Comment Text:
i0-001
COMMENT
CL-08808
From:
Sent:
To:
Subject:
Truc Quach
Monday, March 22, 2010 12:35 AM
secretary
Regulation of Retail Forex
David Stawick
Secretary, Commodity Futures Trading Commission
1155 21st 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 enhanced 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
5.9Kind Regards,
Truc Quach
Perth, Australia
March 22, 2010
i0-001
COMMENT
CL-08808
