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Spot FX trading with Interactive Broker rethink

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OK, first of all ,this post is not meant to point out any fishy scam of retail FX broker like this one.  Price feed and trade execution of IB are mostly flawless, I have no complaint about that, at all.  Yes, the learning curve is steep in order to master the trading platform, TWS.  To be honest, I hated it at first, however, after spending time watching IB webinars, and playing with the platform, I found the platform to be pretty stable and reliable.

Now, back to spot FX trading with IB.  I found it to be a little bit troublesome, and, maybe, painful. IB charges commission for every trade. This is fine. The painful part of it is, if the underlying  currency of the traded currency pair is different from your account base currency, you will have to convert your P/L manually back to your account base currency. And, yes, the conversion is considered as a new trade, and commission is charged. For example, you have just traded USD.JPY, and your account base currency is AUD, then you will have to convert your P/L in JPY to AUD once the position is closed.

Try making a couple of trades in IB paper account, and have a look at your account balance, you will understand what I am trying to say.

Well, overall, the commission might still be considered as low, but the whole process is a hassle. I am not sure if there is any workaround for this issue that I might be missing out.  Shoot me a comment if you are an experienced spot FX trader with IB.

A broker with good reputation, financial strength, solid platform(provided you know how to use it), and easy access to any market in the world, I feel comfortable trading with IB, however, for spot FX trading, I am rethinking  now…..

Brokers’ response to CFTC’s leverage reduction proposal

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Proposal of leverage reduction

I tweeted the news about CFTC is seeking public comment on proposed reduction of leverage to 10-to-1. In other words, 10:1 leverage would be the maximum amount allowed for all Forex traders in the U.S.

Since then, I have received few emails from retail brokers about their comments to this proposal.  So far, Oanda, MB trading, Interbank FX  are opposing the proposal (No surprise though, given the fact that their U.S operations will be affected directly by this proposal). I did not hear from FXCM, however, the customer service officer was advising me to do account transfer to U.K or Australia if I do not wish to be affected by the new proposed regulation.

Here are brokers’ responses:

Interbank FX

We stand behind the belief that you should be given the freedom and right to choose the amount of leverage that is appropriate for your individual desired risk, and that this basic principle of ‘choice’ is in jeopardy by the proposed CFTC regulations.

If you feel strongly about the proposal, we encourage you to help determine the outcome of these proposed regulations. You can help make an impact by sending comments directly to the CFTC at: secretary@cftc.gov.

MB trading FX (Information received via email, not available on MB trading website now)

MB Trading recognizes the importance of regulation that strengthens industry oversight. We agree with policing and regulating the industry, as was Congress’ intent when empowering the CFTC to create additional rules. However, we don’t agree with policies that might clearly disadvantage firms in the United States which in turn disadvantage you, the client. We encourage you to voice your individual opinion directly to the CFTC. The Public Comment Period is open for 60 days from the date of publication, which was January 13, 2010.

Oanda (via Oanda forum)

in this particular case we strongly believe that limiting leverage to 10:1 is highly restrictive and discriminatory against retail clients because it limits their trading choices. The proposed limit is not in the best interest of the trading public and additionally discriminates against forex dealers operating out of the United States, further limiting choice.

Hence, OANDA strongly opposes this new rule, and we believe it works against the open, accessible forex marketplace we have been trying to create. We will work hard to vigorously oppose the proposed leverage limit, and we are working together with other forex firms, such as FXCM and Gain Capital, to oppose this new rule.

I wonder after this proposal, what will be the next trick that CFTC will play? In short, it is messy. To save the trouble, I will leave my account outside U.S. Here is my another tweet about this.

Does NFA changes really hurt FX trading business?

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So, we know NFA has been changing rules. Retail traders are complaining, moving away from U.S based brokers.
But, is the change really bad? Well, firstly, I am not trying to defence NFA. I am just thinking, should I really look for another European based, or Australian based broker?
I am not sure. The change of the margin requirement does not affect my trading, since I am never a high leverage player. So, increase capital requirement of broker, increase margin requirements for Forex position, is there anything that I miss out and it is really bad for the business?
Any thought?
And, about European brokers, I’m totally unfamiliar with them, and hence,not confident of sending money to them. So, I maintain status quo now, leave my trading fund with some big U.S based broker.

So, we know NFA has been changing rules. Retail traders are complaining, moving away from U.S based brokers.

But, is the change really bad? Well, firstly, I am not trying to defend NFA. I am just thinking, should I really look for another European based, or Australian based broker?

I am not sure. The change of the margin requirement does not affect my trading, since I am never a high leverage player. So, increase capital requirement of broker, increase margin requirements for Forex position, is there anything that I miss out and it is really bad for the business?

Any thought?

And, about European brokers, I’m totally unfamiliar with them, and hence,not confident of sending money to them. So, I maintain status quo now, leave my trading fund with some big U.S based broker.

NFA new margin requirements

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This is not a breaking news, just a reminder to my readers since THE change is coming in around a month time. Official date given by NFA is 30th November 2009. CFTC approved NFA amendments to Section 12 of NFA rule book, which requires FDMs to collect a margin deposit of 1% of the notional value of the position held in the USD, GBP, CHF, CAD, JPY, EUR , AUD, NZD, Swedish krona, Norwegion krone and Danish krone, and 4% of the notional value of other positions.

This simply means that, more margin is required to open or hold a FX position. In short, for the major pairs mentioned above, maxim leverage of 1:100 is allowed, and 1:25 for the other pairs. Though at the first glance, this seems to be protective for novice traders who naturally loves the high leverage game  before getting burnt. I guess the most impacted group is the experienced professional traders who know how to handle their trades and prefer high leverage which allows them to achieve more profits with less capital. This will surely affect the way of conducting the trading business.

I haven’t made a thorough research on brokers’ reactions. I had a quick look at FXCM, Oanda, MB trading and Interactive Brokers. So far, FXCM is one the first to comply the new margin requirements starting 22-Nov-2009. Oanda has already met the margin requirements set up by NFA.  And I don’t see any big change for big firm like Interactive Brokers where leverage level for sport FX trading is always low. No update on MBT website so far.

Check your U.S based broker for details.

Short $EURGBP orders canceled – 3rd class Oanda

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Just how bad is Oanda’s tradig platform. I decided to cancel all short orders of EURGBP after watching the FXtrade platform behaved weirdly.

oanda_screwed

Look at the distance between the order price and the current price. They were around 100 pips away, but, it was showing as 1.1 pips? And I tried to switch tabs, it appeared correctly for a second, and back to 1.1. Did I miss out anything?

You can’t trade your capital on this type of platform. Of course, I am not talking about the minis.

Forex Brokers Evolution

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I have been hearing some news about rising capital requirement for Forex brokers. Here we go. Well, how many small brokers will be eliminated by then? Well, in the non regulated market, this move is considered as an improvement to the retail Forex trading though.

From Fxstreet.com

NFA (National Futures Association) has received notice that the Commodity Futures Trading Commission has approved changes to NFA Requirements Section 11 and the Interpretive Notice entitled “Forex Transactions.” The amendments increase the minimum net capital requirement for Forex Dealer Members (FDMs) to $5,000,000. They also eliminate the concentration charge and replace it with restrictions on the types of firms with which an FDM may maintain assets and cover its exposure for purposes of CFTC Regulation 1.17. These changes will become effective on December 21, 2007.

Full article from FXstreet.com here.