Comment Text:
i0-001
COMMENT
CL-08815
From:
Sent:
To:
Subject:
Rob Frelow
Monday, March 22, 2010 1:17 AM
secretary
Regulation of Retail Forex
Identification Number:
RIN 3038-AC61
I am against the change in leverage to 10:1.
Ignoring all of the claims that this change is being done specifically to help the Futures market (since Futures
currently have leverage above 10:1)
Ignoring the competitive disadvantage this creates for U.S. brokers.
Ignoring the fact that people will simply move their accounts offshore.
I find it interesting that the CFTC seems to be pushing the retail market towards Futures, claiming the leverage
change is for our own protection. Consider this, the maximum loss in Futures is infinite, while the maximum loss in
Forex is almost always your account deposit. Taking this into account, your change will increase our risk on at
least 2 levels.
1. We will need to deposit more 10-20 times more money in our Forex account to trade in the same fashion we
are used to. This inherently increases our risk by a factor of 10-20. A friend of mine lost $60,000 when his
broker went bust a few years ago, had your rule been into effect (and considering he deposited just enough to
trade the same volume), his loss would have been
$600,000
to $1.2 million.
2. Moving our money from Forex into Futurse increases our risk by a potential infinite amount, since it is very
possible to lose much much more than your account.
Now let's take into consideration the "Trading For A Living" trader. He/she withdraws money every money to pay
the mortgage, bills...etc. He/she lives on his monthly profit. You are effectively taking this man/woman's livelihood
away.
Deposit: $100,000
Leverage: 100:1
Monthly Profit average: 5%
Monthly "Paycheck": $5,000
Let's see how your proposed changes would affect him assuming he took the same risk on each trade (in terms of
% of his total deposit):
Deposit: $100,000
Leverage: 10:1
Monthly Profit average: 0.5%
Monthly "Paycheck": $500
He will now have 2 choices moving forward:
1. Deposit $1,000,000 into his account to maintain the same amount of risk/volume he has been using (unlikely)
2. Make more frequent and riskier trades, as he will need to make 10x the amount of profitable trades each
month in order to maintain his $5,000 income.
I understand you are doing this because there are many foolish traders out there who don't know what they are
doing, don't do the research, think it will be easy and immediately blow their accounts. Please understand, these
people would lose their accounts even with 0.5/1 leverage. Please Please Please think about how this affects the
intelligent, educated and seasoned trader.
Don't throw the baby out with the bathwater.
NRobert Frelow
