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In our effort to provide the best solution for your trading regarding the NFA’s new rule on hedging, please know that we have been in contact with the NFA and have offered several solutions which we believe will accommodate almost all types of trading strategies and comply with the NFA rules. Our discussions with the NFA are ongoing and we will keep you advised. In the mean time, know that FXDD is making no immediate changes to any platforms and that you will be fully advised prior to any proposed changes.
The FXDD Team.
How can they do this? Simple. FXDD still isn’t licensed by the NFA.
It’s easy to thumb your nose at regulators when you don’t actually have to answer to them. FXDD applied to become a member of the NFA in April of 2008. One year later their application remains unapproved.
Should traders be concerned about this? Absolutely. Not only is FXDD unlicensed (and therefore in possible violation of U.S. law) but now they are actually thumbing their nose at the very regulator who they are seeking to get that license from.
This is not prudent behavior on FXDD’s part and traders should stay clear of this firm until they are actually authorized to operate inside the United States.
Yes, this new rule is dumb, particularly because it accomplished nothing except to roil the market. Hard to believe the misinformation and blatant speculation that surrounds it. Not overly impressed with the folks at NFA.
Unfortunately, so-called "hedging" is even dumber than the rule. It's a misnomer. This is not hedging as a "hedge fund" would do it. It should be called a "Freeze." That's what you're doing when you open an off-setting position. You've frozen your original position and are now OUT OF THE MARKET. Whether you're down 50 or up fifty, makes no difference. You cannot salvage a losing position via this so-called hedge. One side going up, the other down.
Eventually you will have to eat it.
The biggest problem however, is "opportunity cost." While you're frozen, the market moves
400 pts, either way, while you're fat, DUMB, and happy. You're marvelous "hedge" doesn't look so hot now.
Interesting post from Francesc at FX Street regarding FXDD’s decision not to implement the NFA’s new hedging rule. Jim Green, Managing Director at FXDD, wrote in to say that FXDD “was not fighting NFA.” They’re just having “constructive conversations” with NFA about the new hedging rule:
“Dear Francesc: It has been some time since we last communicated. Although FXDD enjoys the coverage it (usually) receives on FXstreet, your recent headline was somewhat misleading and I want to state for the record that FXDD is not fighting the NFA on the hedging rule. As you know, FXDD is pending with the NFA and we discuss our application with the designated parties at the NFA. Our discussions with the NFA should not be interpreted as “fighting.” We have had and continue to have very constructive conversations with the NFA in terms of the practical application of the new rule and, for purposes of the rule, what actions are permissible.
I respectfully ask that you clarify our position with your readership.”
Ok. FXDD may not believe they are fighting with NFA, but how else should NFA interpret FXDD’s decision not to implement the new hedging rule?
Of course, in fairness to FXDD, why should they implement a regulatory rule that will be harmful to their business if this same regulator continues to stall on their license application? This could be FXDD’s way of saying “give us a license, then we’ll implement your rules.”
But is it wise to take on NFA like this? This is why traders should sit on the sidelines until FXDD gets that license. They are playing a game of chicken with regulators. And in the current climate we are in where regulators are under enormous pressure to crack down on rogue financiers no trader wants to be in the middle of what could be one ugly head on collision.
They are both stuck in bankruptcy with creditors (and traders) waiting in a line that stretches around the block. Let that be a lesson to anyone who owns shares in General Motors or has an account with an unlicensed Swiss Broker.
The Swiss Financial Market Supervisory Authority (FINMA) has rendered on May 18, 2009 a decision opening the bankruptcy of CROWN FOREX SA as of Tuesday May 19, 2009 at 08:00 am (Swiss time).
The decision will be published on May 29, 2009 at 10:00 am (Swiss time).
Philippe von BREDOW and Laurent WINKELMANN have been appointed as bankruptcy liquidators by the FINMA.
Effective immediately, as of the date and time of the bankruptcy opening, the activities of CROWN FOREX SA are suspended, the company, its Directors and officers are forbidden to make or receive payments, and all the clients’ open positions are closed.
We thank you to communicate to the liquidators, until June 30, 2009, in writing the following :
1. Account Number and relevant details;
2. Open positions as of Tuesday 19 May 2009 at 08:00 (Swiss time), together with supporting documents thereof;
3. Any additional claim you may have toward CROWN FOREX SA;
4. Any debt you may have toward CROWN FOREX SA.
Sincerely
Philippe von BREDOW - Laurent WINKELMANN
NOTTER MEGEVAND & PARTNERS
Place Edouard-Claparède 3
1205 Genève
SWITZERLAND p.vonbredow@nomea.ch l.winkelmann@nomea.ch
This is why traders need to beware opening an account with any Swiss broker that doesn’t have a banking license. Notable Swiss brokers like ACM, DukasCopy and MIG have all applied for licenses. But they do not yet have that license. Beware opening an account with these firms until they do, lest you end up like the poor sods at Crown Forex.
Yes, this new rule is dumb, particularly because it accomplished nothing except to roil the market. Hard to believe the misinformation and blatant speculation that surrounds it. Not overly impressed with the folks at NFA.
Unfortunately, so-called "hedging" is even dumber than the rule. It's a misnomer. This is not hedging as a "hedge fund" would do it. It should be called a "Freeze." That's what you're doing when you open an off-setting position. You've frozen your original position and are now OUT OF THE MARKET. Whether you're down 50 or up fifty, makes no difference. You cannot salvage a losing position via this so-called hedge. One side going up, the other down.
Eventually you will have to eat it.
The biggest problem however, is "opportunity cost." While you're frozen, the market moves
400 pts, either way, while you're fat, DUMB, and happy. You're marvelous "hedge" doesn't look so hot now.
I don't hedge this way and agree there's no real benefit. However, I do trade multiple systems on the same pairs, sometimes taking simultaneous long/short positions. As usual, the law of unintended (or is it?) consequences comes to play with the bureaucrats and their regs and rules.
Now they're taking away one of FX's big advantages: the ability to diversify trading strategies (e.g., trade a long-term trend-following system on the EURUSD while also running a short-term scalping EA on it).
This is a useful tool for determining a broker’s size and stability (in addition to the net capital numbers.)
The following firms have net capital below $20 million
Easy Forex $15,552,000
Ikkon Royal $16,423,000
Alpari $16,557,000
MB Trading $17,031,000
Advanced Markets $19,686,000
The following firms have net capital above $20 million
Forex Club $21,354,000
CMS Forex $29,360,000
PFG $30,444,000
Interbank FX $38,393,000
FX Solutions $45,032,000
GFT Forex $87,169,000
Gain Capital $95,879,000
FXCM $113,463,000
Oanda $161,723,000
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