Saturday, March 6, 2010

CFTC to Shutdown Currency Trading for Individuals

The Commodities Futures Commission is proposing new rules that would, for all practical purposes, shutdown the ability of individuals to trade in foreign currencies.

Here's WSJ reporting on the proposal:
The Commodity Futures Trading Commission has proposed rules that would reduce the amount of borrowed funds that retail investors can use when investing in the U.S. foreign-exchange market to as much as 10-to-1, from the existing 100-to-1 for major currencies.

Under current rules, a customer putting up a security deposit of $1,000 in cash will be able to trade a notional amount of $100,000, a common contract size for currencies such as the dollar and the Japanese yen. The new rule would cap that amount at $10,000.

Joe Weisenthal explains why this would put the nail in the coffin for currency trading for individual traders:
Let's be clear here. This isn't about limiting retail forex trading, it's about killing retail forex trading. See when you're talking about currency, there's really nothing to get excited about if you can't leverage out the wazoo. When a move of a few hundredths of a cent is considered a notable move, 10x leverage is boring and hardly worth the effort.

This week lawmakers grilled Gensler, and were concerned that if this happened, trading would simply migrate overseas.

This will undoubtedly happen, at which point the only natural response will be to ban US punters from putting money with London (or Gibraltar or Bermuda) based shops, just like forex.
The important question to ask here is, "Why is the CFTC doing this?". The head of the CFTC, the former Goldman man, Gary "The smartest student in his class at Wharton" Gensler, has to know that this will shutdown retail trading.

This has to be some long range government thinking to prevent individuals from profiting from a collapse of the dollar. Why muck up the profits for insiders, like Goldman Sachs, by allowing individuals in the game? It reminds me of FDR's move to confiscate gold held by individuals. After it was all confiscated and it was made illegal for individuals to hold gold, the insiders, including John Maynard Keynes and Bernard Baruch, loaded up on gold stocks. Then FDR instituted a huge government program to prop up the price of gold. He drove the gold price from $20 per ounce to $35 per ounce. This resulted in huge profits for Keynes and Baruch. The public, with their gold confiscated, could only look through the window as to what was going on.

Is this Genser's plan for the future dollar crash?


  1. Well you knew that was coming..
    Some of those earnings on currency trading also probably elude the tax man..hence Uncle Sam's peevishness.

  2. I suggest that your readers join with those who intend to replace the politicians who fail to keep their oath to preserve the Constitution:

    Membership now over 228,700 and growing daily