Greetings everyone. I’m sure you all have heard by now about the new CFTC regulations affecting US forex brokers and US retail forex traders. Well, everyone has an opinion whether these new regulations are good or bad. I happen to be on the side of the debate that the new regulations are bad, but in the interest of fairness I would like to present you with the other side of the story as they say. A gentleman by the name of Charley from dailyforex.com has sent me an article in which he writes in support of these new CFTC regulations. Hear him out and feel free to share your opinion regarding this point of view.
Article begins below:
Last month, as of October 18th, the Commodities Futures Trading Commission (CFTC) began the requirement of all Forex brokers to register with them. Actually, this is good news for all concerned. So often people see government regulation and they cringe thinking nothing good can come of it. But in this case, the opposite will be true.
Forex is estimated to be a 600 trillion dollar industry. Anyone that has been around the Forex market and has followed its progress knows that with the incredible growth came with it some bad press. And a lot of it was deserved. With an unregulated market as such, it stood waiting to be taken advantage of by scammers, illegitimate brokers, and outright thieves. That has now changed.
The guidelines the CFTC has put forth for the registered Forex brokers aren’t much different than what they may be adhering to already. For instance, the CFTC’s new rules require Forex dealers/brokers to cap leverage at 50:1 on major currency pairs and 20:1 on exotics. This not only makes the market more tenable, but also levels the playing field making it more realistic. This ruling shouldn’t affect the major Forex brokers (many of them use the ratio anyway), but it will discourage the less-than-above-the-board brokers from continuing their unfair practices.
The ruling mainly affects the retail Forex trader, and most certainly benefits the majority of smaller traders that aren’t paying commission, but are paying on the pairs spread.
The next step is to expand the ruling. The requirements from the CFTC are great and a huge step forward, but now it’s time to see something similar to happen in Europe and the Asian markets. Once the positive result is reflected from this initial ruling, it won’t be long before the others follow suit.
As it stands now, the CFTC ruling doesn’t really deal with Forex swaps, because they haven’t seen a problem there. However, the Treasury wants all possible loopholes to be filled and instructed the CFTC to work on a policy regarding Forex swaps as well. Although it may not be needed at this point, it certainly couldn’t hurt to address the issue.
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Hope you found this article interesting. If you wish to share you own 2 cents as they say, I suggest you join me and other traders in the debate over at the Forex Nirvana forum. There is a specific thread dedicated to the new CFTC regulations, and you can find it over here:
http://www.forexnirvana.com/f7/cftc-proposed-leverage-changes-1355/
Until next time, I wish you all many pips.
Cheers,
Alan