Please click on the appropriate link below to view the answer to your question:
Common Questions
• I heard that the new CFTC rules will restrict US clients from trading with a broker that is not regulated in the US. Is this true? Click here.
• How will my MT4 account(s) be affected? Click here.
• When will the new rules go into effect? What are the key dates? Click here.
• Why Is lower leverage important? Click here.
• Why is hedging not allowed in the US? Click here.
MT 4 Platform and Trading Functionality
• What stays the same when my MT4 account(s) are moved to FXCM US? Click here.
• What changes when my MT4 account(s) are moved to FXCM US? Click here.
• Will I have hedging on the MT4 platform? Click here.
• How do I close hedged positions on the MT4 platform? Click here.
Margin and Leverage
• What are the new margin requirements? Click here.
• How much are the margin requirements increasing? Click here.
• How do I calculate my new margin requirement? Click here.
• Will my positions be margined out? Click here.
• How can I avoid a margin call? Click here.
• Why did the NFA approve amendments to increase margin requirements? Click here.
• Where do I find up-to-date margin requirements?Click here.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. To learn more, please attend one of the upcoming FXCM Live Webinars, contact FXCM by live chat, or click “Post Reply” now and we will provide you with an answer.
Last edited by FXCM Online Support; 10-15-2010 at 02:08 PM.
I heard that the new CFTC rules will restrict US clients from trading with a broker that is not regulated in the US. Is this true?
That is correct. The Commodity Futures Trading Commission (CFTC) recently enacted regulations concerning off-exchange retail foreign currency transactions. The new CFTC rules will require all US and overseas brokers to register with the CFTC in order to be able to accept US residents as clients, and will prohibit US clients from trading Forex with any broker that is not regulated in the US.
As you are a U.S. resident, FXCM Ltd (FXCM UK) can no longer be the counterparty for your forex transactions. In accordance to rules and regulations, you are required to consent to the transfer of your account and agree to the Risk Disclosure and the FXCM LLC Trading Agreement before your account is transferred to FXCM LLC (FXCM US). As a US resident having your account(s) with FXCM LLC will comply with this new rule.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click “Post Reply” and we will provide you with an answer.
No. The Dodd-Frank Act requires that counterparties to US retail forex customers must be registered with the CFTC. Non-registered brokers accepting US residents after October 18, 2010, will be open to possible legal action for violating US law. As a vocal advocate of increased regulation and investor protection, FXCM will be in compliance with the new CFTC rules.
We understand that some of the changes may be inconvenient for traders. We want to make this transition easy for you and allow you to get the answers you need to continue trading. Visit FXCM’s CFTC live webinar page to view the upcoming live Q&A webinars that will help you prepare for upcoming changes.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click “Post Reply” and we will provide you with an answer.
When will the new rules go into effect? What are the key dates?
• October 15, 2010 – Anticipated account transfer date from FXCM UK to FXCM US.
• October 17, 2010 – US resident accounts will update to trade functionality that comply with the new CFTC rules. View details below.
• October 18, 2010 –The new CFTC rules will be in effect.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click “Post Reply” and we will provide you with an answer.
What stays the same when my MT4 account(s) are moved to FXCM US?
MT4 trading platform
You will place trades with the same MT4 platform. No additional download is required.
Login, password and account number
Your login details and account number will stay the same.
Open positions
All open positions and orders (excluding hedged positions) will be transferred to FXCM LLC; there is no need to close positions. View details for hedged positions below.
Pending Orders, Stops/Limits
Entry orders, and stops/limits can remain open during this move; there is no need to remove entry orders or stops/limits.
The ability to place stop and limit orders on individual tickets
All stop and limit orders can remain open during this move. There is no need to remove them. You may continue to place stop and limit orders on individual tickets from the Trade tab of the Terminal Window.
Customer Support
You can still contact FXCM 24 hours a day, seven days a week by phone at 1-888-503-6739, by e-mail at info@fxcm.com, or by Live Chat.
Myfxcm.com
You will still have the convenience of managing your account online with myfxcm.com.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click “Post Reply” and we will provide you with an answer.
What changes when my MT4 account(s) are moved to FXCM US?
Hedged Positions will be closed
If your account was transferred to FXCM US on October 15, then hedged positions will be closed on Monday October 18, 2010 23:59PMET. If your account is transferred to FXCM US after October 15, then all hedged positions will be liquidated prior to your account transfer to FXCM US.
