CFTC proposal to cut Forex leverage to 10:1

Update (September 1st, 2010):
CFTC has reached a compromise with the Forex Dealer Coalition (FXDC) regarding leverage requirements:
instead of 10:1 leverage cut in the proposed earlier rules, the new 50:1 leverage will be introduced on October 18th, 2010 for all U.S. customers.

Traders as well as US-based brokers are in a light shock as in mid January 2010 CFTC has proposed to cut the leverage in currency trading to 10:1.

The proposal hasn’t become a rule yet, but already has spread with the lightning speed across the trading public in US and worldwide. CFTC proposal is to affect all NFA regulated brokers, who, should the rule pass, would be limited to offer 10:1 leverage on all Forex accounts.

The text of the official CFTC proposal can be read here: RIN 3038-AC61

As the news spread, the largest Forex brokers in US has felt a headache knowing what results it can bring.
They have formed a Forex Dealer Coalition (FXDC) to fight against the new 10:1 leverage proposal.

Foreign Exchange Dealers Coalition warns that:

“CFTC’s recent rule proposal, which would limit customer trading leverage to 10
to 1, would be a crippling blow to the industry…”

– 90% of those accounts can be expected to go offshore;
– thousands of high-tech jobs involved in the industry will be lost;
– United States could well be costing itself billions of dollars in taxes;
– the problem of Forex fraud will get worse absent legitimate dealers offering retail Forex, while worldwide unregulated dealers which are out of reach of the CFTC will thrive;
– and finally, the most obvious fact: traders will simply not accept 10 to 1 leverage.
All Forex market participants, including individual traders are encouraged to provide their feedback on the new CFTC 10:1 leverage proposal. There are several methods to be heard:
• E-mail: [email protected]. Include “Regulation of Retail Forex” in the subject line of the message.
• Fax: (202) 418-5521.
• Mail: Send to David Stawick, Secretary, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, DC 20581.

From the latest on CFTC 10:1 leverage proposal

1. FXDC Coalition has opened a new website where they continue talking about the issues of 10 to 1 leverage rule proposed by the CFTC.
2. The official CFTC site has released a list of some January letters received about the 10:1 leverage cut.
You can read them at CFTC website: Federal Register Comment File 10-001
In general, Forex traders continue to express their disappointment and an overall concern about the proposed leverage cut. The letters contain requests about reviewing and canceling the potentially damaging rule about a new leverage.
Comments on the proposal are accepted till March 22nd, 2010.
3. The CFTC arguments remain that:
“The extreme volatility of the foreign currency markets exposes retail forex customers to substantial risk. Forex dealers currently
extend leverage to their customers at ratios of between 25:1 to 400:1 or higher, which allows customers to control contracts worth significantly more than their cash investment. Given these high leverage ratios, even minor fluctuations in currency rates can exponentially increase a customer’s losses and gains. Even a small move against a customer’s position can result in a significant loss. Under current practices, customer positions are usually closed out once the losses in an account exceed the initial investment. However, if, for any reason, the positions are not closed out at a zero balance, the customer could be liable for additional losses.”

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I am a new, small trader, mostly mini account size. If 10:1 happens, how would I go about contacting potential offshore “legitimatge” dealers who allow scalping? Any suggestions? I’m looking for 100:1 leverage. I just finished a very good forex training course and hope to become a successful trader. Thanks!!!!!

So, restriction from preventing loss (ie. no hedging), leverage restriction to 50:1 on majors and 20:1 on minors (eg. GBP/JPY), and a restriction of US citizens to CFTC brokers to prevent them from taking their business elsewhere. Obviously, someone doesn’t want any US citizens who can’t afford to obtain their own offshore corporations to trade with offshore brokers to profit from forex. Why? What US cartel is financially benefiting from the success of imposing these restrictions upon the American population?

