Can I say I told you so?
The CFTC has finally come through with its new rules on retail foreign exchange, which come into effect on October 18th, 2010 (Q&A about the new rules can be found here). Despite fears to the contrary, the CFTC will not be cutting permissible leverage in retail forex trading down to 10:1. The people have been heard! There was so much contrary opinion against that move from traders and brokers that the regulators were forced to rethink the plan.
That said, the CFTC will, however, be restricting leverage to no more than 50:1 (2% margin requirement) on the major currencies (5% on regional currencies). This is basically taking the NFA restriction put in place last year for 100:1 max leverage and tightening it up. I’m sure that’s going to have some folks up in arms, but the reality is that most of your better traders never go much beyond 10:1 actual leverage. Further, one of the biggest forex brokers out there, Oanda, has never permitted more than 50:1 leverage.
I know this won’t have any impact on my trading, nor encourage me to move my account outside the US. What about you?
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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.
** See John’s full bio.