NFA Speaks on Cap Requirement

The NFA made another announcement about the coming increase in Capital Requirements stated below:

The following firms, according to the latest CFTC Report, do not meet the coming $5 million requirement:

Hamilton Williams ($1,100,000)
IG Financial Markets ($1,014,000)
One World Capital ($1,170,000)
Wall Street Derivatives ($1,237,000)
SNC Investments ($1,247,000)
Advanced Markets ($1,269,000)
Direct Forex ($1,406,000)
Solid Gold Financial ($2,010,000)
CMC Markets ($2,806,000)
E FX Options ($3,055,000)
Forex Club ($3,308,000)
GFS Futures & Forex ($3,403,000)
MB Trading ($4,452,000)
Easy Forex ($4,628,000)

The last few weeks I have been enjoying the NFL season and thus my posts have not been as prolific as they were over the summer. However, it has come to my attention that the NFA has actually increased the minimum capital requirement to $10 million, NOT $5 million. Huh? Allow me to explain.

If you look at the text of this NFA Notice (National Futures Association | News Center) you'll see the nfa says:

What is this exemption you say? The exemption allows firms to offer customers margin of lower than 2%. In fact, the standard margin rate for customers in the forex industry is 1% with some firms like Money Garden offering margin as low as .25%.

And so the question is will these firms be able to meet the new $10 million requirement, or, will they have to change their entire business model and dramatically raise margin requirements on all their customers?

It's safe to say if they do not have the mimumn $10 million (and let's not forget there are many other capital requirements forex brokers have to meet in addition to the minimum) they will have to raise margin requirements on all their customers which will in turn result in many, if not most, of their customers to close their accounts so that they can trade somewhere else at a better margin level.

Once again, this calls into question just how stable are these firms? The NFA is turning this industry upside down. There is no way of knowing who will survive in December. Traders need to beware. These are the firms most vulnerable to these coming cap increases:

Hamilton Williams ($1,100,000)
IG Financial Markets ($1,014,000)
One World Capital ($1,170,000)
Wall Street Derivatives ($1,237,000)
SNC Investments ($1,247,000)
Advanced Markets ($1,269,000)
Direct Forex ($1,406,000)
Solid Gold Financial ($2,010,000)
CMC Markets ($2,806,000)
E FX Options ($3,055,000)
Forex Club ($3,308,000)
GFS Futures & Forex ($3,403,000)
MB Trading ($4,452,000)
Easy Forex ($4,628,000)

If you are trading with one of these brokers be sure to ask them if they are going to meet the TEN MILLION DOLLAR REQUIREMENT and if not, when will they start raising their margin requirements on their customers?

Hello,
should we be worry with FXDD ?
they're for second time offering special bonus for new money deposits
for current and new traders before end of December.
Do they need to pile up more money because of NFA ?
Hmmm........
Just a little tiny concern

Sincerely,
ChampionFx

FXDD is not regulated, so the new NFA requirement will not effect them. As a matter of policy I never trade with unregulated firms however.

According to the most up to date CFTC Report on file for Hamilton Williams (dba Velocity4x) this firm's future is in grave doubt. Hamilton Williams only has $1,100,000 in adjusted net capital. That leaves them a scant 100 grand over the required adjusted net capital requirement. How dire is the financial situation over at Velocity? Dire enough that the NFA last spring charged Hamilton Williams with a bucketful of financial violations:

BASIC Case Summary
• C.R.2-10 - RECORDKEEPING FCMS/IBS
• F.R.SEC11(b)NEW - FDM TAKE CONCENTRATION CHARGE-UNAFFILIATED
• F.R.SEC11(a)NEW - FDM MAINTAIN ADJUSTED NET CAPITAL
• F.R.SEC12NEW - SECURITY DEPOSITS FOR FOREX TRANSACTIONS WITH FOREX DEALER MEMBERS

This is pretty serious stuff. This isn't like getting slapped with a fine for failing to put an asterisk on a marketing brochure. These allegations go right to the heart of whether or not Velocity4x is even viable as a company. Here are some statements from the NFA's Complaint:

Wow. And these guys are going to be able to come up with $10 million two months from now? (Velocity offers 100:1 leverage which means they'll need $10 million MINIMUM to stay in business.) Where is this money going to come from? What venture capitalist is going to put his money into a company that has just been charged by the NFA with a whole host of bookkeeping violations that could get it shut down? I fear the future won't be bright enough for Hamilton Williams' execs to have to wear shades.

