oxmcinlm
12-31-2022 02:49,
On May 15 the National Futures Association (NFA)
will implement a new rule, approved by the CFTC
in April, banning FX traders from holding opposing rankings
at precisely the same currency.
For traders using most U.S.-based FX traders, this
implies they will no longer be able to use a technique known
asâ€hedging,†or taking an equal but opposite position in a
currency when price moves against your primary trade,
instead of leaving the position and taking the loss. After
May 15, offsetting trades will cancel each other out on a
first-in, first-out (FIFO) basis.
In its letter to the CFTC indiing the shift, the NFA
stated there are two reasons it suggested the rule. â€First, [carrying
offsetting positions within an account] basically eradies
any opportunity to profit on the transaction.â€
However, the Dollar is frequently used since it also eradies
the opportunity for further losses. The NFA's second reason
is holding two opposite positions raises the cost to the
customer. Having this type of hedge position, a client pays
twice the commissions due to the two separate trades.
Additionally, according to the NFA's correspondence,â€a FX customer will
cover the whole spread twice (buying in the high end of the
spread and selling in the low end) instead of paying half
on entry and half on exit.†Increased carrying charges when
a standing rolls when held immediately add to the price as
well.
All of these prices are to the benefit of the dealer as well as also the
detriment of the client. Part of the NFA's defense for its
rule is that it feels traders could encourage it into unwitting customers
in an attempt to produce extra profits of the
raised prices. The NFA also claims the clinic could be
used to generate income by using the carrying fee to
accept intentional losses.
The NFA's letter cited pros and cons introduced to them
through comments received on the proposed ban before it
was approved.
But as recognized by the NFA, FX brokers
initially began offering the choice of holding two opposite
rankings, and in some cases advertising its availability,
due to client demand. Many of the dissenting voices
have stated the NFA has no business dictating what egies
a trader can utilize.
Some commenters recognized the fact that the method
incurred greater costs, but said this could be taken
care of if traders counted the trade as a single position when
calculating interest rates. According to the NFA's letter,
â€In fact, a minumum of one commenter appears to suggest that NFA
must require this therapy.â€
One major FX dealer said the change has much larger
impliions regarding order-handling technologies, and will
demand the alteration of their firm's whole trading platform.
â€I do not think they understood just how much time it will take traders to
fix their platforms to comply, along with eduing that our
customers on the new ways of handling their risk,†stated the
spokesperson.
Other issues
Aside from the change regarding offsetting positions, the
NFAhas also put stricter limitations on the way and when traders
are permitted to change order prices after they have been
implemented and reported to the client.
Changes are usually attributed to Internet mistakes, erroneous
data feeds, and other technical mistakes. On the other hand, the
NFA discovered that the majority of the mistakes were directly related to
systems beneath the dealer's hands. The NFA decided traders
mustâ€bear the burden†of those price changes, and therefore are
just permitted to make changes as it's to the benefit of
the client, or when the dealer operates aâ€straight
through†support (one which is totally digital and
provides direct access to a counterparty), along with the straightthrough
dealer receives bad data from the counterparty. In
this case, the dealer has 15 minutes to inform the client of
the change in case they opt to cancel or adjust the order.
This change takes effect on June 12.
will implement a new rule, approved by the CFTC
in April, banning FX traders from holding opposing rankings
at precisely the same currency.
For traders using most U.S.-based FX traders, this
implies they will no longer be able to use a technique known
asâ€hedging,†or taking an equal but opposite position in a
currency when price moves against your primary trade,
instead of leaving the position and taking the loss. After
May 15, offsetting trades will cancel each other out on a
first-in, first-out (FIFO) basis.
In its letter to the CFTC indiing the shift, the NFA
stated there are two reasons it suggested the rule. â€First, [carrying
offsetting positions within an account] basically eradies
any opportunity to profit on the transaction.â€
However, the Dollar is frequently used since it also eradies
the opportunity for further losses. The NFA's second reason
is holding two opposite positions raises the cost to the
customer. Having this type of hedge position, a client pays
twice the commissions due to the two separate trades.
Additionally, according to the NFA's correspondence,â€a FX customer will
cover the whole spread twice (buying in the high end of the
spread and selling in the low end) instead of paying half
on entry and half on exit.†Increased carrying charges when
a standing rolls when held immediately add to the price as
well.
All of these prices are to the benefit of the dealer as well as also the
detriment of the client. Part of the NFA's defense for its
rule is that it feels traders could encourage it into unwitting customers
in an attempt to produce extra profits of the
raised prices. The NFA also claims the clinic could be
used to generate income by using the carrying fee to
accept intentional losses.
The NFA's letter cited pros and cons introduced to them
through comments received on the proposed ban before it
was approved.
But as recognized by the NFA, FX brokers
initially began offering the choice of holding two opposite
rankings, and in some cases advertising its availability,
due to client demand. Many of the dissenting voices
have stated the NFA has no business dictating what egies
a trader can utilize.
Some commenters recognized the fact that the method
incurred greater costs, but said this could be taken
care of if traders counted the trade as a single position when
calculating interest rates. According to the NFA's letter,
â€In fact, a minumum of one commenter appears to suggest that NFA
must require this therapy.â€
One major FX dealer said the change has much larger
impliions regarding order-handling technologies, and will
demand the alteration of their firm's whole trading platform.
â€I do not think they understood just how much time it will take traders to
fix their platforms to comply, along with eduing that our
customers on the new ways of handling their risk,†stated the
spokesperson.
Other issues
Aside from the change regarding offsetting positions, the
NFAhas also put stricter limitations on the way and when traders
are permitted to change order prices after they have been
implemented and reported to the client.
Changes are usually attributed to Internet mistakes, erroneous
data feeds, and other technical mistakes. On the other hand, the
NFA discovered that the majority of the mistakes were directly related to
systems beneath the dealer's hands. The NFA decided traders
mustâ€bear the burden†of those price changes, and therefore are
just permitted to make changes as it's to the benefit of
the client, or when the dealer operates aâ€straight
through†support (one which is totally digital and
provides direct access to a counterparty), along with the straightthrough
dealer receives bad data from the counterparty. In
this case, the dealer has 15 minutes to inform the client of
the change in case they opt to cancel or adjust the order.
This change takes effect on June 12.