Below is a copy/paste (from forexfactory) from a forex broker efgroup.com to provide additional food for thought for this thread. I've put it into 2 posts (copy/pastes) because it was too large to post in one post.



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Hi all-

Well, looks like someone started a situation in the last 24 hours and I want to talk everyone through exactly what is going on. Let’s start with the facts, then move to the reality, and then maybe a little opinion. As you know, I try not to spend time naming or talking about other brokers specifically. My job is to help you out with EFX and not try to answer questions about (or bad-mouth) another platform.

The story that started all of the boards talking this morning was a post that the NFA is about to move the minimum net capital requirement to $5 million, and that they are closing the doors on a bunch of companies over the last few weeks. Along with about 20 other platforms, we were listed by whomever wrote the post as being “at risk” because we currently show a net cap that is well above the minimum currently required, but we don’t show $5 million.

Now, the clever part of the post that was put out there (you’d have to look at the bigger firms that intentionally maintain a higher net cap to figure out who had the motivation to do this) is that it implies that because six brokers doors were “shuttered” (term used in the post), the other 20 or so are in danger and the NFA is out to kill. This is a fairly ridiculous link. The firms that were closed had problems with their net capital dropping under the CURRENT minimum. In some cases, they were basically out of money. Of course they were closed after the NFA did their due diligence per the guidelines and eventually determined that they were not going to get their net cap back up.

Folks, the NFA is a regulatory body. They want to protect the public, but they also exist because of forex platforms. If they shut them all down unnecessarily, they hurt themselves too. They come around, they charge fees, they do audits, etc. Let’s set some facts straight.

The way we understand it, the NFA is going to vote on July 1 whether to raise the minimum net capital requirement to $5 million, up from the current $1.5 million. If they do approve that (that’s the first IF, nothing changes in the world if they don’t), then member firms will have until January 1, 2008, to get their net capital to $5 million. Do we feel like this would be an issue for us, as we already hold much more than the current requirement and over half of what we need to the potential new requirement? No. So let’s just take the vote at face value, assume that it happens, and then address what it should mean for us in the easiest solution. Nothing. I should point out that it wasn’t long ago that the NFA raised the minimum net capital from a few hundred thousand to $1.5 million, and we met that without any issues even though we weren’t showing it before.

They aren’t going to walk into all of these firms on July 2 and shut them down. And, just so we’re clear, if the NFA moves the cap requirement up and a firm can’t get the money in to meet the requirement, that doesn’t mean that your money as a customer is affected. Some of the things that I’ve heard over the last 24 hours are so crazy. Here’s one: “If the NFA moves the net cap requirement up and a firm can’t comply, don’t we lose all of our money as the customers of the firm because they have to close?” Huh? No relation. The firm would first need to lose all of their assets and then yours for that to be the case.

Let me talk a little bit about other options for some of the smaller firms. There is nothing that says that any of these firms have to be NFA members. They can operate through the SEC or NASD.

Before I get to what this means in a practical sense, let me post two paragraphs from MB Trading Futures' (our FCM) compliance department dealing with the issue:

"First, the National Futures Association (NFA) has noticed its Forex Dealer Members (FDM) of a new proposal to increase the minimum net capital requirements of those members. The proposal is in the early stages of the approval process; it has not been approved by the NFA Board, which is the minimum requirement.

NFA is simply providing FDMs with an opportunity to respond to the proposal that recommends increasing the minimum net capital requirements of FDMs to $5 million from $1 million (or 5% of total customer liabilities, whichever is greater), which are due on July 6, 2007. NFA will draft a final version of the proposal based on comments received from FDMs. The final version of the proposal will be submitted to NFA’s Board for approval. NFA’s Board could approve the final version or a modified version of the final proposal. Once the proposal is finally approved by the NFA Board, it must be submitted to the CFTC for approval. CFTC could approve the finalized version of the proposal as submitted by the NFA Board or approve a modify version. It is anticipated that the final stage of the approval process will be December 2007 at the earliest."