Russia gives more freedom than the
good old USA!!!! when it comes to investments, how strange this world has become.
Remember, we are fighters for freedom and look now at what we have become: Protected by Big Brother while the corporations have added further debt for every U.S. citizen to the tune of approx. $180,000 (even at birth for the total debts our government has created for all of us). I think it is time to have a real change, not a phony one!!!

Trader – you said everything i was thinking. thanks

this was the last straw…first 200:1 went down to 100:1, then first in first out rule, then no hedging, now down to a useless 50:1 maximum leverage…THAT”S IT …I’VE HAD IT!

BYE BYE stupid usa brokers, nfa and ftc BULLSHITERS!
IT”S MY MONEY AND I WILL “CHOOSE” my leverage and if i want to hedge or not. HOW DARE YOU!!! NAZI’s.

I am not with this regulation this 10/1 it is really a mess for minor investors who have mini accounts in USA.

There were no news or talks since the public opinion letters were received by CFTC.

Forex brokers that formed a Coalition remain firmly against the leverage cut, while many brokers also have taken actions to move/open new businesses overseas (in case of..)

So, we’re still waiting, but from the past months events and overall reaction from individual traders and dealers, it is obvious that CFTC has received no support whatsoever regarding their leverage cut proposal.

Hi, BG.

How is this issue been going on lately ? It’s been a long time since I’ve hearded about it…

Did they decided something about it ?

Thanks in advance,

this rule will be aplied to US brokers, not european ones, thus moving US brokers to europe – a good stimulation of business activities for europe. why US regulators create so many barriers in speculative trading?

Yeah, people wanna defend other people who cant trade who say this new rule should be imposed. they say why should a trader have that much leverage if they don’t need it and that scams are all over the place, enticing new traders. when was it my duty to care about people who don’t want to educate themselves and learn from their mistakes? I did just fine learning my lessons and think it’s ridiculous to limit leverage like that. as far as I’m concerned, it’s everybody for themselves. they don’t like that, they can go find another business to start or stay at their day job. I just don’t get why people care so much about someone they never met or will trade with or teach how to trade. leverage isn’t gonna stop a scam or people from loosing money if that’s what they’re trying to accomplish. I like 100 and 200:1 myself. if i was trading one pair at a time with FIFO rules, then I wouldn’t even care. i haven’t traded with CFTC brokers for months now. the last was MBT

I believe people in the US take more risks than any other country in the world. As a result, people loose more than they win in general. CFTC doesn’t care about people’s money and their life. They only care about USD flowing from US traders to traders from other countries in the world – outflow of currency.

PS. Gamblers will always gamble. If you impose tax in Vegas, gamblers will move to somewhere else. They don’t like regulations, at least not those that takes away freedom from them.

A good regulation: All foreign exchange should be regulated by the government. But it’s not happening. People are being scammed. CFTC doesn’t care about that? Make a website, put a list of brokers that are regulated by regulating authorities. Tell people not to invest anywhere else. But that’s not happening.

A bad regulation: Reducing an already reduced leverage. It won’t help. If I choose to go for higher leverage, US market isn’t the only option for me. Just imagine how much money will flow to other countries once this is enforced.

To me it looks like CFTC likes to gamble more than anyone else: take a chance and see what happens hoping it will go in the right direction.

Examples reviewed, corrections are highlighted in BOLD:

Example I. (100:1 standard):
If I buy 1 Lot EUR/USD = 10 USD / 1 pip

Example II. (100:1 mini):
If I buy 1 Lot EUR/USD = 1 USD / 1 pip


Example III. (10:1 standard)
If I buy 1 Lot EUR/USD = 10 USD / 1 pip

Example IV. (10:1 mini)
If I buy 1 Lot EUR/USD = 1 USD / 1 pip


Whether it’s 100:1 or 10:1 leverage, the pip value remains the same:
1 standard lot = 10 USD/pip
1 mini lot = 1 USD/pip

Leverage only determines how many of those lots you can pull off in every trade.
The more lots you open, the more risk you take.
Everyone is smart enough to decide how much to risk, or are they?

