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1) FAQs for NFA FIFO Rules
***Watch This Video Presentation To See How To Manage Your Risk Using OCO Entry Orders***
NFA Compliance Rule 2-43(b)- Q. Why is the NFA imposing these new rules?
A. When it comes to mandating First In First Out execution (FIFO), the NFA stance is that FIFO provides more transparency to customers, offering a more accurate picture of the P/L on multiple positions than viewing profit or loss on an individual position.
- Q. What is First In First Out (FIFO)?
A. First In First Out simply means that when you have multiple positions in the same currency pair, the position which was first opened will be the first to be closed. This execution process is the common practice in the US equities and futures markets.
- Q. Why will complying with the FIFO rule require that I lose the ability to place stop-loss and limit orders as well as the ability to close positions from the Open Positions window?
A. Stop-loss and limits orders do not necessarily close the oldest position on a currency pair first. The same is true for the ability to close a position from the Open Positions window.
Using Stops and Limits After July 31st – Clients of FXCM LLC
- Q. Can I place stops and limits after July 31st?
A. You will be able to use entry orders to place stops and limits after July 31st 2009. Entry orders provide the ability to realize profits and cut losses. For BUY positions, placing an entry order to sell below the price where you got into the position protects you from additional losses, and placing an entry order to sell above the price where you got in locks in profits.
- Can you provide an example of using an entry order for stops & limits.
Example 1:
If you have a BUY EUR/USD position at 1.3900: You could place a stop loss using a SELL ENTRY ORDER (Stop Entry, SE) at 1.3800 OR a limit using a SELL ENTRY ORDER (Limit Entry, LE) at 1.4000.
Example 2:
If you have a SELL EUR/USD position 1.3900: You could place a stop loss by using BUY ENTRY ORDER (Stop Entry, SE) at 1.4000 OR a limit using a BUY ENTRY ORDER (Limit Entry, LE) at 1.3800.
- What changes with stops and limits on July 31st?
You will no longer be able to have Stop and Limit orders attached to individual tickets
- If I use entry orders for stops and limits, is there a chance that both might be triggered?
Yes. However, FXCM is introducing a new order type that will enable you to prevent this from happening. OCO (One Cancels the Other) entry orders, which will provide traders with the same functionality as they have been accustomed, except that they are not linked to any positions. Watch the video above to see how to manage your risk. The coverage on how to use OCO order beings after 6 minutes.
FX Trading Station- Q. Do I need to download the platform again?
A. No. Though there will be a prompt to upgrade your platform when you log in on August 2nd, 2009.
- Q. What will happen with my existing positions?
A. As stop-loss and limit orders will no longer be in compliance with US regulations, they will be removed from all FXCM LLC accounts after July 31st. If you choose to continue trading with FXCM LLC, you will need to place Entry Orders to manage your risk on any open positions. OCO entry orders will be available at the beginning of August.
- Q. May I still see individual open positions, by ticket? May I see individual ticket P&L
A. Yes, you may view individual open positions in the open positions window, or load an account report at any time. Profit and loss is displayed in real time. We do however encourage clients to spend time familiarizing themselves with the Summary Window as this is the best way to see your net positions for each pair at any given time. Watch the video above to learn more about the Summary Window.
- Q. I like to trade on the charts, how will that be affected? How can I close a position from the chart?
A. You can still place market and entry orders from the chart as you did before. Stop-loss and limit orders will be disabled as will the ability to close positions without placing opposing market orders.
- Q. If I can't close trades through the Open Positions window, how will I do so?
A. Simply place an opposing market order on the same currency pair, for the same amount as your open position.
- Q. If I can't place stop-loss and limit orders through the Open Positions window, how am I expected to manage the risk of my positions?
A. You will be able to use entry orders to place stops and lim its after July 31st, 2009. Entry orders provide the ability to ralize profits and cut losses.
Stops and limits are essentially two entry orders that are linked to an individual open position. If a stop-loss or limit order is triggered the other is canceled. FXCM has introduced a new feature called OCO (One Cancels the Other) entry orders, which will provide the same functionality that can serve as stop-loss and limit orders except that they are not linked to any positions.
