Forex Trading Restrictions Posed on Retail FX Small Account leverage by US Regulators
The history of retail foreign exchange trading market in the US have been thus far clouded by bad reputation, as a result giving a false image about the trending global forex market to the average US investor. But that’s all about to change with US Commodity Futures Trading Commission (CFTC) having imposed restrictions on ‘leverage’ allowed by top forex brokers to retail forex traders with effect from October 18th, 2010.
Forex trading experts feel that CFTC is trying to penetrate the freedom of investors, thus arguing that it should totally be the choice of the investors how much leverage to use rather than CFTC deciding it for them. Nevertheless the changes are being made in the best interest of the average US investors and are expected to change the overall US perception about retail forex trading over time.
Don’t get this wrong, CFTC did not just cap the leverage allowed for traders but also put forward further requirements for forex brokers in order to be eligible to access the US forex investors market. Last year saw the exit of some small forex brokers from the US markets with National Futures Association (NFA) increasing the minimum capital requirements for dealers from $5 million to $20 million. But being strict on smaller scale dealers, does it necessarily mean a secure marketplace for average traders? Perhaps not and it only means that forex dealers are being regulated within US. CFTC finally landed on a maximum leverage limit of 50 times collateral for major instruments and a maximum of 20 times collateral for more insignificant instruments. Restriction on leverage is one of four major segments in the overall changes in regulations. New rules RFED (Retail Foreign Exchange Dealer) registrations, minimum capital requirements, better disclosure and protection towards investors are the remaining segments undergoing changes with effect from October 18th 2010.