(CFTC tries to offer help to those who never meant to be investors. The rest needs no help from the authorities.)

Hello all, I have not been reading what is the main goal for CFTC to reach but let me understand this 10:1 proposal. (I am not a PRO in Forex but I am at the beginning stage)

1 LOT = 100000 (standard)
1 LOT = 10000 (mini)

Example I. (100:1 standard):
If I buy 1 Lot EUR/USD = 10 USD / 1 pip

Example II. (100:1 mini):
If I buy 1 Lot EUR/USD = 1 USD / 1 pip

Example III. (10:1 standard)
If I buy 1 Lot EUR/USD = 1 USD / 1 pip

Example IV. (10:1 standard)
If I buy 1 Lot EUR/USD = 0,1 USD / 1 pip

Can someone confirm if the examples are correct?? If they are then there is no point for CFTC to change the leverage. A trader will trade 10 lots instead the 1 lot before when 100:1 leverage was and the result will be the same, correct or not? At that case Traders will make and lose same money as before.

If CFTC is warried about traders to win money – there is no point in changing leverage. If CFTC is warried about traders losing money (slowly or quickly)?!?!? – should reducing the leverage to 10:1 help anything?? If someone wants to trade they will have to add extra ZERO for their deposit.

Now is the question. Is that a big deal?? Will that help?? Or I am completely wrong with the examples above? If someone does not have the money – they will deposit only 1000 USD anyways and trade with 10 LOTS anyways. Who is stupid will remain stupid and who is not will find the way to keep trading.

I have to read the CFTC proposal, why it is. What is the main purpose for suggesting this change actually?? Can someone tell me, please. I really do not understand the difference if my counting is correct. :-))

If CFTC is so concerned about saving our money, why they don’t allow hedging anymore? They are only trying to make us stop trading. We should be allowed to use leverage of 1000:1.

All forex brokers allow clients to set desired leverage and it should be up to me how I choose to spend my money and I should be in charge of deciding if I want 1:10 or 1:1000 leverage.

It it happens, I’ll move all my funds off-shore and my trader friends will do the same.

And people should not smoke.. and eat fatty food blah blah blah..
My god.. I’ve managed to take $500 and in 2 years turn into something I do full time for myself . There are smart people and stupid people in every aspect of life. Just one more govt. Intrusion. I would want that same person to be able to start with something other $5K or $10K….. I want everyone that is willing to learn and put the effort in , the ability and chance.
I still go to Vegas and win / lose. Should I not be able to go there? It’s MY MONEY… It’s MY LIFE.
Obviously I’m moving all my accounts overseas.

In response to the comment 2 above:

400 to 1 leverage vs. 100 to 1 leverage does not mean a quarter of the profits. All it means is that you can place trades of say, 400,000 instead of 100,000 and have the same amount of risk. If you trade a leverage of 400 to 1 you’re going to need a lot of extra money hanging around to cover yourself. If 100 to 1 isn’t enough, you can just trade more lots. Now 10 to 1 I think is going to have traders both big and small scratching their heads and saying “well if I have to set aside such a large amount of money for a small profit, I might as well just buy a certificate of deposit or put it in a savings account.

forex brokers are not a banks to keep money on it with no security to my fund in, thousands of poor peoples made millions of brofit from forex so look to other side, sides of winners.

If you are making money in Forex, you will understand that leverage, along with good money management is the ONLY way to make money.

Think about it.

If you made $50,000 a year with whatever system and money management you used.
And you had 400:1 leverage. Now with 100:1 you are making 25% of that, which is $12,500.
Now if they do cut the leverage to 10:1, you are going to make $1,250
So where is the motivation to even trade anymore? hello !!!!!
Imagine multiplying your current equity by 10 times, just to make the SAME TRADES.
It’s not going to happen. They are trying to cut out the little guys from making money, it’s plain and simple.

what they need to restrict are those damn forex commercials on FOXBN and CNBC!!!…

Lol..first of all why do you care if these “STUPID INVESTORS” lose their money?? its their money to begin with!!

second of all..”investors” are now gonna vie for a way around this 10:1 rule..because thats just what people do naturally when they are being restricted!!..which simply means more manipulation to the market! wonderfull move indeed..u watch

MOST importantly…this is just another attempt and step to restrict any profit potential for small time traders!!!

