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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The headlines become more and more apocalyptic. Zero hour is almost upon us, and the Forex MegaDroid team have just sounded the loudest alarm call so far in the hype war over the new NFA FIFO regulations, which finally come into force this weekend. If you recall earlier this month Albert and John promised their long suffering customers that:
More on The Forex MegaDroid Says "Kiss Your FX Trading Goodbye"!
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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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I received an email this morning from Forex.com promoting the benefits of opening a MetaTrader account with their FSA regulated UK operation. The headline read:
Total control of your trading strategies. – Don't let hedging restrictions affect how you trade your account.
When I clicked on it I didn't receive lots more information about how hedging restrictions might affect my trading. Instead I found myself looking at an online application to open an account at Forex.com UK
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As we reported back in May, FXDD still allow "hedging" on their MetaTrader 4 accounts. Presumably they feel able to do this because their application to become a member of the NFA is still pending. The announcement that we linked to in our May article was removed from their website some time ago, but yesterday a new take on the NFA hedging ban appeared in its place:
More on FXDD Say No Hedging Doom and Gloom Highly Exaggerated
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An email from the Forex MegaDroid team was waiting for me in my inbox this morning. It seems they will be releasing a new version of their robot before the end of the month, which is when the first-in first-out provisions of NFA compliance rule 2-43(b) finally come into force.
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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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