Margin requirements
Margin requirements will change to 2% (50:1 leverage) on major pairs. Please pay attention to your available margin before your account is transferred to avoid a margin call. View tables and learn more about how these changes will affect your account(s) below.
Exotic currency pairs
Several of the least popular currency pairs will be discontinued the weekend of October 8, 2010.
Exotic currency pairs that will be discontinued include:
USD/MXN, EUR/CZK, USD/SGD, EUR/PLN, USD/CZK, HKD/JPY, USD/PLN, USD/ZAR, SGD/JPY, USD/RUB, USD/HUF, USD/TRY, EUR/HUF, TRY/JPY, ZAR/JPY
If you have an open position in an exotic currency pair that will be discontinued, then your position will remain open. Note that your position will be subject to the new margin requirements.
Exotic currency pairs will be available on the Trading Station II. To change your account to trade with the Trading Station II instead of the MT4 platform, please email admin@fxcm.com when you have no open positions and request that your account be changed to trade with the Trading Station II. Please allow one to two business days for processing.
Hedging Disabled
You will no longer be able open new buy and sell positions on the same currency pair at the same time.
Auto Account Syncs
Auto Account Syncs will be based on equity instead of the account balance. All MT4 accounts receive a read-only login to track the read-only account equity from the FX Trading Station II. FXCM recommends that all clients have both the FXCM Trading Station and MetaTrader 4 platform open when trading.
Funding information to deposit funds
FXCM LLC (US) clients send USD deposits to Bank of America (USD accounts) in the US. To ensure that you use the correct funding details, please use the funding details available from myfxcm.com.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click “Post Reply” and we will provide you with an answer.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click “Post Reply” and we will provide you with an answer.
How do I close hedged positions on the MT4 platform?
Since FXCM US accounts have to be compliant with the CFTC no hedging rules, the Close By order type allows you to close hedged positions on the MT4 platform without creating a new position in the FXCM read-only account.
To close hedged positions in the MT4 platform:
1. From the “Trade” tab of the terminal window, right click on the individual position you wish to close. 2. Select “close order”.
3. An order window will display. Select “Close by” in the “Type” window and click Close by Market.
4. The order window will update. Select the opposing order to remove and click “Close”.
5. The open positions will be deleted from the Trades tab.
MT4 traders have the option to close multiple hedged MT4 positions without creating new positions in the read-only account by selecting the “Multiple Close by” order type and then selecting the specific tickets to close.
Since open, hedged positions on the MT4 platform will not match the open positions on the read-only account, FXCM recommends that all clients login to the read-only account from the Trading Station II when trading with the MT4 platform.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click “Post Reply” and we will provide you with an answer.
The margin requirement with FXCM LLC (US) for open trades and all future trades will be adjusted to 50:1 for major currency pairs and 20:1 for exotic currency pairs. This means that you will have to put up more margin to open a new position or to hold on to an existing position based on currency pair. Starting October 17, the new FXCM LLC margin requirements will be as follows:
Several of the least popular currency pairs will be discontinued the weekend of October 8, 2010.
Exotic currency pairs that will be discontinued include:
USD/MXN, EUR/CZK, USD/SGD, EUR/PLN, USD/CZK, HKD/JPY, USD/PLN, USD/ZAR, SGD/JPY, USD/RUB, USD/HUF, USD/TRY, EUR/HUF, TRY/JPY, ZAR/JPY
If you have an open position in an exotic currency pair that will be discontinued, then your position will remain open. Note that your position will be subject to the new margin requirements.
Exotic currency pairs will be available on the Trading Station II. To change your account to trade with the Trading Station II instead of the MT4 platform, please email admin@fxcm.com when you have no open positions and request that your account be changed to trade with the Trading Station II. Allow one to two business days for processing.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click Post Reply and we will provide you with an answer.
The maximum available leverage will change to 50:1 (2% margin). The following examples show the increase in margin requirements for USD denominated accounts that are changed from 100:1 leverage (1% margin) to 50:1 leverage (2% margin) for the major currency pairs:
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click "Post Reply now" and we will provide you with an answer.
Your new margin requirement, or used margin, will depend on the size of all open positions when the new margin requirements take effect.