BECAUSE PLAIN AND SIMPLE..NONE OF THE PROPOSAL/ARGUMENTS ARE EVEN VALID in restricting leverage beyond 100:1..the market has been well effecient how it was……why not do the same for BIG TIME commodity traders also??????

Just don’t beat me up, guys 🙂 I’ll be saying something controversial to your opinions.

Think for a moment that Forex has become a place for stupid (sorry) investors, who have not earned anything in their speculative life (even can’t exchange money in their local exchange at best rate time, or distribute risks on own bank deposits depending on the fluctuations in the global economy). I’m talking about the basics, where no money is lost during financial operations.

Forex, due to its small deposit minimums and huge leverage, has opened its doors wide to all people who want to play the markets, but may not have skills for it. The problem is, no mater how much money those people bring into Forex, Forex takes those money away from them.

Should we ask ourselves: should these people ever need to enter Forex? Why lure them in knowing that they will lose money? Who benefits from this?

Answers are: these people should not trade. The way to make it happen is by lowering the leverage, so that only traders with serious money – the real speculators – can trade (the way it was before).

Luring new traders is bread and butter for all Forex brokers. With 10:1 leverage this opportunity will be gone – they would need to increase deposit minimums to facilitate trading with a lower leverage, or divide lots into even smaller parts, to allow trading with cents and micro cents.

I think CFTC’s goal is to: rise awareness that Forex is not a place for gambling;
make NFA brokers trade with real investors, who has money and skills to trade and and don’t need high leverage; prevent losers from losing their money (in US).

Despite CFTC’s best efforts, many problems will stay: CFTC can’t control Forex industry worldwide, meaning those who want to trade with high leverage and small deposit will go offshore, and so will the brokers, by opening offices abroad.


this will get passed now matter what!!! just prepare for it!! get ready to leave US accounts…
think about it…the proposal is set to get enacted withing two days before the FOMC announcement in march!!!
coincidence??? i dont think so

InterbankFX is sending emails to thier cilents too. I’ve got one, few quotes:
“An example of how the proposed regulatory restrictions would affect a major currency pair appears below:
Maximum Leverage under Current Regulations / Maximum Leverage under Proposed CFTC changes
100:1 leverage (one percent) / 10:1 leverage (10 percent)
1 lot (100,000) / 1 lot (100,000)
Margin requirement: $1,000 / Margin requirement: $10,000 ”

“We stand behind the belief that you should be given the freedom and right to choose the amount of leverage that is appropriate for your individual desired risk, and that this basic principle of ‘choice’ is in jeopardy by the proposed CFTC regulations.
If you feel strongly about the proposal, we encourage you to help determine the outcome of these proposed regulations. You can help make an impact by sending comments directly to the CFTC at: [email protected]. ”

Interb Max

This will hurt small investors, first of all. An individual with a tiny deposit won’t be able to participate in his currency market, unless they open an account with non-NFA broker.

Large investors won’t suffer as much, since majority is on the low leverage.
Conclusion: Forex industry in the States risks to lose all small investors – a huge money pot.

First, no hedging, now 10:1 leverage.

Foreign brokers must be celebrating now as new clients will run from US to them. No more need to invent new features and compete for best trading conditions – US brokers are out of the competition!!!

OMG, what a blow! NFA brokers continue to suffer from their own regulators…
If it goes through, a US broker will be one of the lest attractive dealers in the world for most of the beginner traders for sure, while everyone knows that beginners are the best clients for Forex brokers.

I know that FXCM is actively lobbying against 10:1 rule because they send emails to their clients encouraging them to write to CFTC.