Comments on: New NFA Rule Impacts More Than Just Forex Hedging

By: Jason

Jason — Wed, 17 Jun 2009 02:45:17 +0000

Very simple change from a US broker. I live in Australia and all brokers here allow hedging still and could not care less, we are not governed by the stupid US rules thank god.

Plus you can use any EA you like, my broker here makes there money via the spreads only, so they dont care if you win all the time

Problem solved!

By: GP

GP — Mon, 01 Jun 2009 10:47:53 +0000

Since this ruling has become active, I have had to close an NFA broker’s account due to trades no longer being processed by the automated platform and system I had been using successfully up to this point…another broker transferred an account to a different subsidiary overseas. At this point I will no longer worry about a trade being rejected for this reason, it does seem like a waste though, to have to deal elsewhere….

By: John

John — Sat, 30 May 2009 01:24:13 +0000

Dkoop – Market makers have always done offset accounting and viewed things in net terms. That’s how they’ve guaged their exposure and managed it. The ruling will not impact them in the slightest. Keep in mind the NFA is just forcing a singular required bookkeeping method (offset). Basically, they are just requiring that the brokers show customer accounts in exactly the same way they do their own.

By: Dkoop

Dkoop — Sat, 30 May 2009 00:36:00 +0000

This new rule applies to retail customers. How does it apply, if it applies, to the market maker themsleves? As i understand it they requently offeset our postiions in the market with a Hedge. Does this rule affect the market makers in anyway and how would that affect retail currency exchange?

By: Money Blown

Money Blown — Mon, 18 May 2009 14:55:48 +0000

For those of us that aactually make money off long and short positions this sucks.

You should be able to ask the the broker for the option to hedge.

Has any found code to to dtermin the long or short buy. My EA worked great with both on the same pair.

The only work around is having two accounts and using the same profile, then changing the EA’s to go long or short.

psst

By: GP

GP — Thu, 14 May 2009 11:58:50 +0000

John- thank you as always for your valuable insight and opinions, you have been a great teacher through your many articles and books. My concern with this ruling though is that it may well have the effect of placing our US brokers at a competitive disadvantage- for example, I have been using a few expert advisors with good results, and have been checking to see if any multiple open positions have been offset inadvertently- so far, so good, but if it does happen, I guess I will find out how the trade will be affected after May 15th. If it means that the results will be degraded, I imagine that I will need to transfer to a broker elsewhere….

By: John

John — Mon, 11 May 2009 14:26:14 +0000

thepipeline – You seem to be thinking “offset” and “close” are not the same thing. I would contend – and from what I’ve heard the brokers see it the same – that the NFA looks at the two things being equivalent. That means if you have a long position on comprised of multiple different entries, if you do a sale/short of a fractional part of the existing position your broker will apply that sale/short to the earliest entered long.

You have to keep in mind that forex is more akin to futures than stocks. In stocks selling and shorting are not necessarily the same. In futures when you are long you have to offset that long with a short to close the trade. Thus, offset=close. Forex works basically the same way.

By: thepipeline

thepipeline — Sat, 09 May 2009 22:40:24 +0000

As I read the rule, I do not see the FIFO part of the rule applying to anything except the offsetting or hedged positions. Here is the sentence that applies:

“Forex Dealer Members may not carry offsetting positions in a customer account but must offset them on a first-in, first-out basis.”

The operative words are “must offset them…”. The word them refers to offsetting positions.

If you are only trading in one direction, ie, only long or only short, then you can still close your open orders in any order that you wish. People are getting all bent out of shape about the FIFO rule, when it only applies to the closing of what would otherwise be offsetting positions. Not that I like thenew rules. I would rather the government let us trade like we want to. I am a big boy and do not need a nanny looking out for me. But, lets not get all worked up and make it out to be worse than it is.

By: Dkoop

Dkoop — Thu, 07 May 2009 13:58:49 +0000

Richmond FX, when they were around, had a great entry order system, if I remember correctly.

I only demo’d their system though and didn’t get that involved in it. They ahd all sorts of OCO orders pre set without having to write any code. You simply filled in the blanks.

I would suggest to FXCM to have a look at their old system.

By: John

John — Thu, 07 May 2009 13:31:13 +0000

Jonny – Sounds like your “go long and short” strategy is a straddle type of play. Do I read that right?

I think if the NFA came through and said we”re making these rules changes to get retail forex accounting in line with the rest of the markets (which is all it really does) and avoided the “to protect traders” bits the changes would be a bit more palatable to folks. There would still be squawking to be sure. They were never going to avoid that.

As for the capital thing, I don’t feel like requiring some fixed minimum absolute capital level is really the way they needed to go. Essentially, that restrains competition. A capital level relative to customer assets strikes me as being all that’s required. All you’re trying to do there is to make sure customer accounts are protected.