New CFTC margin limit proposal in US 10:1

[dennerle]

Originally Posted by rsmereka

Never,

This is a US thing IMHO. The UK/European regulating bodies have no plans to shadow these ridiculous rules. Some people have suggested it's a US governmental/political thing that has nothing to do with making Forex trading better or more secure.

UK/Europe also did not follow up on the NFA regulations that have been in place for many months now in the US.

Rick

in that sense, UK/European bodies seem more rationale than NFA or CFTC

[pipsbuster]

One of my friends decided to clarify the matter with the new CFTC regulations and sent them a couple of questions. Below are his questions and the CFTC answers to them. I think you will find this info very informative.

Dear Mr. XXXXXXX,



Your email has been forwarded to me for response. In answer to your first question, in the year 2000, Congress amended Section 2(c)(2)(B) of the Commodity Exchange Act (7 USC 2(c)(2)(B)), setting out who is allowed to serve as a counterparty to a retail off-exchange forex transaction; these are often referred to as the “enumerated” or “eligible” counterparties. Among the eligible counterparties were affiliates of CFTC-registered FCMs and financial institutions (which includes foreign banks). It was through these two categories that off-shore entities were allowed to serve as counterparties.



However, two things have changed. First, in 2008, the Congress passed the Farm Bill, which directed the CFTC to register counterparties as either FCMs or Retail Foreign Exchange Dealers (RFEDs). The recently published final rules, which take effect on October 18, 2010, reflect this statutory mandate, so as of October 18th, foreign affiliates of US FCMs will no longer be able to offer to serve as counterparties to US retail customers unless they become registered with the CFTC as FCMs or RFEDs.



Second, although foreign banks are currently able to offer to serve as counterparties, the recently pass Wall Street Reform and Consumer Protection Act has once more amended Section 2(c)(2)(B) eliminating the provision permitting foreign banks to serve as counterparties. This change will be effective in July of 2011.



I realize this is a long answer, but the upshot is, if your “foreign broker ” is an unregistered affiliate of an FCM, as of October 18th, it will either have to be registered as an RFED or FCM, or transfer accounts to someone who is. If your “foreign broker ” was a foreign bank, it can continue to serve as a forex counterparty to US retail customers until July of next year. Security deposit/leverage rules will apply to all registered entities doing business with US retail customers.



I hope this proves helpful.



Sincerely,





William Penner

Deputy Director, Compliance and Registration

Division of Clearing and Intermediary Oversight

Commodity Futures Trading Commission

(202) 418-5407




From: questions
Sent: Tuesday, September 07, 2010 4:36 PM
To: DCIO Internet
Subject: FW: Questions on the new Forex regulations

From: XXXXX XXXXXXX [mailto:xxxxxxxxxxxx@yahoo.com]
Sent: Monday, September 06, 2010 12:13 PM
To: questions
Subject: Questions on the new Forex regulations

Hello,

I have several questions pertaining to the most recent Forex regulations implemented by the CFTC which become effective on October 18, 2010. In particular, I would like to know the following:

1. Will foreign-based Forex brokerages be allowed under the US law to continue servicing US customers after October 18, 2010? If so, for how long?

2. Will the new leverage requirements apply to those Forex brokers servicing US customers after the aforementioned date?

I look forward to your prompt response.

Thank you in advance.

Kind regards,
XXXXX XXXXXXX

[pipsbuster]

My friend also spoke with a representative of IBFX Australia. Below is a transcript of their conversation containing some valuable info in it:

Client Services 50: This is Brandon how may I Help you?
Customer: Hi, Brandon. I got a question to you: will IBFX Australia continue servicing US customers after October 18, 2010 in light of the latest CFTC regulations?
Client Services 50: No we will not be having US clients doing business in Australia
Client Services 50: Due to the regulations in question
Customer: so all IBFX customers from the US will have to stick to the 1:50 leverage accounts, correct?
Client Services 50: That is my understanding of this, yes
Customer: Thank you for your assistance, Brandon. I really appreciate it.
Client Services 50: I wish I did have better news for you
Customer: Do you think IBFX will be able to do anything about it?
Client Services 50: I doubt it Jake, honestly we tried but we are obligated to follow these rules to the letter
Customer: what about servicing foreign companies owned by US residents? For example, if I set up a company in Canada and apply for a trading account with IBFX Australia on its name, will you open it?
Client Services 50: That is a great question
Customer: if you are not sure, just forward it to your legal department for a comment. I would appreciate their response at my email xxxxxxxxxxxx@yahoo.com
Client Services 50: I actually have the rules here they are just hard to find
Client Services 50: To my knowledge there is only way very specific way to do that
Customer: what is it?
Client Services 50: That is what i am trying to find as quick as I can
Client Services 50: The rules have changed about 4 times in a week
Customer: Did the CFTC release four official follow-ups to their initial statement?
Customer: I have no problem hanging on, take your time
Client Services 50: 8. An entity that is formed in a country other than the USA with directors/owners/authorized persons who are residents of the USA - Yes
Customer: great. makes me wonder what the purpose of these new regulations then is. pretty much any American can easily set up and maintain a company in Canada or elsewhere as long as he/she pays their taxes.
Client Services 50: Agreed
Customer: Would you mind if I share these news with my fellow traders? That is the path they might choose to follow.
Client Services 50: Yes you can, I dont see why not
Customer: Thank you for all your help. Have a nice day!
Client Services 50: You're welcome. If you have any questions or concerns feel free to contact us anytime. We are here for you 24 hours a day, Sunday afternoon through Friday afternoon.

[Dan]

Thank you for posting this information. I guess I will have to learn real fast how to set up a business/company in Canada. Does anyone know if this is hard to do and if I even have enough time to do it before the deadline?

Dan

[rsmereka]

Originally Posted by Dan

Thank you for posting this information. I guess I will have to learn real fast how to set up a business/company in Canada. Does anyone know if this is hard to do and if I even have enough time to do it before the deadline?

Dan

Hi Dan,

According to this, it can be done and the site is suggesting BC as the operating province for the corporation. I am assuming that the company would need to be incorporated which will cost around 1K to set up. The information is conflicting, the top part says that a US resident can open an incorporated business in Canada but the bottom part says that at least one of the directors of the corporation must be a Canadian resident or landed immigrant.

Bottom line, it's going to be expensive and complex. I think a discussion with a business lawyer is in order.

Rick

[Dan]

Originally Posted by rsmereka

Hi Dan,

According to this, it can be done and the site is suggesting BC as the operating province for the corporation. I am assuming that the company would need to be incorporated which will cost around 1K to set up. The information is conflicting, the top part says that a US resident can open an incorporated business in Canada but the bottom part says that at least one of the directors of the corporation must be a Canadian resident or landed immigrant.

Bottom line, it's going to be expensive and complex. I think a discussion with a business lawyer is in order.

Rick

Thanks Rick,

I am contacting a company that deals with this type of thing but am waiting for an email back at the moment. I have a friend that is a lawyer but he isn't specialized in business law he knows a little about it though. The information varies from site to site, but prices are from around $400 and up to $1000 and times that it will take to obtain also vary from 5 days up until maybe not even getting approved at all. I will continue to research. It may be expensive and time consuming but I think it will be worth it given the alternative. The US government is really irritating me lately. Thanks again for the heads up.

Dan

[Ken Long]

In reference to the previous posts, FXDD has been promoting their new Malta accounts as a way to preserve our leverage and hedging abilities. I wrote to them asking if US citizens would be accepted, it was my understanding that we wouldnt be allowed to open offshore accounts to avoid the regulations, but they said we would be welcome to open accounts there, and they continue to promote it as a safe haven for EA traders who want to trade with high leverage .
I will have to check into this a little more. I dont know how they can say that US customers are welcome, and claim it as a way to avoid the leverage changes.

[gross77777]

I am not sure if just having a Canadian corporation is enough. I called Jade FX and they told me that in addition to corporate paperwork they would require a copy of the government issued photo id and a copy of the utility bill and it can not be from a resident or citizen of US.
Not sure how to go around this one.

[rsmereka]

Originally Posted by gross77777

I am not sure if just having a Canadian corporation is enough. I called Jade FX and they told me that in addition to corporate paperwork they would require a copy of the government issued photo id and a copy of the utility bill and it can not be from a resident or citizen of US.
Not sure how to go around this one.

The link I provided above (post #45) maintains that at least one director of the corporation would have to be a Canadian and this is where you would get your photo ID and utility bill.

Rick

[gross77777]

It sounds quite complicated .It might be easier to just find a friend or relative outside of the US and ask them to help out .They can probably add you to the utility bill, so you can have the foreign address and a utility bill with your name on it.The only trick would be how to get a governement issued photo ID from that place.