Steps to calculate your new margin requirement (used margin):
1. Write down the trade details for each trade you currently have open.
Include the currency pair and the trade size, like this: EUR/USD 10,000
2. Write down the NEW margin requirement for each trade.
For example, EUR/USD 10,000 $300
3. Multiply the NEW margin requirement by the number of lots traded.
For example, $300 X 1 lots (10,000) = $300
4. Add up all of the new margin levels that you just calculated. This number is your NEW used margin (USD MR). Subtracting this from your equity will give you your usable margin (USBL MR). Remember, when your usable margin (USBL MR) drops below zero your live trades are triggered to be liquidated.
For example, I have a 20k Buy EURUSD position and a 150k Buy USDJPY position:
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click "Post Reply now" and we will provide you with an answer.
To determine whether you are at risk for a margin call you must determine whether your usable margin (USBL MR) will be below $0 when your account is transferred. In the example below the trader has 3 open positions and $4000 in total equity.
Prior to the account transfer the weekend of October 15, 2010:
- 20K EURUSD Buy position $150 x 2 lots (20,000) = $300
- 40K GBPUSD Sell position $170 x 4 lots (40,000) = $680
- 120K USDJPY Buy position $100 x 12 lots (12,000) = $1200
- Used Margin $300 + $680 + $1200 = $2180 - Usable Margin $4000 - $2180 = $1820
After the account transfer the weekend of October 15, 2010:
In this example the usable margin (USBL MR) would be below zero. Therefore, at trading open on October 17, 2010 all the live trades would trigger to be liquidated.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click Post Reply and we will provide you with an answer.
A margin call is triggered when usable margin reaches zero. When a margin call happens, all open positions are closed at the next available price.
It is important to monitor your usable margin before the new margin requirements go into effect to make sure that you have enough usable margin to hold existing positions. As a general rule of thumb, we suggest that usable margin (%) remain above 80% after you calculate your new used margin requirement.
Steps to calculate your usable margin (%):
1. Find your new margin requirements (used margin) after the account transfer.
o For example, my new margin requirement is $4,360.
2. Calculate usable margin by subtracting used margin from equity.
o For example, my equity is $10,000.
o Usable margin $10,000 - $4,360 = $5,640.
3. Calculate usable margin (%) by dividing usable margin by equity.
o Usable margin (%) $5,640 / $10,000 = 56.4%
Usable margin of 56.4% is below the suggested usable margin of 80%. This account may be overleveraged, increasing the likelihood of a margin call.
There are two ways to avoid a margin call from happening:
1. Deposit funds: Adding funds to your account will increase your equity and your usable margin. To deposit funds, visit myfxcm.com and log in with your live account details.
2. Reduce open positions: Closing open positions will free up usable margin by making the used margin deposit available as usable margin.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click Post Reply and we will provide you with an answer.
Why did the NFA approve amendments to increase margin requirements?
The NFA is concerned that higher leverage amounts can deplete a customers account balance and result in forced liquidation much faster than retail customers realize.
FXCM agrees in principle with the NFAs intention for changing margin requirements. We have seen that clients who trade with more conservative leverage tend to be more successful over an extended time period. When an account uses a higher degree of leverage, a few losing trades can offset many winning trades. The new margin requirements are intended to protect forex traders from using excessive leverage.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click Post Reply and we will provide you with an answer.
One of the main reasons that new traders lose money is because they over-leverage their account.
When you use excessive leverage, a few losing trades can quickly offset many winning trades. To clearly see how this can happen, consider the following example.
Scenario: Trader A buys 50 lots of USD/JPY while Trader B buys 5 lots of USD/JPY. Questions: What happens to Trader A and Trader B account equity when the USD/JPY price falls 100 pips against them? Answer: Trader A loses 41.5% and Trader B loses 4.15% of their account equity.
By using lower leverage, Trader B drastically reduces the dollar drawdown of a 100 pip loss.
Does lower leverage really work?
FXCM’s experience in Hong Kong, where significantly lower leverage levels are mandated by law, suggests lower leverage results in more successful trading.
As another example, many professional traders use up to 8:1 leverage and typically much less. The reason to use low leverage is to make sure that that a losing position does not make a significant negative impact on the overall account.
How can I use lower leverage?
The Dailyfx.com Research and Education team has created a variety of trading videos to help you identify trading opportunities using lower leverage. To learn more about money management and the benefits of trading with lower leverage, log into the DailyFX+ Trading Course.
We aim to provide you with all the answers you need to manage your account as a result of the new CFTC rules. If you have any questions, please click “Post Reply” and we will provide you with an answer.
Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. Forex Capital Markets LLC. will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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