FINRA, which is a U.S. regulator for brokerage firms, recently proposed a rule that would limit leverage in forex to 1.5:1, which is a huge decrease from what is offered now. This would not affect many forex dealers -- most are regulated by the NFA and CFTC in the United States. However, there have been forex dealers who recently became broker-dealers in order to avoid the NFA -- and now they're getting whacked from the other side of the regulatory fence.
Anyway, today I had some thoughts for FINRA:
http://www.robbooker.com/radio/archives/Feb19_2009_TraderRadio.mp3
A point I failed to make in the podcast is that customers will just go someplace else to trade forex. If they can't get the leverage they want in the United States, they'll just move their accounts offshore. That is already happening. FINRA thinks they are doing traders a favor by "protecting" them. Here is what they are doing:
1. Sending customers to overseas firms who are not as well financially regulated;
2. Penalizing U.S. businesses that offer forex
How does this, in the end, do anything to help traders? And why doesn't FINRA take the money and resources it has put into worrying about Forex leverage, and put it into oversight of a broker like the one Bernie Madoff was running to hide his fake trades?
