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Earth to FINRA: You are insane
Fri, Feb 20 2009, 08:39 GMT
by Rob Booker
FINRA. which is a U.S. regulator for brokerage firms, recently proposed a rule that would limit leverage in forex to 1.5:1, which is a huge decrease from what is offered now. This would not affect many forex dealers -- most are regulated by the NFA and CFTC in the United States. However, there have been forex dealers who recently became broker-dealers in order to avoid the NFA -- and now they're getting whacked from the other side of the regulatory fence.
Anyway, today I had some thoughts for FINRA:
Here's the link:
A point I failed to make in the podcast is that customers will just go someplace else to trade forex. If they can't get the leverage they want in the United States, they'll just move their accounts offshore. That is already happening. FINRA thinks they are doing traders a favor by "protecting" them. Here is what they are doing:1. Sending customers to overseas firms who are not as well financially regulated;
2. Penalizing U.S. businesses that offer forex
How does this, in the end, do anything to help traders? And why doesn't FINRA take the money and resources it has put into worrying about Forex leverage, and put it into oversight of a broker like the one Bernie Madoff was running to hide his fake trades?
Published on Fri, Feb 20 2009, 08:44 GMT
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Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
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