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NFA

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.