MetaQuotes, the Russian company that produces the MetaTrader forex trading platform, has announced that it is reviving its automated trading championship in 2010. According to the post on the MQL5 website:
The main purpose of the competition is promoting the idea of the automated trading and the new development environment MetaQuotes Language 5 (MQL5). The total prize of the Automated Trading Championship 2010 is 80,000 US dollars.
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Following the example of the forex dealers a few weeks ago, a group of 6 introducing brokers have banded together to form the Introducing Brokers Coalition against the CFTC proposals for “Regulation of Off-Exchange Retail Foreign Exchange Transactions and Intermediaries”. Unlike the forex dealers, first on the IBs list of proposals they would like to see changed is:
That a Forex IB must enter into a guarantee agreement with a CFTC-regulated Forex Dealer Member (FDM), along with a requirement that the Forex IB may be a party to only one guarantee agreement at a time.
By asking IBs to enter into an exclusive arrangement with only one FDM, IBs are limited in where they can refer customers, which is not aligned with the best interest of the customer. Independent IBs bring a valuable service to the retail trader. By carefully matching a trader’s style and needs with the right broker as it relates to spreads, trading platforms and customer service offerings, independent IBs help retail customers make the decision that’s right for them.
The wording of the CFTC proposals doesn't seem to me to insist on "an exclusive arrangement with only one FDM", but they certainly seem to be trying to find a way of closing down the numerous "forex broker comparison" websites that you find all over the web these days.
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Is sounds as though some US congressmen have been reading some of the thousands of complaints the CFTC has received about its proposals to reduce leverage on spot forex from 100 to 1 down to 10 to 1.
Yesterday CFTC chairman Gary Gensler was testifying before the House Committee on Agriculture Subcommittee on General Farm Commodities and Risk Management. The CFTC website has a transcript of that testimony, according to which Mr. Gensler informed the subcommittee that:
As directed by the 2008 Farm Bill, the CFTC in January proposed regulations concerning off-exchange retail foreign currency transactions. Pursuant to this authority, the Commission released for public comment a comprehensive scheme that would put in place requirements for, among other things, registration, disclosure, recordkeeping, financial reporting, minimum capital and other operational standards.
So far, the Commission has received more than 5,600 public comment submissions related to the forex proposal.
More on Congressmen Question CFTC 10 to 1 Leverage Reduction
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Recently FXCM UK started allowing users of their proprietary Trading Station II platform to trade contracts for difference (CFDs) in a range of non forex instruments. Maybe they should change their name to CFDFXCM? The now misleading name aside, this allowed UK customers of FXCM to start trading gold, silver, oil and a range of stock indices from around the world.
Their website doesn't seem to be up to speed on this yet, but in my inbox this morning was an email from FXCM informing me that:
FXCM is launching new trading instruments on your FXCM Trading Station on February 21, 2010. Now you can Spread Bet Oil, Gold and Global Stock Indices in addition to Forex—all on one platform!
This is very welcome news for FXCM customers who also happen to be UK residents. It means that if we manage to make a profit trading (sorry, I should have said gambling) any of these exotic new instruments the extremely generous UK Government won't charge us any tax on our "winnings".
FXCM have updated their video introduction to their spreadbetting platform to include the new instruments. If you want to take a close look at the small print about all this you can download it from the FXCM website here.
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In the first response I have spotted made by a forex broker to their recent proposal to limit leverage to a maximum of 10 to 1, the CFTC earlier this week published a 6 page letter from Interbank FX on their website. Interbank FX welcome most of the other CFTC proposals, but say that the 10 to 1 leverage proposal:
- Is unnecessary to protect retail investors because this goal is already achieved through rigorous capital requirements…
- Will make retail forex trading in the United States uncompetitive and hence drive retail business either offshore… or to trading venues including futures exchanges and potentially banks or other financial intermediaries not regulated by the CFTC.
- Runs counter to the considered judgement of the NFA, which late last year began to apply a 100:1 leverage limit…
- Is inconsistent with the intent of Congress…
- Is inconsistent with the Commodity Exchange Act's requirement that the CFTC "take the least anticompetitive means of achieving the objectives of" the Act…
They then take another 4 pages justifying those bullet points, before reaching the following sobering conclusion:
The Solution is Regulation, Not Prohibition
Most of the CFTC's proposed rule is sound. Indeed these parts of the rule presuppose that there will be a U.S. retail forex industry to be regulated. Unfortunately, if the leverage limitations are adopted, no such industry is likely to exist.
