Thread: New CFTC Rules FAQ (US Residents)

New CFTC Rules FAQ (US Residents)

Please click on the appropriate link below to view the answer to your question:

• Who is the CFTC? Click here.
• What are the new CFTC margin rules? Click here.
• What does FXCM think about the new margin rules? Click here.
• When will the margin requirements take affect? Click here.
• How will my trading be affected? Click here.
• I am a U.S. resident. Can I move my account to FXCM UK? Click here.
• What are the key dates? Click here.
• Can I still trade with the MT4 Platform? 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 register for the upcoming FXCM Live Webinar, contact FXCM, or click Post Reply now and we will provide you with an answer.

Who is the CFTC?

The Commodity Futures Trading Commission (CFTC) is an independent agency responsible for regulating the retail spot forex market in the United States along with the National Futures Association (NFA). A primary goal of both US regulatory organizations is to protect investors.

FXCM is a registered Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and is a member of the National Futures Association (NFA). As a vocal advocate of increased investor protection, FXCM is proud to be one of the first foreign exchange firms to register as a FCM with the CFTC following the passage of the Commodity Modernization Act in December 2000.

The U.S. regulatory framework is widely regarded as one of the best in the world for investor protection. If a dispute with a FCM arises, investors can turn to the NFA or the CFTC.

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.

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What are the new CFTC margin rules?

Recently, the CFTC announced new margin rules that affect all US residents and accounts held with FXCM LLC (US).

The new CFTC margin rules allow for a maximum available leverage of 50:1 for major currency pairs and 20:1 for exotic currency pairs for accounts held with FXCM LLC (FXCM US).

What will the new margin requirements be?

Below, you will see the new USD margin requirements as of October 10, 2010 for FXCM LLC (US):

Margin requirements are subject to change without notice based on price fluctuations and will be adjusted up or down in increments of $10for USD denominated accounts. At present, we believe that margin requirements will not change more than once a month. Up to date margin requirements are displayed in the Simplified Dealing rates window of the trading platform by currency pair.

FXCM agrees with the new CFTC margin rules and has already implemented 50:1 as the default margin setting on new FXCM LLC standard forex trading accounts. As a result, the new leverage requirements will have a minimal impact on our Standard 10k LLC accounts.

Click here to learn more about the transfer process and the differences between trading functionality between FXCM LTD and FXCM LLC.

What is the effected date for the new CFTC rules?

FXCM LLC (US) will adjust leverage to 50:1 for major currency pairs and 20:1 for exotic currency pairs on October 10, 2010. The effective date for the new rules is October 18, 2010.

Who is affected by the new CFTC rules?

The new CFTC margin rules apply to all FXCM LLC (FXCM US) clients regardless of their location. International residents (outside of the U.S.) with accounts held with FXCM LTD (UK) are not affected by the new CFTC rules.

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.

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What does FXCM think about the new margin rules?

FXCM agrees with the new CFTC Margin Rules.

We believe the reduction in leverage is a reasonable compromise from the initial CFTC proposal of 10:1 leverage. The new margin requirements are intended to increase the likelihood of profitable trading and reduce risk by restricting traders from excessive leverage. In fact, FXCM has already implemented 50:1 as the default margin setting on new FXCM LLC standard forex trading accounts. We are actively helping traders make the transition to trading with lower leverage and are available 24 hours a day, seven days a week to assist you.

FXCM wants profitable traders.

As a No Dealing Desk forex broker, we do not take a market position. We are paid by trading volume, therefore we want profitable traders because they tend to trade more. FXCM has invested in our award-winning FX Trading Station, institutional-level DailyFX+ research, and many other resources to help give traders a competitive edge.

FXCM believes lower leverage will benefit traders.

FXCM’s experience in Hong Kong, where significantly lower leverage levels are mandated by law, suggests lower leverage results in more successful trading. FXCM believes lower leverage benefits traders as higher leverage can often result in a few losing trades offsetting many winning trades. To see how lower leverage compliments sound money management, view the DailyFX+ money management videos.

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.

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When will the margin requirements take affect?

Starting October 10, 2010, the maximum leverage available with Forex Capital Markets, LLC (FXCM LLC) for trading will be 50:1 for major currency pairs and 20:1 for exotic currency pairs.

All positions and orders created after October 10, 2010 will be subject to the new margin requirements. Additionally, open trades and active orders created before October 10, 2010 will also be subject to new margin requirements.

What should I monitor before the new margin requirements?

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. The position size that you can hold in your account using leverage is determined by your account equity and the margin settings on your account. To track how close you are to the maximum position size for your account, FXCM provides real-time information on usable margin (the account equity available to take on new positions—USbl Mr) and used margin (the account equity needed to maintain open positions—Usd Mr). Together, used margin and usable margin equal account equity.

As a result, your usable margin changes as open positions fluctuate in value. If your open positions are gaining value, your usable margin increases. Conversely, when floating losses increase, usable margin decreases.
A margin call is triggered when floating losses cause usable margin to hit zero. When a margin call happens, all open positions are closed at the next available price.

How do I avoid a margin call?

Margins calls are triggered when an account becomes over leveraged. As a general rule of thumb, we recommend limiting total account leverage to a maximum of 20:1. For example, if you have an account balance of $10,000, you could trade a maximum position size twenty times larger than your account balance. In this example, 20 X $10,000 = 200,000 (200k total for all positions).

At 20:1 leverage, a market movement of 1% will increase or decrease your account balance by 20%. You can use this simple calculation to determine your risk tolerance. For example, someone who is less risk tolerant may want to leverage their account only five times so that a 1% market movement means a 5% increase or decrease in the account balance.

While greater leverage can increase the magnitude of your gain, it can also increase the magnitude of your loss and chances of receiving a margin call.

