The Countdown Has Begun for the Retail Forex Revolution

After a variety of trials and tribulations along the way the Wall Street Reform and Consumer Protection Act, now officially renamed Dodd-Frank after its two sponsors, was finally signed into law by US President Barack Obama on July 21st.  According to The Economist magazine:

Dodd-Frank is riddled with messy compromises.

not least of which is:

There are some glaring omissions. There [is no] meaningful tidying-up of the tangle of federal regulatory agencies.

and there is also:

A nonsensical compromise to allow Senator Blanche Lincoln, author of a proposal to force banks to spin [banks’ swaps desks] off, to save face. Interest-rate, foreign exchange and high-quality credit swaps can be retained.

So the banks that caused the financial crisis will still be able to deal in forex and swaps thereon, but what about the beleaguered retail forex trader? Section 742 of the act (although it doesn't say this in so many words!)  leaves that side of things to the tender mercies of the CFTC:

(E) (ii) PROHIBITION

(I) IN GENERAL – Except as provided in subclause (II), a person described in subparagraph (B)(i)(II) for which there is a Federal regulatory agency shall not offer to, or enter into with, a person that is not an eligible contract participant, any agreement, contract, or transaction in foreign currency described in subparagraph (B)(i)(I) except pursuant to a rule or regulation of a Federal regulatory agency allowing the agreement, contract, or transaction under such terms and conditions as the Federal regulatory agency shall prescribe.

(II) EFFECTIVE DATE – With regard to persons described in subparagraph (B)(i)(II) for which a Federal regulatory agency has issued a proposed rule concerning agreements, contracts, or transactions in foreign currency described in subparagraph (B)(i)(I) prior to the date of enactment of this subclause, subclause (I) shall take effect 90 days after the date of enactment of this subclause.

According to the CFTC website this translates to:

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFTC will write rules to regulate the over-the-counter derivatives marketplace. The CFTC has identified 30 areas where rules will be necessary. The public is encouraged to provide input on the rule-writing process. Information regarding each rule-writing area will be published as it becomes available.

Retail forex is one of those "30 areas", but if you click on the link that says "Foreign Currency (Retail Off Exchange)" you will discover that consultation with the public on this matter actually finished long before Dodd-Frank became law:

The comment period closed on March 22, 2010, and the Commission is in the process of drafting final rules.

By my reckoning 90 days from the enactment of Dodd-Frank is October 19th 2010. Before then we should all have discovered if the Obama administration and the CFTC have taken on board any of the huge number of comments they received since they began their "consultations" with the forex trading public.