Federal futures regulators finalized new rules for the retail foreign exchange market late Monday, but they backed away from their original proposal to place strict limits on the amount of borrowed funds retail foreign exchange investors can use.
The rules, posted after business hours on the Commodity Futures Trading Commission’s website, create a new regulatory regime for firms that deal in retail foreign exchange products by requiring them to register with regulators and abide by minimum net capital standards.
The original proposal had called for capping leverage at a strict 10-to-1 ratio, instead of the existing 100-to-1 for major currencies. That portion of the proposal drew a record number of comments as dealers, investors, and lawmakers all raised opposition amid fears it could kill the industry in the U.S.
As such, the CFTC said late Monday it had scrapped that part of the plan. Instead, the agency said it will allow the National Futures Association to impose its own leverage rules as long as they require investors to place a minimum security deposit of 2% on trades involving major currencies and 5% on the notional value of the trade for all other currencies. The National Futures Association is the self-regulatory organization for the industry. The CFTC said it will review the leverage requirements periodically to ensure they don’t need to be adjusted.
The retail foreign exchange market is a niche market that allows mom and pop investors to bet on price movements in foreign currencies by purchasing off-exchange contracts through a brokerage firm. The use of leverage allows them to greatly increase profits, but volatility in prices can also result in magnified losses.
The CFTC has sought to impose greater regulations on the industry amid concern about a growing number of fraud cases. Congress gave the agency expanded authority in 2008 to impose the rules that were announced Monday. Those include imposing a $20 million minimum net capital standard on foreign exchange dealers and greater disclosure rules to help benefit customers.
“The CFTC has worked to craft rules that will protect American investors, and at the same time provide for the operation of legitimate business activity,” CFTC Commissioner Bart Chilton said in a statement late Monday. “With these new rules, the agency is ensuring that people investing in forex are protected from fraud and abuse.”
The CFTC’s new rules haven’t yet been published in the Federal Register. They will take effect Oct. 18.
[...] decided to devote a post to that. In a nutshell, starting October 18, maximum leverage on the major Dollar pairs will be 50:1 and on other crosses 20:1. Nothing truly damaging and quite achange from the proposed 10:1. Personally, I do not care, [...]
[...] decided to devote a post to that. In a nutshell, starting October 18, maximum leverage on the major Dollar pairs will be 50:1 and on other crosses 20:1. Nothing truly damaging and quite a change from the proposed 10:1. Personally, I do not care, [...]
[...] to that. In a nutshell, starting October 18, maximum leverage on the major Dollar pairs will be 50:1 and on other crosses 20:1. Nothing truly damaging and quite a change from the proposed 10:1. Personally, I do not [...]
US CFTC regulations on retail forex transactions…
The U.S. Commodity Futures Trading Commission (CFTC) announced the publication in the Federal Register of final regulations concerning off-exchange retail foreign currency transactions. The rules implement provisions of the Dodd-Frank Wall Street Refor…
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[...] based in US, or those using American brokers, margin requirements change today. Following the CFTC new rules regarding spot Forex trading, the maximum allowed leverage in US is 50: 1 (2% margin) for the major [...]
[...] those using American brokers, margin requirements change today. Following the CFTC new rules regarding spot Forex trading, the maximum allowed leverage in US is 50: 1 (2% [...]
[...] based in US, or those using American brokers, margin requirements change today. Following the CFTC new rules regarding spot Forex trading, the maximum allowed leverage in US is 50: 1 (2% margin) for the major [...]
[...] based in US, or those using American brokers, margin requirements change today. Following the CFTC new rules regarding spot Forex trading, the maximum allowed leverage in US is 50: 1 (2% margin) for the major [...]