Thanks forexsavior ,

then I would have to ask , why the other brokerages that are currently sinking
with NFA requirement should worry with regulations if FXDD saved themselves
from all this brouhaha capital requirements being unregulated ?
Rather than going out of bussines for many brokerages , won't they just want to do the same as FXDD and quite few others brokerages in order to keep them running and not having to shut down their business ?
Is there something going to happen, that there will be no such thing as a unregulated brokerage anytime soon ?
I've read the whole thread but I could have missed probably those answers that someone else did maybe already ask .
Thank you , please , keep us updated good job !

Sincerely,
ChampionFx

Unregulated Brokers can only operate if their parent company is somehow regulated. It is known as the affiliate loophole. They are using the loophole to avoid regulation but none of the other firms have large parent companies like FXDD

The New Cap Numbers are out! With the exception of MB Trading (now at $5,190,000) there has been no indication from the poorly capitalized firms on this list that they are shoring up their financials in preparation for the big cap increase to $5 million due in just 6 weeks. In fact one firm, Direct Forex, is reporting that they are in violation of the minimum capital requirement by $276,000!

Meanwhile, the $10 million minimum capital requirement for firms offering 100:1 leverage is proving to be a big barrier as well. How that plays out remains to be seen. But things might really get wild in the forex industry the next couple of weeks.

The following firms, according to the latest CFTC Report, do not meet the coming $5 million requirement:
http://www.cftc.gov/files/tm/fcm/fcmdata0907.pdf

Direct Forex ($762,000)
IG Financial Markets ($1,017,000)
Advanced Markets ($1,216,000)
Wall Street Derivatives ($1,231,000)
SNC Investments ($1,301,000)
One World Capital ($1,408,000)
Hamilton Williams ($1,453,000)
CMC Markets ($2,001,000)
Solid Gold Financial ($2,101,000)
GFS Futures & Forex ($3,078,000)
E FX Options ($3,752,000)
Forex Club ($3,989,000)
Easy Forex ($4,351,000)

The clock is ticking. Are your funds safe?

When trading with a deal desk, the least of your worries is them qualifying.

Andy

The Ten Million Dollar Capital Requirement affects ONLY those firms that trade at a margin level of greater than 100:1

So which firms in the Dead Pool are directly affected by this? Well, not many. IG index would be affected if they actually solicited customers in the U.S. but it appears their U.S. registration is just a shell. GFS Futures & Forex offers 200:1 mini accounts on their website. Thus this rule could have a major impact on their business. But the firm that stands to lose the most is Money Garden. MG Forex is notorious for offering 400:1 "Flex" accounts and this new rule could turn the firm upside down. Here is a quick rundown after looking at each firm's website.

IG Financial Markets ($1,017,000) [700 to 1 leverage]
Advanced Markets ($1,216,000) [100 to 1 leverage]
Wall Street Derivatives ($1,231,000) [Unknown]
SNC Investments ($1,301,000) [100 to 1 leverage]
One World Capital ($1,408,000) [100 to 1 leverage]
Hamilton Williams ($1,453,000) [100 to 1 leverage]
CMC Markets ($2,001,000) [100 to 1 leverage]
Solid Gold Financial ($2,101,000) [100 to 1 leverage]
GFS Futures & Forex ($3,078,000) [200 to 1 leverage]
E FX Options ($3,752,000) [100 to 1 leverage]
Forex Club ($3,989,000) [100 to 1 leverage]
Easy Forex ($4,351,000) [50 to 1 leverage]
Money Garden ($5,507,000) [400 to 1 leverage]
Ikon ($7,562,000) [Unknown]