For example, if you bought GBPUSD at 1.4700 and wanted to take profits one hundred pips above and cut your losses one hundred pips below you would simply need to place two entry orders to sell at 1.4800 and 1.4600. You would then link the two orders as OCO so that if one order triggered, the other would automatically be canceled. This would prevent you from entering into a position that you did not intend if the price action were to reverse.
OCO Entry Orders?
- Q. What are OCO Entry Orders
A. OCO stands for "One Cancels the Other. It simply means that if one part of the order is executed, the other part will be automatically canceled. For instance, all stop-loss and limit orders on the FX Trading Station are OCO orders (no longer available for FXCM LLC accounts after 7/31/2009). That is to say that if a stop hit, the limit would automatically be deleted.
- Q. How do I place an OCO Entry Order?
A. Please view the video above..
- What will happen to the OCO Entry Orders if I close the position via a market order?
A. While OCO Entry Orders may have similar functions to stop-loss and limit orders, they are not in fact attached to an existing order. Therefore, any OCO Entry Orders that were placed with the intention of managing the risk on a given position will have to be deleted should that position be manually closed by a market order.
Note that if your account should suffer a margin call, all of your open positions will be automatically closed. Any protetive OCO entry orders must then be manually remove to avoid entering new positions.
- Will OCO Entry Orders only be available to FXCM LLC clients?
A. The OCO Entry Order functionality will be available on all versions of the FX Trading Station. However, if the account does not have hedging enabled the OCO orders executed in the opposing direction of open positions will effectively offset those positions. Conversely, a market order to buy 100K GBPUSD will NOT be offset by an entry order to sell 100K GBPUSD if the account has hedging enabled.
MetaTrader4 (MT4)
MetaTrader4 (MT4) clients who wish to maintain their current platform functionality (with hedging enabled) may transfer to FXCM UK. CLICK HERE to opt-in.- Q. I am an MT4 user and wish to keep my account with FXCM LLC. How will my account be affected?
As of July 31, 2009, all FXCM U.S (FXCM LLC) MetaTrader 4 open positions will be closed. To keep MetaTrader 4 and your Expert Advisors you can transfer to a FXCM U.K. (FXCM Ltd) MetaTrader 4 account.
To date, we have received no indication that the MT4 platform will be able to be modified to comply with first-in-first-out execution without significant loss in functionality. The solutions that FXCM have examined would cripple the operation of many expert advisors and will result in a much less robust platform. As a result, FXCM plans to support the MT4 platform through its UK entity―Forex Capital Markets Limited (FXCM UK)―which is regulated by the UK’s Financial Services Authority (FSA) . The MT4 platform will no longer be offered through FXCM U.S. and will be discontinued on July 31, 2009.
After market close, 4 PM on July 31st, all trading functionality will be disabled and all positions will be liquidated. All pending orders, including stops and limits, will be deleted. Please note that all closed positions will force you to realize any losses or profits on your account at that time.
You have the option of having your account transferred to FXCM UK with no change to your existing trading platform functionality. If you wish to transfer your account to FXCM UK, please complete the one page form. MetaTrader 4 Account Transfer Form
Forex System Selector
Forex System Selector clients who wish to maintain their current platform functionality (with the hedging enabled) may transfer to FXCM UK.- Q. I use the Forex System Selector platform, how will my account/portfolio be affected?
A. Tradency, the company behind the Forex System Selector software will also be putting through a patch to comply with the new rules. The following changes will be in effect: 1) Adding StopLoss and TakeProfit levels to open positions will be disabled for FXCM LLC accounts, 2) When trying to close a position that is "younger" than another position on that same currency pair, you will receive an alert message explaining that you need to close the "older" position first, 3) Multi-change on the "Positions Tab" will be disabled.
Transferring to FXCM UK:
- Q. How do I know which FXCM entity I am trading with?
A. The entity you are trading with will be noted in the upper left hand corner of the combined account statement which can be run through the FXCM Trading Station or through MYFXCM.COM .
- Q. If I switch my account to FXCM UK what protection is available?
