Changes to ForEx Regulations Will Only Hurt The Little Guy
We are in a recession, or depression or whatever you want to call the hard economic times we are in. Everything I have learned by studying economic history indicates that reducing government regulation on small business stimulates growth to get us out of economic slumps. The current administration seems to have taken the opposite approach…massively regulate all sectors of business, restricting what people and companies can do. Their argument is that we have to “protect the consumer.”
It seems to me that according to the current administration, Americans are just too ignorant to protect themselves, that they should be protected from themselves for making stupid decisions.
The foreign exchange market has not escaped this heavy-handed habit of regulating everything. Starting Monday, Oct. 18 all US ForEx brokers will be at a serious disadvantage worldwide. US Government regulation through CTFC/NFA in just a few short hours will have a massive impact on any Foreign Exchange trader who holds a trading account with a US broker. Let us look at a few areas where these restrictions will impact the most.
- FIFO (First In First Out): When you have more than one position open for a given currency pair you must close the oldest order first.
- NO HEDGING: Prevents active buy sell orders for a same currency pair.
- LEVERAGE: 50:1 leverage margin on the 4 major pairs EUR/USD, GBP/USD, USD/JPY, and USD/CHF. 20:1 on all other pairs. This will make trading untenable for most “small business traders.” As an example, a trader that was using a leverage of 200:1 with a US$10,000 account will now be forced to use US$100,000 for the same volume of trades used before.
In the end, again, the only person to be hurt with more regulation by the CTFC/NFA is the little guy.
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