A big H/T to Alea for this story, plus the title.
Late on Monday, the US Commodity Futures Trading Commission released its final foreign exchange market rule. The centrepiece is the limit on leverage for firms dealing in retail forex — the decision itself, following months of weighty deliberation.
‘Stead the current 100:1, we now get 50:1. From Reuters:
A key change in the rule, which goes into effect on October 18, will allow the National Futures Association to put in place leverage rules as long as they require investors to place a minimum 2 percent security deposit in the case of major currencies and 5 percent of the notional value of the transaction for all other currencies.
But that’s still rather different to what the CFTC initially proposed, back in January.
Then the Commission wanted to introduce 10:1 leverage for major currencies. That lead to a record number of comments — mostly complaints — on the CFTC website. Day traders went incandescent with rage, while Congressmen fretted that business would shift away from the US, to markets with less onerous limits.
So, per their wishes — 50:1 leverage is the chosen, erm, limit.
Related links:
A ‘London loophole’ for FX – FT Alphaville
CFTC Releases Final Rules Regarding Retail Forex Transactions - CFTC
Forex leverage limit 50:1 – Will US traders run away? - Forex Crunch
Tokyo FX traders keep calm and carry on - FT Alphaville