Thread: Leverage limits and the KOM contest

As has been suggested in another thread I think that with the rule changes regarding leverage for US account holders taking effect that the rules of the King of Micro contest should be changed to allow it to be a fair competition for US account holders.

It is not a fair contest if the winner is determined by % of account growth when account holders in countries other than the US are allowed to use higher leverage than US holders. Since US account holders are only allowed to use a maximum of 50:1 leverage then I think it would only be fair for FXCM to change it's KOM rules to allow only a maximum of 50:1 leverage to be in use for all contest participants.

Not only would this measure maintain fairness, but it would encourage more responsible trading for all contest participants, as opposed to some of the very risky trading that has nevertheless resulted in victory many times in the past with the KOM. I have to admit that when I first encountered the KOM contest and I viewed the trading of some of the winners I had a hard time justifying conservative trading in light of being crushed month after month by KOM winners and their incredible leveraging. If part of the goal of FXCM is to motivate profitable trading and if indeed it is the case that in the long term those who are wise and conservative in money management are proven to be the most profitable, then lowering the maximum leverage requirement for KOM participants to 50:1 will prove itself beneficial to FXCM through encouraging more responsible leveraging.

I am very happy that there is even such a thing as the King of Micro contest and up until this point I feel that FXCM has made an honest attempt to keep the contest fair. I'm hoping that type of attention towards fairness continues by updating the rules regarding leverage in the contest. One of the reasons I chose FXCM as my broker is due to it's exciting and inspiring KOM contest, with it's generous rewards and it's very open-minded provisions that allow all participants to view the trading results of the past winners. Thank you FXCM for that. Please allow this good thing to continue by maintaining fairness for your US customers.

Yours Truly,
PatrickB

Originally Posted by PatrickB

As has been suggested in another thread I think that with the rule changes regarding leverage for US account holders taking effect that the rules of the King of Micro contest should be changed to allow it to be a fair competition for US account holders.

It is not a fair contest if the winner is determined by % of account growth when account holders in countries other than the US are allowed to use higher leverage than US holders. Since US account holders are only allowed to use a maximum of 50:1 leverage then I think it would only be fair for FXCM to change it's KOM rules to allow only a maximum of 50:1 leverage to be in use for all contest participants.

Not only would this measure maintain fairness, but it would encourage more responsible trading for all contest participants, as opposed to some of the very risky trading that has nevertheless resulted in victory many times in the past with the KOM. I have to admit that when I first encountered the KOM contest and I viewed the trading of some of the winners I had a hard time justifying conservative trading in light of being crushed month after month by KOM winners and their incredible leveraging. If part of the goal of FXCM is to motivate profitable trading and if indeed it is the case that in the long term those who are wise and conservative in money management are proven to be the most profitable, then lowering the maximum leverage requirement for KOM participants to 50:1 will prove itself beneficial to FXCM through encouraging more responsible leveraging.

I am very happy that there is even such a thing as the King of Micro contest and up until this point I feel that FXCM has made an honest attempt to keep the contest fair. I'm hoping that type of attention towards fairness continues by updating the rules regarding leverage in the contest. One of the reasons I chose FXCM as my broker is due to it's exciting and inspiring KOM contest, with it's generous rewards and it's very open-minded provisions that allow all participants to view the trading results of the past winners. Thank you FXCM for that. Please allow this good thing to continue by maintaining fairness for your US customers.

Yours Truly,
PatrickB

Hi PatrickB,

You've brought up some good points to consider. We want the contest to be fun and fair for all participants. We rely on your feedback to make improvements.

Here are some other points to consider:

1. FXCM has clients from all over the world.

2. The majority of FXCM's clients are with our UK-regulated entity.

3. FXCM's UK-regulated entity allows Micro clients up to 400:1 leverage to magnify gains and losses.

4. Is it fair to limit the leverage of traders around the world in the King of the Micro contest based on regulations in the US that don't apply to their UK-regulated accounts?

5. In light of the new regulations in the US, should the King of the Micro contest only be offered through FXCM's UK-regulated entity in the future?

I would appreciate feedback from our Micro clients from around the world on this topic. Please let us know what you think.


