Yesterday, we spoke with CFTC and Congress about how new regulation coming out of Washington would affect traders. We also sat down with former CFTC Chair Sharon Brown-Hruska, now a vice president in NERA’s securities and finance practice. Brown-Hruska says that while it’s justified for the CFTC to crack down on illegal forex operations, the agency’s current proposal to limit leverage in OTC forex to 10:1 “overshoots the mark.”
She says with the current proposal there’s the potential to damage legitimate traders and that killing the market would not solve the fraud problem.
Daniel Waldman, partner at Arnold & Porter LLP and former general counsel at CFTC, says that although it’s uncertain what form pending legislation will take, that regulatory changes ARE coming. He says that the bottom line is that we will see new legislation and traders, therefore, need to follow developments on the regulatory front.
Brown-Hruska agrees, saying that the trading community “needs to make their voice heard” as new regulations are set to change the way they do business.
For more from our Washington insiders, including background and details on pending legislation, check out our feature story in the April issue.
Tags: CFTC, forex, OTC, regulation
I have a question; How does the CFTC determine if a Forex broker dealer is operating within the US? If a broker dealer has a location outside the US and has his site on a server within the US, has contacts phones on US soil, and also active in gaining US clients, does that put him as a US forex dealer or not?
bob
I won’t even trade forex anymore, because every broker I could find is a CROOK. Just go to the Forex Peace Army website and look at the vast array of evil-doers. There seems to be no end to them, because of NO REGULATION!! Now, I am a life-long Republican, and regulation is the last thing I would consider for most things. However, the deal
with forex brokers being able to manipulate the spread whenever they choose to do so, has got to stop! The biggest problem, is the government is too stupid and too much on the take to do so. I don’t see why forex couldn’t be done on a commission basis, just like commodities, and forget this spread business! I believe if we did this here in the US, and traders saw how much fairer things were here, they would flock to the legitimate US brokers. This would force other countries to comply or lose much of their business.
Forex= CAVEAT EMPTOR
Hi Bob,
To answer your question, a source at a U.S. forex dealer says, “Determining jurisdiction is not always a clear cut question as it can depend on a variety of factors, but generally speaking a legitimate foreign forex counterparty will not be transformed into a U.S. forex dealer simply because it has some presence in the U.S. and solicits U.S. customers. Ultimately, though, the CFTC could evaluate on a case-by-case basis whether the Commodity Exchange Act or the Commission’s regulations require U.S. registration.”