As we reported back at the beginning of August forex broker GFT published on their website a document entitled "Get the Facts" which pointed out that their DealBook platform didn't require changing to comply with the recently introduced NFA hedging and FIFO rules. Amongst other things they stated then that:
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Following on from its "no hedging" and first-in first-out rule changes, the National Futures Association in the United States will shortly impose further restrictions on the activities of its Forex Dealer Members (FDMs). In notice Notice I-09-18 dated September 24, 2009 the NFA informed brokers that:
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I was browsing the MQL4 forum in the hope of discovering some more news about the apparent delay in the release of MetaTrader 5 when I beheld a surprising sight. In a banner across the top FXCM were promoting their UK operation once more. This time they were being terribly blunt. It's a question we have asked here at the Trading Gurus several times, and here is how the FXCM marketing machine expressed it:
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In a recent letter to the Commodity Futures Trading Commission the National Futures Association commented on proposed further increases in net capital requirements for Futures Commission Merchants and Introducing Brokers.
Whilst the NFA:
More on NFA "Respectfully" Criticizes SEC Capital Requirements
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The Commodity Futures Trading Commission recently released its latest report on financial data for Futures Commission Merchants. This contains the numbers as of May 31st 2009, "from reports filed by June 30th 2009". This report is particularly interesting because on May 16th the NFA's minimum net capital requirement for Forex Dealer Members increased from $10,000,000 to $20,000,000. The CFTC helpfully allow you to download monthly data going back to 2002 too. It's interesting to discover which brokers have fallen by the wayside over recent months as successive increases in regulatory capital requirements have weeded out the weaker players.
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In the second of our series of interviews with senior figures from the Forex industry, I spoke earlier today with Marc Prosser, Chief Marketing Officer of Forex Capital Markets. I started off asking the question on everyone's lips these days about the new "hedging" ban. We then talked about the relative merits of "straight through processing" versus "dealing desk" business models, and then briefly touched on the regulatory aspects of transatlantic transfers of client cash.
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I've just put the phone down after a long conversation with George Tchetvertakov, head of market research at Alpari UK. We started off talking about the new NFA "hedging" regulations and their effects on the retail foreign exchange business. Eventually we moved on to discuss some other topics, including using hedging as a means of reducing risk, and George's opinions about markets in general.
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I telephoned FXCM again about my latest problem with an expert advisor that was unable to place any orders. I eventually managed to speak to a very helpful lady with an American accent who is a MetaTrader specialist in their sales department. She'd obviously been asked this question before, and here is my understanding of her explanation.
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The FXCM Limited MetaTrader banner promises:
No Dealing Desk Execution
Hedging Capabilities through FSA Regulated Entity
Spreads as Low as 1 Pip EUR/USD
Accept ALL MT4 Expert Advisors
The Trading Gurus are based in South West England, so we're not too unhappy about the idea of opening a live account with an FSA regulated forex broker based in the UK. Those bullet points sound exactly like the sort of brokerage account we've been waiting for, so I opened a demo account with FXCM UK, and fired up one of our Expert Advisors.
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Gain Capital are another foreign exchange broker who are now promoting their MetaTrader platform through an FSA regulated UK company. Gain have long used the FOREX.com brand in the United States. According to the press releases section of their website:
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