FXCM just released its formal statement on the new CFTC rules and it seems they are pretty worried about the possibility of not being able to accept US clients in their own non-US subsidiaries. Potentially this means that US based brokers will have to terminate all accounts in their foreign subsidiaries belonging to US residents. This means that many US clients who in the past year shifted their funds from US based brokers to other foreign brokers may have to start looking for a new home – something I discussed yesterday. That’s another huge blow to US brokers.
The U.S. Commodity and Futures Trading Commission (CFTC) recently announced final rules regarding off-exchange retail forex trading which will take effect October 18th 2010, and FXCM would like to address some questions concerning the new rules.
FXCM has reviewed the new rules and has already been in correspondence with both the CFTC and the NFA in order to obtain interpretive guidance on some of the provisions. Our goal is to provide our clients and the forex community with clear and correct information as to how accounts with FXCM LLC will be impacted. At present, we are still awaiting clarification regarding a particular provision of the Dodd-Frank financial reform statute enacted on July 21, 2010 and the impact it could have on certain accounts held at overseas affiliates.
However, below is the information we can share.
1. Leverage will be reduced as of October 18, 2010
Starting October 18, 2010, the maximum leverage available with FXCM LLC for trading will be 50:1 for major currency pairs and 20:1 for non-major currency pairs.
We believe that the reduction in leverage is a reasonable compromise from the initial CFTC proposal of 10:1 leverage. 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. FXCM has already implemented 50:1 as the default margin setting on FXCM LLC standard accounts, although traders still have the option to change margin levels upon request to 100:1 leverage with FXCM LLC. As of Oct 18th 2010, FXCM will comply with the new maximum leverage requirements.
Please note: The change in maximum leverage allowed only pertains to accounts held with the FXCM LLC (U.S.) entity.
2. As of October 18, 2010 all referring brokers introducing business to registered FCMs or Retail Foreign Exchange Dealers will be required to formally register with the CFTC as introducing brokers and become NFA members.
In anticipation of this rule, FXCM has already initiated procedures to be in compliance as of October 18th. At present, all Introducing Brokers to FXCM LLC are either registered with the CFTC as IBs or pending registration.
FXCM will continue to follow up with the CFTC and NFA regarding developments related to the implementation of the CFTC’s new rules and provide you with advance notice of future changes.
If you have any additional questions, please do not hesitate to contact FXCM client services staff 24 hours a day.
About FXCM Holdings LLC
Forex Capital Markets (FXCM) is a leading global forex and CFD broker* that caters to both retail and institutional markets. Founded in 1999, FXCM is one of the largest brokers, regulated by several of the world’s most respected financial authorities.
At the heart of FXCM’s client offering is No Dealing Desk forex trading. Clients have market access to some of the world’s largest liquidity providers; which enables FXCM to offer clients spreads as low as 1 pip on major crosses. Clients also have the benefits of mobile trading, one-click order execution and trading from real-time charts. FXCM’s CFD product* offers no re-quote trading and allows traders to trade oil, gold, silver, and stock indices, along with forex on one platform. In addition to currency and CFD trading, FXCM offers educational courses on forex trading and provides free news and research through DailyFX.com.
*Please be advised that CFD accounts are not available to residents of the U.S. or its territories. Additionally, FXCM LTD offers spread betting exclusively to UK residents. Residents of other countries are NOT eligible.
Trading foreign exchange and CFDs on margin carries a high level of risk, and may not be suitable for all. Read full disclaimer.
It appears that US FCM’s will no longer be paying fees to un-regulated IB’s after October 18th. Their pending status will no longer protect them. This will be forcing most of these IB’s out of business unless they can consolidate their businesses with regulated IB’s.