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In response to the proposed legislation to reduce forex leverage to 10 to 1, beleaguered US brokers have banded together to form the Forex Dealers Coalition to fight a common enemy; the CFTC! The Coalition have just launched their website, which urges their readers to:
Take Action Today to Protect Our Industry
and also helpfully provides an easy way to send appropriately worded (as far as the FXDC are concerned!) emails to the CFTC.
The boilerplate emails available include such helpful phrases as these for forex traders:
This unsustainable rule would drive U.S. forex dealers, which brings tens of millions of dollars into the U.S. banking industry each day, offshore into the hands of foreign competitors.
As an investor, I would be forced to take my business outside of the United States.
and these for forex industry employees:
Now is not the time for the CFTC to propose rules that would eliminate valuable high-tech service jobs, leaving thousands of additional Americans unemployed.
Unregulated forex dealers….. will be out of the reach of the CFTC and they will thrive.
Personally I have grave doubts that such entreaties will have a significant impact on the ultimate decision of the powers that be. Only time will tell.
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It has been brought to our attention that the original link we published to the page on the CFTC website that allowed you to download the 193 page document detailing its newly released proposals to limit leverage in the retail forex industry in the United States to 10 to 1 now simply says:
The page you have requested is not available on CFTC.gov.
If you haven't read the new regulations yet, and you would like to know what your lords and masters have in mind for you please try this link to the new location on the CFTC website. The document has now reduced in size to only 50 more elegantly formatted pages, and is dated Wednesday January 20th 2010.
If for any reason that link should stop working too, please feel free to download the document from the Trading Gurus servers instead.
For the sake of complete transparency, we have also made the original version of the document available here too.
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Fresh from his onslaught on retail forex traders, Barack Obama today took aim at another target instead. Those nasty, greedy bankers. According to Bloomberg Mr. Obama said in an interview with ABC that:
We’ve got a financial regulatory system that is completely inadequate to control the excessive risks and irresponsible behavior of financial players all around the world.
According to an administration official his suggested solution to this problem is to limit the size and proprietary trading activities of banks as a way to reduce risk-taking. The President also pointed out that:
People are angry and they’re frustrated. From their perspective, the only thing that happens is that we bail out the banks.
Perhaps somebody should whisper in Mr. Obama's ear that many people in "the land of the free" are angry and frustrated about something else entirely. They are angry about the bank bail out to be sure, but that anger is compounded by a "completely inadequate financial regulatory system" that doesn't only allow banks to fail. It also seeks to prevent US citizens from exercising their right to earn a living in the way that they themselves choose.
This news wasn't good for investors in banks over here in Europe either. According to the Wall Street Journal:
Shares in the U.K.'s largest banks sank Thursday as investors braced for proposals expected later in the day from U.S. President Barack Obama. Banks elsewhere in Europe were also falling, with the STOXX Europe 600 banking index off 2%.
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The CFTC has now published details of how to comment on its new ten to one leverage proposals for retail forex accounts. If you click the link at the bottom of that page you can also read the initial comments that the CFTC has received.
At the time of writing there are 11 published public comments. Here are some extracts from those comments:
It is an unwelcome attempt to "save me from myself", that will only curtail my personal trading. I am sending a copy of this email to both of my US Senators.
STAY OUT OF TRYING TO RUN MY PERSONAL LIFE!!!!!!
This regulation will stifle small business by making small scale trading unprofitable.
I have reason to believe changes restricting leverage will delay my achievement of financial independence.
There are reasons why professional traders abandoned Futures in droves over the past decade. This won't get them back.
This piece of legislation would be disastrous to not only the economic recovery, but to future economic health as well.
Are you trying to allow only the rich people [to be] the only ones to trade forex?
To summarise, not one of the commentators approved of the 10 to 1 leverage proposal. Most of them pointed out that if implemented it would damage or destroy their income from trading if they didn't move their accounts offshore. Some got rather heated about it!
If you feel you would like to comment on the proposal yourself you can use the email address we mentioned yesterday or the new online form.
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You are probably aware by now that the latest regulatory changes proposed by the CFTC, and in particular the reduction of retail forex leverage to 10 to 1, have caused a lot of consternation in the forex industry, to say the least! I anticipate that one side effect of the new rule will be that even more money will very soon be winging it's way from the United States over the Atlantic to the United Kingdom. If you are, or hope soon to be, a profitable forex trader then you really do need to start considering whether to send your hard earned moolah in this direction too.
Before you do that though think about this. Did you know that FOREX.com is actually Gain Capital Group LLC for example? If you did know that did you automatically assume that Gain Capital Ltd. was behind FOREX.com in the UK, and regulated by the FSA? If so think again!
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