study, seminars, webinars, and practice accounts, while learning to trade
currency as my primary method of earning a living. I am fully aware of the risks
involved in trading. If this 10:1 leverage is imposed, my trading will be negatively
impacted and my ability to earn a living in currencies will vanish in the. I would
have to put more funds at risk to trade.
Below is a partial list of the reasons I oppose the 10:1 leverage limit:
1. Retail Forex has operated as basically a decentralized market and done
amazingly well by Broker Self-Regulation, especially as compared to the other
financial markets in the U.S. over the last 2 years, that were highly regulated and
on exchanges.
2. The NFA has already reviewed leverage and reduced it to 100:1 for major
currency pairs in November 2009. This level has been determined by the National
Futures Association, Brokers and U.S. traders as an acceptable level of leverage
and risk. The recent reduction to 100:1 from higher levels is an adjustment many
U.S. traders are still adjusting to.
3. The proposed 10:1 leverage will "shut out of the market" many experienced andi0-001
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knowledgeable small traders. Please consider leaving the leverage as the NFA has
implemented and simply require more new account training and proper disclosure
forms regarding leverage risks on all Retail Forex accounts. Education is the
answer, not restricting what people can and can not do with their investment
decisions.
4. Since many Retail Forex Brokers around the world offer greater leverage and
some even more protection of the clients funds than in the U.S., more money will
be directed out of the U.S. and traders will
simply trade offshore. U.S. jobs will be lost at a time that the national
unemployment is near 10%. Brokers will leave the U.S. as their client bases
dwindle. Many high paying jobs will be lost in the U.S.
5. Future jobs will be lost. The Retail Forex market is growing in many parts of
the world and many of those traders would
have opened accounts in the U.S. but not if the Brokers have all gone out of
business and become uncompetitive in the
world market. This 10:1 leverage is anti-competitive.
6. Most of the fraud you are looking to save the retail trader from is caused by
con-men and deceptive advertising.
Registration as proposed will help reduce this fraud. The 10:1 leverage will not
affect fraud and eliminates the traders.
7. You will be increasing the retail traders risk by requiring maximum 10:1
leverage of experienced and reasonable traders to
deposit more funds with broker entities for trading. These broker entities
(FDM's/RFED) are not required to maintain our
funds in segregated accounts and the client funds are not protected under U.S.
Bankruptcy laws. So changing to 10:1
leverage actually increases the client/retail trader's risk. Refco retail forex
accounts are a prime example.
8. Removes the freedom and ability of the individual trader to choose the desired
risk and affects the trading of the trader.
It also impacts the trader that uses higher leverage as a significant factor in their
trading strategy.
9. If this 10:1 leverage goes into effect, the run off of U.S. trader accounts, will
overnight put U.S. Retail Forex Brokers into
Bankruptcy as all the account holders run to the exits asking for their accounts to
be closed and funds returned. No doubt
many will not be able to withdraw their funds in time, since it is unlikely that the
Brokers can cover all accounts leaving ati0-001
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once or even 90% of them leaving at once. This will be a regulation induced
nightmare !
10. Congress did not intend for the CFTC to eliminate the U.S. Retail Forex
Industry, but, merely, protect the client from
fraud. If they had wanted to eliminate the industry they would have done so, but
instead they authorized the CFTC to
regulate, which means they intended for the industry to remain in operation. This
10:1
leverage will "kill" the U.S. Retail
Forex Broker and Industry.
I ask you to please consider the points above and leave the leverage intact as it is
and only consider regulation changes that make the Retail Forex industry safe of
fraud. I encourage you to ask for proper disclosure, licensing, advertising and
consider making the funds in the Retail Forex accounts segregated and 100%
returnable to the account holder in the event of a broker bankruptcy.
Final Comment: If the 10:1 leverage goes into effect then all of the other proposed
changes are irrelevant, since the Retail Forex Brokers will be out of business
overnight and no regulation will be needed.
Thank you,
Deborah Snapp
1614 NE 154
th
St.
Vancouver, WA 98686
360-597-4285
