Watchdog closes retail forex loophole
By Gregory Meyer in New York
Published: January 12 2010 19:26 | Last updated: January 12 2010 19:26
A US markets watchdog is pushing deeper into fast-growing retail foreign exchange markets with rules that clarify a regulatory grey area.
The Commodity Futures Trading Commission will spell out its recently acquired powers to fight fraud in off-exchange currency trading available to small investors in a proposal to be published as soon as this week.
Its move finally closes a loophole in place since 2004 when a US appeals court ruled that the agency lacked jurisdiction in foreign exchange spot trading.
Congress addressed the loophole in 2008 but left the CFTC to write the regulations.
“[The CFTC] is getting the rules down on paper, because they’ve realised, ‘If we don’t delineate the rules, they get bent,’” said Glenn Stevens, chief executive of Gain Capital, the US-based company that runs Forex.com, an online trading site.
The rules bring fresh oversight to a small but expanding portion of the $3,700bn-a-day global foreign exchange market, according to Aite, the consultant.
Retail traders make up more than $125bn of that volume, up from $10bn in 2001, it estimates.
The CFTC has announced several foreign currency fraud cases in the past year.
In November it charged two salespeople with defrauding $190m from customers and allegedly spending it on seven luxury cars, a submarine, a houseboat and gambling.
After Congress agreed that the loophole should be closed, the National Futures Association, an industry-funded self-regulatory group, also tightened rules for retail currency dealers.
Last year the association raised dealers’ minimum capital requirements from $5m to $20m.
That move hastened industry consolidation and the number of NFA-registered foreign exchange dealers fell from 41 to 18.
The latest proposed rules will strengthen the CFTC’s authority over companies selling currency trading to retail traders, forcing them to register with regulators and disclose more to potential customers, according to a government official familiar with the proposal.
The CFTC would also get clear jurisdiction over most spot currency trades.
“All salespeople and everybody that deals with retail forex have to be registered with the CFTC,” said Larry Dyekman of the NFA.
“That’s going to be a big change to the forex industry.”
Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
http://www.ft.com/cms/s/0/97077034-f...nclick_check=1
da li ovo znaci da nece postojati market maker, navjerojatnije ne....samo ce valjda imati manji prostor za manipulacije....