If you feel your account is overleveraged and may receive a margin call after the transition to new margin requirements, then you can:

1. Deposit funds – Adding funds to your account will increase your usable margin. To deposit funds, visit myfxcm.com and login 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 now and we will provide you with an answer.

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How will my trading be affected?

Starting October 10, 2010, the margin requirement with FXCM LLC for open trades and all future trades will be adjusted to 50:1 for major currency pairs and 20:1 for exotic currency pairs.

New USD margin requirements with FXCM LLC:

FXCM has already implemented 50:1 as the default margin setting on new FXCM LLC standard forex trading accounts. As a result, the new leverage requirements will have a minimal impact on our Standard 10k LLC accounts.

There are two categories of clients affected:

1. Traders on leverage greater than 50:1 leverage – The maximum available leverage will change from 100:1 to 50:1.

The following examples show the increase in margin requirements for accounts that are changed from 100:1 leverage (1% margin) to 50:1 leverage (2% margin) for the major currency pairs:

• EUR/USD (plus most EUR-based pairs): Margin requirements will increase from $150 to $300 per 10k lot.
• USD/JPY (plus most USD-based pairs):: Margin requirements will increase from $100 to $200 per 10k lot.
• GBP/USD (plus most GBP-based pairs): Margin requirements will increase from $170 to $340 per 10k lot.
• AUD/USD (plus most AUD-based pairs): Margin requirements will increase from $100 to $200 per 10k lot.

2. Traders who trade exotic currency pairs – The maximum available leverage will change from approximately 25:1 (4% margin) to 20:1 (5% margin).

The following examples show the increase in margin requirements for accounts that are changed from 25:1 leverage (4% margin) to 20:1 leverage (5% margin) for the exotic currency pairs:

• USD/MXN (plus most USD-based exotic pairs): Margin requirements will increase from $400 to $500 per 10k lot.
• SGD/JPY (plus most SGD-based exotic pairs): Margin requirements will increase from $400 to $500 per 10k lot.
• EUR/TRY (plus most GBP-based exotic pairs): Margin requirements will increase from $700 to $875 per 10k lot.

How do I figure out my new margin requirements?

The following examples provide a simple way to determine the new margin requirements on October 10, 2010.

Examples of New Margin Requirements for Major Currency Pairs:

1. 50k EURUSD position:

• Margin requirement = $300 per 10k position.
• Total margin requirement = $1,500 ($300 X 5).

2. 300k GBPUSD Position:

• Margin requirement = $340 per 10k position.
• Total margin requirement = $10,200 ($340 X 30).

3. 1,000k USDJPY Position:

• Margin requirement = $200 per 10k position.
• Total margin requirement = $20,000 ($200 X 100).

Examples of New Margin Requirements for Exotic Currency Pairs:

1. 10k USDMXN position:

• Margin requirement = $500 per 10k position.
• Total margin requirement = $500 ($500 X 1).

2. 500k USDSGD Position:

• Margin requirement = $500 per 10k position.
• Total margin requirement = $25,000 ($500 X 50).

3. 1,000k TRYJPY Position:

• Margin requirement = $500 per 10k position.
• Total margin requirement = $50,000 ($500 X 100).

What should I monitor before the new margin requirements?

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. The position size that you can hold in your account using leverage is determined by your account equity and the margin settings on your account. To track how close you are to the maximum position size for your account, FXCM provides real-time information on usable margin (the account equity available to take on new positions—USbl Mr) and used margin (the account equity needed to maintain open positions—Usd Mr). Together, used margin and usable margin equal account equity.

As a result, your usable margin changes as open positions fluctuate in value. If your open positions are gaining value, your usable margin increases. Conversely, when floating losses increase, usable margin decreases.
A margin call is triggered when floating losses cause usable margin to hit zero. When a margin call happens, all open positions are closed at the next available price.

How do I avoid a margin call?

Margins calls are triggered when an account becomes over leveraged. As a general rule of thumb, we recommend limiting total account leverage to a maximum of 20:1. For example, if you have an account balance of $10,000, you could trade a maximum position size twenty times larger than your account balance. In this example, 20 X $10,000 = 200,000 (200k total for all positions).

At 20:1 leverage, a market movement of 1% will increase or decrease your account balance by 20%. You can use this simple calculation to determine your risk tolerance. For example, someone who is less risk tolerant may want to leverage their account only five times so that a 1% market movement means a 5% increase or decrease in the account balance.

While greater leverage can increase the magnitude of your gain, it can also increase the magnitude of your loss and chances of receiving a margin call.

If you feel your account is overleveraged and may receive a margin call after the transition to new margin requirements, then you can:

1. Deposit funds – Adding funds to your account will increase your usable margin. To deposit funds, visit myfxcm.com and login 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 now and we will provide you with an answer.

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I am a U.S. resident. Can I move my account to FXCM UK?

No, FXCM will not be offering the option to move your account overseas because the new CFTC rules (as per Dodd Frank Act) will prohibit US clients from trading Forex with a counterparty that is not regulated in the US.

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.

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What are the key dates?

To make this transition a simple process for clients that may be affected, the key dates to know are:

• October 10, 2010 – FXCM LLC (US) will adjust leverage to 50:1 for major currency pairs and 20:1 for exotic currency pairs.
• October 18, 2010 – The effective date for the new CFTC rules that allow for a maximum leverage of 50:1 for major currency pairs and 20:1 for exotic currency pairs for accounts held with FXCM LLC (FXCM US) and require that U.S Resident trade Forex only with counterparties that are regulated in the US.

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.

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Can I still trade with the MT4 platform?

Yes. We are working to make the MT4 platform compatible with US regulatory requirements. You will be contacted by email with further details on changes to trading functionality for MT4 accounts.

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.

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thanks for all of these .