There is an article on the Financial Times website on the subject of increased regulation in the US of retail forex trading. For those who have been following along with developments over the last year (No More “Hedging” for Forex Traders, New NFA Rule Impacts More Than Just Forex Hedging, New NFA Retail Forex Leverage Restrictions) there won’t be much new information.
Here’s an interesting point of reference from the article, though.
The rules bring fresh oversight to a small but expanding portion of the $3,700bn-a-day global foreign exchange market, ….
Retail traders make up more than $125bn of that volume, up from $10bn in 2001, it estimates.
There are always a lot of questions about the influence of pricing and trading within the retail forex trading complex as it relates to the forex market as a whole. These figures – showing that retail trade accounts for only about 3% of daily volume – make it very clear that retail is effectively a non-factor in the movement and determination of forex prices.
The final thrust of the article is that movement is happening to further tighten things up.
The latest proposed rules will strengthen the CFTC’s authority over companies selling currency trading to retail traders, forcing them to register with regulators and disclose more to potential customers, according to a government official familiar with the proposal.
The CFTC would also get clear jurisdiction over most spot currency trades.
“All salespeople and everybody that deals with retail forex have to be registered with the CFTC,” said Larry Dyekman of the NFA.
“That’s going to be a big change to the forex industry.”
Since folks in the rest of the securities markets (stocks, futures, etc.) have to be registered to deal with individual customers, this is basically just bringing retail forex in-line with everything else.
Update: My own employer (Reuters) posted a similar story.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
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