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Foreign Exchange

FX news: CFTC retail rules bedding down but anomalies exist

There will continue to be fallout from the CFTC’s new regulations for retail FX but the big players are taking the regulations in good grace and, I imagine, some relief that the mooted curtailment of leverage to 10:1 was not imposed.


In fact Drew Niv, CEO of FXCM, is even talking up the merits of the reduction to 50:1. “We believe that the reduction in leverage is a reasonable compromise from the initial CFTC proposal of 10:1 leverage,” he says. “FXCM does believe lower leverage will be to the benefit of traders as higher leverage can often times result in a few losing trades offsetting many winning trades.” This might make one wonder why FXCM hadn’t previously limited leverage to that extent, as had Oanda.


As regards the split between major and exotic pairs, it looks as if this will continue to be ascertained by reference to Section 12 of the NFA’s Financial Requirements: currency pairs composed of USD, GBP, CHF, CAD, JPY, EUR, AUD, NZD, SEK, NOK or DKK are major and all others exotic. A rule has to be determined somehow but it appears that it will be some time before the CFTC’s suggestion, that the designation of which currency pairs are major should be adjusted by the NFA “in light of such factors as changes in volatility” will be implemented.



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