CFTC Seeks Public Comment on Proposed Regulations Regarding Retail FOREX Transactions
Washington, DC â€“ The U.S. Commodity Futures Trading Commission (CFTC) today announced the publication in the Federal Register of proposed regulations concerning off-exchange retail foreign currency transactions. The proposed rules follow the passage of the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, 122 Stat. 1651, 2189-2204 (2008), also known as the â€śFarm Bill,â€ť which amended the Commodity Exchange Act in several significant ways. In particular, the Farm Bill:
â€˘ clarified the scope of the CFTCâ€™s anti-fraud authority with respect to retail off-exchange foreign currency transactions;
â€˘ provided the CFTC with the authority to register entities wishing to serve as counterparties to retail forex transactions as well as those who solicit orders, exercise discretionary trading authority and operate pools with respect to retail off-exchange foreign currency transactions; and
â€˘ mandated minimum capital requirements for entities serving as counterparties to such transactions.
â€śThese proposed rules for retail foreign exchange trading are important steps in implementing the additional consumer protections authorized in the 2008 Farm Bill,â€ť CFTC Chairman Gary Gensler said. â€śThe Commission looks forward to receiving and considering the publicâ€™s comments on this important issue.â€ť
Pursuant to this authority, the Commission is proposing a comprehensive scheme that would put in place requirements for, among other things, registration, disclosure, recordkeeping, financial reporting, minimum capital, and other operational standards. Specifically, the proposed regulations would require the registration of counterparties offering retail foreign currency contracts as either futures commission merchants (FCMs) or retail foreign exchange dealers (RFEDs), a new category of registrant created by the Farm Bill. Persons who solicit orders, exercise discretionary trading authority and operate pools with respect to retail forex would also be required to register, either as introducing brokers, commodity trading advisors, commodity pool operators, or as associated persons of such entities. As was the case prior to the passage of the Farm Bill, â€śotherwise regulatedâ€ť entities such as financial institutions and SEC-registered brokers or dealers remain able to serve as counterparties in such transactions under the oversight of their primary regulators.
The proposed regulations also include financial requirements designed to ensure the financial integrity of firms engaging in retail forex transactions and robust customer protections. For example, FCMs and RFEDs would be required to maintain net capital of $20 million plus 5% of the amount, if any, by which liabilities to retail forex customers exceed $10 million. Leverage in retail forex customer accounts would be subject to a 10-to-1 limitation. All retail forex counterparties and intermediaries would be required to distribute forex-specific risk disclosure statements to customers, and comply with comprehensive recordkeeping and reporting requirements.
Comments regarding the proposed regulations may be submitted by any of the means listed in the Federal Register release and should be received by the Commission within 60 days of the date of publication.
How to submit comments:
DATES: Comments must be received on or before [insert date 60 days from publication in FR].
ADDRESSES: You may submit comments, identified by RIN 3038-AC61, by any of the following methods:
â€˘ Federal eRulemaking Portal:
http://www.regulations.gov/search/index.jsp. Follow the instructions for submitting comments.
â€˘ E-mail: [email protected] Include â€śRegulation of Retail Forexâ€ť in the subject line of the message.
â€˘ Fax: (202) 418-5521.
â€˘ Mail: Send to David Stawick, Secretary, Commodity Futures Trading
Commission, 1155 21st Street, N.W., Washington, DC 20581.
â€˘ Courier: Same as Mail above.
All comments received will be posted without change to
http://www.cftc.gov, including any personal information provided.
GVI Forex john 19:00:25 GMT - 01/14/2010
Cutting leverage to 10 to 1 is unfair to retail traders. Be sure to make your feelings felt at the CFTC. Futures leverage is a lot higher.
Nairobi Ken 09:19:48 GMT - 01/20/2010
In my opinion cutting leverage is not fair to retail traders coz if someone wants to trade at a leverage of more than 10:1 they would simply take more than one trade at a time to meet their desired leverage only this time the spreads will be raised and a waste of time is inevitable in this case. I think if you are as concerned as you claim to trader protection what you would be looking at is the traders who have direct access to the servers who trade massive lots for short term gains, this distablises the markets and the markets move irregularly. These are the guys u should work to eliminate so that all forex traders are equal.
Colorado Springs SR 19:15:15 GMT - 01/22/2010
Every trader knows the risk and reward of trading a high leverage account. Many brokers already give you the option to lower you leverage. Making it mandatory to lower your leverage would be unfair to the responsible traders who know how to manage their accounts. To protect traders a better solution would be that all brokers offer the option to decrease or increase your leverage. This would give traders both protection and freedom.
USA ZEUS 20:45:28 GMT - 01/22/2010
Excessive leverage is to a trader as overdosing on drugs is to an addict. Both dealers are happy to take your money then knowingly supply what eventually kill you. In the beginning it might be exciting and make you feel good, but in the end you will simply R.I.P.
In both cases the dealers will simply say that the "users" knew what they were doing.
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