NFA admits that funds are flowing out of the US
- 5 Comment
What has been rumored and widely anticipated is finally happening. The NFA keeps imposing one restrictive requirement after another and US brokers are forced to open up shops elsewhere. It has been widely speculated that US retail forex clients will start shifting theire funds abroad, but there has been no official confimation. Yet.
Reading the interview (http://www.onlineforextrading.com/blog/national-futures-association-0192009/) with the National Futures Association Director of Communications and Education, Larry Dyekman, one thing stands out, I’m quoting:
Question: How have recent NFA changes impacted retail forex trading?
Answer: “We receive data on a weekly basis from our Forex Dealer Members regarding the amount of customer funds they currently hold. Since our latest rules went into effect on August 1, we have seen a minimal (4%) decline in customer funds at our 17 Forex Dealer Members.”
A 4% “minimal” decline in funds?? That’s tens of millions of dollars!
It’s great to see an NFA exec finally admit that the result of their inept requirements are that 4% (on average) of US retail Forex traders have shifted their money elsewhere (offshore). So some funds must have moved to Europe and Asia and who knows where else? Is that the result the NFA had expected to achieve? I know they didn’t expect to achieve anything. They just introduced requirements which at first glance made sense. That’s it. They didn’t really think of the outcome one bit. Now we see that decision meant – US money moving to offshore brokers, some of them are much less safe than the others.
Let me make a prediction for the future: I expect 50% of US retail Forex money to leave the States within 3-4 years. Quote me on this one.
NFA, it seems to me, is simply forcing the retail Forex out of the US. Why? I don’t really know, but there are several educated guesses I can make.
5 Comments on this post
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Wayne said:
I’ve got a guess: The CME wants in on the retail FX market. In order to be competitive, they have to make FX trading as conservative as futures trading.
October 26th, 2009 at 2:26 pm -
Michael Greenberg said:
Wayne, nice one. This is exactly what many in the retail forex market believe in…
October 26th, 2009 at 3:27 pm -
RENE said:
I CAN NOT BELIEVE THIS SH**. IS THERE WE CAN DO TO CHANGE THIS STUPID RULE? WE CAN NOT TRADE THE DEPOSIT “MARGIN” ANYWAY THE DEALERS WOULD NOT ALLOW IT. I STILL DO NOT SEE ANY BENEFIT ON THE LAST CHANGE THEY MADE. THEY ARE JUST COMPLICATING OUR LIFE. WHY CAN THEY JUST MAKE CHANGES LIKE THAT? THERE HAS GOT TO BE SOMETHING WE AS TRADER CAN DO TO STOP THIS NON-SENSE. WHAT NEXT?
October 27th, 2009 at 2:20 am -
Stanley said:
Wayne is right on. The “Exchange” has many old friends in Washington – having paid millions in lobbying efforts – and have continually lost market share from forex dealers.
October 27th, 2009 at 10:29 am -
Bill said:
Avoiding the NFA by avoiding US-based brokers is easy enough, but I fear the other shoe has yet to drop — punitive tax policy changes. What would be the most effective way to prevent US traders from seeking a free market in offshore Forex trading? A tax policy that penalized US citizens for trading in offshore markets without going through an NFA-regulated intermediary.
I don’t know that this will happen, but they will either have to accept the exodus, or try to make it somehow difficult, expensive, or actually illegal to trade Forex in a free-trading, offshore marketplace.
I hope they will realize that they have made a mistake and change the rule, but I am not optimistic. So, bye bye NFA, hello world!
Bill
October 30th, 2009 at 6:08 pm
