Posts tagged ‘forex’
When the proposed rule release hit the airwaves back in January, the shock was deafening. This would be the Commodity Futures Trading Commission’s (CFTC) proposal: Regulation of Off-Exchange Retail Foreign Exchange Transactions. The industry was well aware new regulations were in the works, it just wasn’t so sure of the details. And as they say, the devil’s in the details.
Yesterday, we spoke with CFTC and Congress about how new regulation coming out of Washington would affect traders. We also sat down with former CFTC Chair Sharon Brown-Hruska, now a vice president in NERA’s securities and finance practice. Brown-Hruska says that while it’s justified for the CFTC to crack down on illegal forex operations, the agency’s current proposal to limit leverage in OTC forex to 10:1 “overshoots the mark.”
Continue reading ‘From Washington: Get ready, new regs coming’ »
With regulatory reform in Washington THE issue affecting the futures industry right now, Futures magazine is in D.C. this week to talk with Congress and the CFTC about what’s ahead.
House Agriculture CommitteeChairman Collin Peterson (D-MN), whose Peterson-Frank Amendment to HR 4173, passed by the House in December, established a central clearing requirement for OTC derivatives, says, “the way our legislation is crafted right now, you will see a lot of [OTC products] standardized, 70%-80% of this stuff will be standardized.” He mentioned how the House Ag Committee is working with European regulators and that CFTC Chairman Gary Gensler is focused on coming out with harmonized international regulation.
Continue reading ‘From Washington: Futures goes to Congress, CFTC’ »
Forex dealers are not taking the latest rogue regulatory action – CFTC’s proposal to limit leverage in OTC forex - lying down. Last week, the Forex Dealers Coalition (FXDC), a group of the nine largest firms in the industry, sent a letter to the CFTC saying its proposal to limit leverage to 10-1 would “be a crippling blow to the industry and drive it offshore.” The CFTC kicked off its 60-day comment period last week, after which it will make its decision on the proposal. You can get more information and send a letter to the CFTC through FXDC’s Web site, www.fxdc.org. How will the proposal affect your trading? Leave your comments below.
With the Western world moving to quantitative easing and a near 0% interest rate environment, experts agree that interest rate differentials are no longer the significant driver of forex markets as they were in the past.
Adam Boyton, G10 FX Strategist for Deutsche Bank, discussed this along with other factors driving forex markets on a conference call Tuesday afternoon.
Among Boyton’s observations was that equity markets have priced in too much of a recovery, despite pressure the dollar will remain the preeminent reserve currency for at least another five years and that interest rate differentials will no long be a primary driver of forex markets. “[The market] will look at interest rate differentials, but not as much as before,” Boyton said.
This morning just before 8:00 a.m. the euro was trading at 126.30 and over the next hour traded up 184 pips to 128.14, a startling move, especially given the lack of earth shattering economic releases and natural disasters.
“Given that this market trades $29 million per second, $2.5 trillion per day, I can’t imagine what kind of an order it would take to move the euro 150 pips,” says Ken Lazzara, chief dealer at EasyForex.
The U.S. dollar has been on rampage, setting a new high yesterday of 88.485 yesterday, Oct. 28, up from 73.965 on Aug. 1.
For a long while it was fashionable and profitable to bash the greenback, but one of the first traders I know to call the turn is InterbankFX Chief Currency Strategist Rob Booker, who has ridden that bull for some time. (see the September issue’s cover story, Misery Finds Company).
One of Booker’s FX indicators is the Treasury International Capital Data, which tracks international money flows. The most recent report, released on Oct. 16, showed net Long-term securities transactions have been way down. In May, they were $83.2 billion; June: $53.6 billion; in July, it was just $8.6 billion and August: $14 billion.
Last Friday Phillip R. Bennett, former chief executive Refco Inc., pleaded guilty to 20 counts of fraud and now faces life in prison for conspiracy, securities fraud, bank fraud and falsifying filings with the Securities and Exchange Commission. This follows executive VP Santo Maggio’s confession in December, which led to him giving up $23 million. Refco executives Robert C. Trosten, Tone N. Grant and lawyer Joseph P. Collins are still facing charges and, according to the New York Times, are maintaining their innocence.
While this is certainly progress in the two year debacle, I’d like to take this opportunity to point out that the victims have still not been made whole.
More than $100 million in Refco retail customer funds were tied up in this debacle, and those retail traders have “not received a dime” of compensation, says account holder Gail Butler. And Paul Palley, one of the leaders of the Refco Account Holders group that organized on the internet and filed several law suits to get their money back is continuing the fight.
While it’s great that the NFA and the CFTC have increased their efforts to root out fraud by raising the capital requirements for FX dealers, why haven’t they stepped up to fight for these retail traders? As Bennett and Maggio have shown us, it’s never too late to do the right thing. I’d like to see NFA and the CFTC step up and do the same.
It seems that significant changes to the Commodity Futures Trading Commission (CFTC) are just around the corner, if and when reauthorization of the regulatory body comes up for a vote someday.
On Wednesday, the CFTC’s Acting Chairman Walter Lukken testified before the Subcommittee on General Farm Commodities and Risk, (the title of which alone is testimony for the need to change), and proposed that the Commodity Exchange Act be amended such that the CFTC has four new authorities:
1. Require large trader position reporting
2. Require exempt commercial markets (ECM) to adopt position limits or accountability levels.
3. Require ECMs to exercise self-regulatory responsibility over that contract to avoid manipulation; and
4. Provide the ECM and the CFTC with emergency authority over that contract.
In press statements, the Nymex and the Intercontinental Exchange both came out in support of changes to the current regime, and as they are potentially the most affected by the changes, that is all well and good. The question is now and will be, should this apply to all ECMs all the time? Lukken addressed that issue by adding that “price discovery is the key determinant to Commission regulation and oversight.” But is this the targeted approach that the ICE and Nymex intend to support? Maybe, maybe not.
Continue reading ‘Narrow regulatory changes and broad consequences’ »
