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This past Friday, Dan Roth, the president and CEO of the National Futures Association met with CFTC Commissioner Jill Sommers regarding their proposal to regulate the retail forex market..

After almost falling asleep trying to read the one page long CFTC comment file, I jumped for joy when I discovered that the purpose of the meeting was to discuss the proposed leverage restriction!

Here’s the full text of the comment file:


TO: Comment File

FROM: Commissioner Jill Sommers

DATE: February 26, 2010

SUBJECT: Proposal to Regulate Off-Exchange Retail Foreign Exchange Transactions and Intermediaries

On February 25, 2010, Commissioner Sommers met with Dan Roth of the National Futures Association. The Commission’s proposed rulemaking regarding the regulation of retail foreign exchange transactions and intermediaries was discussed, primarily with respect to the proposal to restrict leverage in customer accounts to a 10-to-1 limit. Marcia Blase and Andrew Morton of commissioner Sommers’ staff were also present at the meeting.

I’m thinking a possible reason for the meeting is that they were caught off guard with the backlash of negative comments they’ve received so far. The CFTC recently published over 6,000 of the comments it has received.

Considering the amount of forex traders in the US, 6,000+ comments may not sound a lot, but it is when it’s not only the most comments they have ever received about a rule proposal, it’s the most comments the CFTC has EVER received about ANYTHING.

I’ve read through most of them and every one I’ve read was AGAINST the proposal. So assuming I read a pretty good sample size, a 99% negative response is something that shouldn’t be ignored.

Here are some freshly cherry picked comments:

“Leave the margin requirements alone. We should responsible for our own actions. We know the risk and the rewards. If you feel the need to change the margin, don’t lower it below 50:1.


“I am an investor in-training for forex I have been studying the art for a couple years now part time.I have been gaining experience and understanding in forex to the point were it is starting to help me add to my financial stability. During these trying times most of us are making less money and working twice as hard and twice as long!

Without the leverage for me and thousands of others to trade, it will dampen if not stop us from trading in the forex market.

I do agree that we need regulations to keep this market safe, but increasing funds needed to be in the game will most definitely reduce the retail market participants from being able to invest. At the same time, reduce the avenues that us small guy’s can participate in!”

“First, thank you for your efforts to regulate and protect consumers in this area. Much of the regulation you propose is needed and will benefit everyone involved.

I do want to ask that you reconsider the proposed 10:1 leverage limitation that is proposed though. This will, in effect, exclude many, many folks that are now able to participate in this market.

Or, if they want to participate, this proposed limit will force these citizens to sign on to off shore accounts that will not have the same restrictions and protections they would enjoy if signing up under a U.S.-based company. Since the Forex trade is done over the Internet, it is just as easy to sign up over-seas.

Your 10:1 limit will, in essence, force the “little guy” out of the protections that you are trying to foster with this legislation.”

“Please register my opposition to the CFTC proposal of a 1:10 leverage for retail Forex trading.

The Forex market’s First Rule of Risk is that a trader should never trade with any more capital investment than he/she can afford to lose.

The CFTC proposed leverage revision from 1:100 to 1:10 would increase the amount of my capital investment by 10 times, a 1000% increase in risk exposure.

The basis for my opposition to the proposal is that it flagrantly disregards the Forex market’s First Rule of Risk. I am all for cracking down on fraud.

Regarding the decision of the 10:1 leverage, how does changing leverage really help with fraud? Fraud is fraud no matter what the leverage is actually, correct?

Retail Forex fraud is not something that is caused by the actions of retail Forex dealers; rather it is caused by con-men who masquerade as Forex experts promising silly and unjustifiable returns before disappearing with customer funds.

The 10 to 1 leverage change will not do what is needed to fight fraud.

What we need is SMARTER regulation not necessarily more regulation. Smarter regulation could have prevented tragedies like the Madoff ponzi scheme in which so many people lost their life savings

We should also prevent certain financial institutions from taking excessive risk, but the proposal to increase margin on Retail Forex is not going to accomplish anything beneficial.

I don’t think the retail traders are important enough to cause an economic collapse. If they were to raise margin requirements for the banks that might prevent volatility in Forex, but again the banks would just trade elsewhere. The foreign exchange market did not contribute to the collapse of brokerage firms and banks, it was the excessive underwriting of subprime mortgages and derivatives based on these mortgages.

Could this be the blatant attempt to move business from Retail Forex to the USA future’s exchanges.


Because the CFTC receives a small fee on every futures trade that occurs on a regulated exchange, whereas there is no fee to the CFTC coming from individual retail forex transactions.”

“In regards to RIN 3038-AC61 I disagree with limiting the leverage to 10/1. Education will prevent losses and we all need to be responsible to educate ourselves.”
“I think the proposed regulations regarding retail forex leverage are unjustified and would close the door of this market to retail traders. It would also hinder the ability of new traders to test and develop profitable strategies. I’m a graduate student and I currently make a living trading forex. Taking away 90% of my income to “protect me” is ridiculous.”
“I am strongly against a decrease in leverage to 10:1. I believe it is an attack on the capitalist market to take choice away from the investor. Please do not pass this role.”

It’s way too early for retail forex traders and brokers to claim victory just yet. But at least it looks like the CFTC is actually taking into consideration the feedback they’ve received and will take a harder look instead of simply passing a decision on this matter. Let’s keep our fingers crossed.