Thanks,

Suhail

In response to the above posts, I would suggest a two pronged approach. Obviously, as a US trader, it would be unfair to ask our friends across the pond to suffer our fate, seeing how much we don't like it here. That said, to exclude US traders from participating in the contest would be adding insult to injury. Unfair, and a bit self serving on FXCM's part. Just sweep the US traders under the rug, and continue to expect loyalty on our part, all the while gladly taking our deposits, which enhances the bottom line in anticipation of FXCM's IPO. No good deed goes unpunished, indeed. My own personal opinions aside, I would suggest creating a contest for ONLY US-based traders, and have one for the rest of the world. That way, FXCM would show it is commited to it's traders here in the US, and isn't just paying us lip service. Fair is fair, and as someone who has traded both here in the US, and with FXCM-UK, (which, by switching over, was supposed to take care of all these problems in the first place), I would suggest FXCM show a little more sympathy towards its US traders. Politics can change very quickly, and the trading climate may yet again become favorable for traders who are willing to accept the risk of high leverage, without having their hands held by US regulators. What does not change as quickly, is the opinion of a trader who feels he was left out in the cold. Mr Market has a way of weeding out the good companies, who are proactive, from the fly-by-night companies, who only worry about next quarter's payday. FXCM has been good to me, and other than a little present bitterness regarding these new regulations, I harbor no grudge. Let's hope FXCM does right by its US clients.

Originally Posted by Ntsarhop

In response to the above posts, I would suggest a two pronged approach. Obviously, as a US trader, it would be unfair to ask our friends across the pond to suffer our fate, seeing how much we don't like it here. That said, to exclude US traders from participating in the contest would be adding insult to injury. Unfair, and a bit self serving on FXCM's part. Just sweep the US traders under the rug, and continue to expect loyalty on our part, all the while gladly taking our deposits, which enhances the bottom line in anticipation of FXCM's IPO. No good deed goes unpunished, indeed. My own personal opinions aside, I would suggest creating a contest for ONLY US-based traders, and have one for the rest of the world. That way, FXCM would show it is commited to it's traders here in the US, and isn't just paying us lip service. Fair is fair, and as someone who has traded both here in the US, and with FXCM-UK, (which, by switching over, was supposed to take care of all these problems in the first place), I would suggest FXCM show a little more sympathy towards its US traders. Politics can change very quickly, and the trading climate may yet again become favorable for traders who are willing to accept the risk of high leverage, without having their hands held by US regulators. What does not change as quickly, is the opinion of a trader who feels he was left out in the cold. Mr Market has a way of weeding out the good companies, who are proactive, from the fly-by-night companies, who only worry about next quarter's payday. FXCM has been good to me, and other than a little present bitterness regarding these new regulations, I harbor no grudge. Let's hope FXCM does right by its US clients.

Hi Ntsarhop,

Welcome to the Micro Forum!

We appreciate your feedback, ideas and also your loyalty to FXCM. I am sure there will be more discussion about the King of the Micro contest the closer we get to the new regulations taking effect and we will keep you informed of any changes to the contest if/when that does happen.

We take all ideas and suggestions very seriously, so again, thank you!

Rob

Originally Posted by Suhail at FXCM

Hi PatrickB,

You've brought up some good points to consider. We want the contest to be fun and fair for all participants. We rely on your feedback to make improvements.

Here are some other points to consider:

1. FXCM has clients from all over the world.

2. The majority of FXCM's clients are with our UK-regulated entity.

3. FXCM's UK-regulated entity allows Micro clients up to 400:1 leverage to magnify gains and losses.

4. Is it fair to limit the leverage of traders around the world in the King of the Micro contest based on regulations in the US that don't apply to their UK-regulated accounts?

5. In light of the new regulations in the US, should the King of the Micro contest only be offered through FXCM's UK-regulated entity in the future?

I would appreciate feedback from our Micro clients from around the world on this topic. Please let us know what you think.


Thanks,

Suhail

-Would it be fair to limit the leverage of traders around the world in the KOM contest based on regulations in the US that don't apply to their UK-regulated accounts?

Not if the reasoning were based exclusively on the US regulations. However, the KOM contest is FXCM's creation. It's existence is not predicated on any current market regulations. As I understand it FXCM stands to benefit financially from having traders in general be profitable over the long term, and I have been repeatedly told that lower leveraging and prudent money management is the trend of behavior among profitable traders. That being the case, would it not be reasonable for FXCM to globally encourage responsible trading in it's King of Micro contest, along with providing the financial incentive it provides, regardless of the US (or any country's) leverage restrictions?

At best this would allow everyone around the globe to still compete in the KOM in the same manner as they always have except one aspect; They would simply have to be more conservative with their leveraging if they wanted to compete.