A. The Financial Services Authority (FSA) is the regulatory body that overseas spot FX trading in the United Kingdom. The market has been regulated in the UK much longer then it has been in the US. Accounts with Forex Capital Markets LTD (FXCM UK) are fully segregated in accordance with FSA client money rules. The FSA, one of the world's most respected financial regulatory bodies, regulates FXCM UK. In the unlikely event of FXCM UK's bankruptcy, client assets would not be exposed to any bankruptcy proceedings.
- Q. What will happen with my existing positions if I transfer to FXCM UK?
A. All positions that are opened before 4pm ET on July 24th will not be affected. If you have open positions with stops and limits already in place, the positions will remain as is when the market re-opens on Sunday July 26th.
- I am a US citizen. Can I open an account with FXCM UK?
A. Yes.
- Q. With my account at FXCM UK, will I need to phone the UK to get support?
A. FXCM’s global offices are open 24 hours a day, seven days a week. You may continue contacting the same office and support staff you have been accustomed to, through the same familiar telephone, chat, and email methods, regardless of where your trading account is set up.
- Q. How may I deposit to my account if it is housed with FXCM UK?
A. FXCM UK provides for bank wire, debit card, credit card, and check deposits and withdrawals. Please note there are different website links and funding details associated with accounts at FXCM UK . Visit FXCM - Depositing Funds Options for full details. Please also note clients have the option to hold their accounts in: GBP, EUR, USD, JPY, CAD, and NZD. US clients can send funds to a US bank account.
- Q. Do I need to download any new software if my account is with FXCM UK?
A: No, you will use the same trading station. No additional download is required.
- Q. Will I be able to place stop-loss and limit orders on individual positions after I transfer to FXCM UK?
A. Yes. All FXCM UK accounts will allow clients to place stops and limits.
- Q. Will I be able to close positions from the open positions window if I transfer to FXCM UK?
A. Yes.
- Q. Will hedging be enabled on my account after it is transferred to FXCM UK?
A. Yes. All FXCM UK accounts default to have hedging enabled. That is to say that buy and sell positions will no longer offset each other. Buy and sell positions can now be held on the same account.
- Q. Will OCO Entry Orders be enabled on my account after it is transferred to FXCM UK?
A. Yes. However, if the account does not have hedging enabled the OCO orders executed in the opposing direction of open positions will effectively offset those positions. Conversely, a market order to buy 100K GBPUSD will NOT be offset by an entry order to sell if the account has hedging enabled.
- I am Canadian, can I opt-in to FXCM UK?
You will not be affected by the NFA rule if you submitted an application and/or your account is held with FXCM Canada LTD. You are only eligible to opt-in to FXCM UK if you hold an account with FXCM LLC and have received an email from FXCM regarding an account transfer.
- Q. What is the cutoff date to opt in to transfer my account to FXCM UK?
A: Clients must submit the opt-in form by the end of Tuesday July 21st.
- Q: What happens if I don’t transfer before the deadline? Can I transfer after? How?
A: Clients must submit the opt-in form by Tuesday July 21st in order to have their accounts seamlessly transferred to FXCM UK before the FIFO rule takes effect. If you choose to move over after the deadline you will have to close out all open position, submit an application, and close out all open positions before FXCM can move your account.
- Q. Will my leverage change?
A. No
- Q. Will my account number change?
No.
- Will trading hours change?
No.
- Will my time zones change in the Trading Station?
No. You will have the same time zone on your account as you previously had.
Notice of Leverage Reduction Proposal:
The NFA has recently requested that the Commodity Futures Trading Commission (CFTC) approve another rule proposal that would place additional restrictions on the margin (leverage) levels that FDMs can offer to forex customers. If the CFTC approves this proposed rule, FDMs will be restricted from offering more than 100:1 leverage on major currency pairs and will be limited to 25:1 leverage on non-majors. NFA has proposed this rule because it is “concerned that higher leverage amounts can deplete a customer’s account balance—and result in forced liquidation—much faster than retail customers realize.” Again, CFTC has not yet approved this rule proposal, and there is not yet a specific date for when it would take effect. For more information, please visit:
http://www.nfa.futures.org/news/PDF/...Adj_112408.pdf
Last edited by Jason Rogers; 07-09-2009 at 12:40 PM..
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