I liken it somewhat to the restrictions that are placed on athletes who might use performance enhancing drugs. Certainly if an individual wants to play a sport they may do so and take whatever performance enhancements they want. But if they want to be recognized and rewarded by the professional sports community they must comply with regulations that encourage fair play and healthy participation. Excessive leverage is not healthy. FXCM often teaches this. So then why would FXCM then go and encourage excessive leverage by rewarding it though their KOM contest? Unequal leverage maximums among players is unfair, and it has been all along. FXCM has known this and admits it. So then why would FXCM continue to encourage unfair practices by rewarding them through the KOM contest?

I think regardless of the catalyst (in this case the CFTC's ruling) it is a necessary step in the right direction towards responsible trading and fairness for FXCM to change the rules of maximum leverage for KOM participants. It's also a win for the traders and the broker whenever a broker actively encourages responsible, profitable trading.

I'm not suggesting that FXCM impinge on anyone's leveraging liberty for general trading, only with the KOM contest, which is FXCM's right to do so (as it already has with all of it's current contest rules) being that it's FXCM's contest to begin with.

-In light of the new regulations in the US, should the King of the Micro contest only be offered through FXCM's UK-regulated entity in the future?

I can certainly say that would be the easiest thing for FXCM to do. But it would also be the most negative thing FXCM could do to it's US clients.

The KOM contest is important in many ways. It encourages people to trade and trade more frequently, which is financially beneficial to FXCM. It also encourages people to learn to get better at trading, which is financially beneficial to FXCM. It encourages people to choose FXCM as a broker, which of course is financially beneficial to FXCM. It also holds the potential to encourage more responsible trading and more profitable trading (if my suggestion is enacted), which is financially beneficial to FXCM. All of these benefits would be lost on the US micro market if FXCM decided to exclude US clients from the KOM contest and that would certainly not be financially beneficial to FXCM.

Excluding US clients from the KOM contest would also lend an opportunity to FXCM's competition to steal customers, by providing them a similar incentive to the KOM to fill the gap that FXCM would be leaving by excluding it's US clients.

Overall, I think it quite strange that all along FXCM didn't have a contest maximum leverage requirement for the very reasons that I've already stated. As I think about it I find it quite unfair that all of this time I've been fooled into thinking the contest was more fair than it actually has been. I sincerely hope the good people of FXCM realize the need for this change and recognize it's multiple benefits to their company.

PatrickB

Originally Posted by PatrickB

-Would it be fair to limit the leverage of traders around the world in the KOM contest based on regulations in the US that don't apply to their UK-regulated accounts?

Not if the reasoning were based exclusively on the US regulations. However, the KOM contest is FXCM's creation. It's existence is not predicated on any current market regulations. As I understand it FXCM stands to benefit financially from having traders in general be profitable over the long term, and I have been repeatedly told that lower leveraging and prudent money management is the trend of behavior among profitable traders. That being the case, would it not be reasonable for FXCM to globally encourage responsible trading in it's King of Micro contest, along with providing the financial incentive it provides, regardless of the US (or any country's) leverage restrictions?

At best this would allow everyone around the globe to still compete in the KOM in the same manner as they always have except one aspect; They would simply have to be more conservative with their leveraging if they wanted to compete.

I liken it somewhat to the restrictions that are placed on athletes who might use performance enhancing drugs. Certainly if an individual wants to play a sport they may do so and take whatever performance enhancements they want. But if they want to be recognized and rewarded by the professional sports community they must comply with regulations that encourage fair play and healthy participation. Excessive leverage is not healthy. FXCM often teaches this. So then why would FXCM then go and encourage excessive leverage by rewarding it though their KOM contest? Unequal leverage maximums among players is unfair, and it has been all along. FXCM has known this and admits it. So then why would FXCM continue to encourage unfair practices by rewarding them through the KOM contest?

I think regardless of the catalyst (in this case the CFTC's ruling) it is a necessary step in the right direction towards responsible trading and fairness for FXCM to change the rules of maximum leverage for KOM participants. It's also a win for the traders and the broker whenever a broker actively encourages responsible, profitable trading.

I'm not suggesting that FXCM impinge on anyone's leveraging liberty for general trading, only with the KOM contest, which is FXCM's right to do so (as it already has with all of it's current contest rules) being that it's FXCM's contest to begin with.

-In light of the new regulations in the US, should the King of the Micro contest only be offered through FXCM's UK-regulated entity in the future?

I can certainly say that would be the easiest thing for FXCM to do. But it would also be the most negative thing FXCM could do to it's US clients.

The KOM contest is important in many ways. It encourages people to trade and trade more frequently, which is financially beneficial to FXCM. It also encourages people to learn to get better at trading, which is financially beneficial to FXCM. It encourages people to choose FXCM as a broker, which of course is financially beneficial to FXCM. It also holds the potential to encourage more responsible trading and more profitable trading (if my suggestion is enacted), which is financially beneficial to FXCM. All of these benefits would be lost on the US micro market if FXCM decided to exclude US clients from the KOM contest and that would certainly not be financially beneficial to FXCM.

Excluding US clients from the KOM contest would also lend an opportunity to FXCM's competition to steal customers, by providing them a similar incentive to the KOM to fill the gap that FXCM would be leaving by excluding it's US clients.

Overall, I think it quite strange that all along FXCM didn't have a contest maximum leverage requirement for the very reasons that I've already stated. As I think about it I find it quite unfair that all of this time I've been fooled into thinking the contest was more fair than it actually has been. I sincerely hope the good people of FXCM realize the need for this change and recognize it's multiple benefits to their company.

PatrickB

Hi PatrickB,

Thanks again for your feedback.

It would be good to hear the thoughts of traders from outside the US. Would they like the leverage in the King of the Micro contest limited to 50:1?


Suhail

Perhaps extend the duration of the contest from one month to 3 months. Many of the traders that gain 2000% in one month will probably get margin called the following month, whereas the traders using limited leverage may still be going strong. It would be interesting to see if these huge one month gainers would still be trading 2 months later.

I don't see how that would be helpful. In theory it makes sense that those who risk big will ultimately lose in the long run. But in reality we have no way to know when that loss will come. There is no guarantee that three months of trading would cause a person up X% to collapse, just as there is no guarantee that three months of trading would cause a person who is significantly leverage restricted to be on equal or superior footing with those who are not.

Oddly enough FXCM has printed in their rules:

Originally Posted by FXCM

6. CONTEST TRADING REGULATIONS
The purpose of the contest rules is to ensure that every trader will have the same opportunity for success as other traders. FXCM reserves the right to amend, waive or interpret any rule in its sole discretion when doing so would be in the best interests of the contest.

Since all along it has not been the case that every trader has had the same opportunity for success in the contest (and FXCM has known this), and since FXCM has always reserved the right to amend their contest regulations in the best interest of the contest, why now is it not a clear opportunity to do so?

I understand the throught process behind FXCM asking it's largest client base for it's opinion on how to proceed with this situation. But I question FXCM's motivations when all along this has been a dramatic inequality in the contest and yet they have allowed it to persist.

Originally Posted by PatrickB

.

This had probably been asked a thousand times, but what if an FXCM client wanted to follow one of the Micro Kings? Or maybe not a flash in the pan wonder, but some guy who has turned in ridiculous 300% performances for several months. Is there any way to know what the crazies are doing in real time?

As I understand there will be no restrictions for US clients on moving their accounts to UK-regulated entity. So IMHO the King of the Micro contest should only be offered through FXCM's UK-regulated entity in the future.
With 1:50 leverage I would have to deposit more than 500 USD, and with 2000 USD deposit (which I believe is a reasonable amount for such leverage) it will not be micro anymore.

Originally Posted by xofx

As I understand there will be no restrictions for US clients on moving their accounts to UK-regulated entity. So IMHO the King of the Micro contest should only be offered through FXCM's UK-regulated entity in the future.
With 1:50 leverage I would have to deposit more than 500 USD, and with 2000 USD deposit (which I believe is a reasonable amount for such leverage) it will not be micro anymore.

Unfortunately the US regulations will be prohibiting US residents from trading through any non-US brokers. So we would still be left with unequal leverage for contest participants.

Originally Posted by PatrickB

Unfortunately the US regulations will be prohibiting US residents from trading through any non-US brokers. So we would still be left with unequal leverage for contest participants.

Hi PatrickB,

Thanks for keeping the thread alive! We would really like to know any other ideas or suggestions anyone may have regarding the King of the Micro contest going forward. Thanks, again!

Rob

How about having separate contest for US based accounts and UK based accounts?

Originally Posted by reachme

How about having separate contest for US based accounts and UK based accounts?

Thanks for the suggestion! It may be confusing to have two separate contests, however. Having two separate Top 10's that are not related to each other and having multiple King's takes away from the international spirit that the contest inspires. It has always been enjoyable to watch all the countries compete with each other trying to be the best trader.

That is something to consider though, thanks again!

Rob

If thats the case that it should be fair enough. I dont think 400:1 levarage and 50:1 levarage is fair by any means.
You guys can make it fair with levaraging every body same 50:1 but thats something not going to happen because of conflict of interest more we trade more FXCM makes money part of business.