FOREX prohibiting US Residents from OTC Metal Trades

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HoggetowneHoedown
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Rough Waters

For those that are/may be affected, communicating with Forex or the like should help with uncertainties.  When one opportunity has to be taken away, others will arise.  Most on this site have made it here because of a certain savviness that most do not utilize.  Now that we can freely communicate with each other, believe me Dodd/Frank are scared of us, not the other way around. ;-)

uptofreedom
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I hear ya.  I'm not

I hear ya.  I'm not personally affected, my only paper silver is AGQ in the IRA, which is about 1/10th of my physical.  I had been considering opening a forex account to hedge with and/or profit from the volatility.  It sure sounds like that'll be out...  I guess 50x leverage on The Collapse was too good to be true.

My only dilemma at this point is whether or not it's time to take the hit, cash out the IRA and put that into physical as well.   If the forex.com email is valid then that just drives another wedge between the paper and physical prices.  If the price discovery mechanism is breaking down physical might not ever get any cheaper.

rckt
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10:1 Levarage

jessescrossroadscafe.blogspot.com

He is saying that anything over 10:1 leverage will be illegal and I think he is looking at this document:

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/forexfinalrule_qa.pdf. 

Looks like you can get 10:1 leverage on XAG and XAU at Oanda.  I think I could be ok with that.

CookieMonster
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my bad on leverage bit

I didn't realize it was 10:1 leverage as the text of the law on the seeking alpha article just used the words margined.

But the farm bill section referred to there referred to all commodities so sucks that they are using part of the farm bill to attack precious metals.

i am actually a lawyer so this does seem like extremely selective enforcement to me and i'm sorry if i scared anyone w/ my statement they'd have to end AGQ, ZSL or other leveraged etf's.

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@ sterling

sweet avatar.

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bernanke opposed this move

Harkin admitted there was opposition to the amendment — including the somewhat mysterious President's Working Group (PWG) on Financial Markets, which tends to speak out during times of market crises. The PWG keeps no minutes, announces no meetings and its only known members are U.S. Federal Reserve head Ben Bernanke, U.S. Treasury Secretary Hank Paulson and the Securities and Exchange Commission chairman. Interestingly, the CFTC chairman is also part of the PWG.

http://deltafarmpress.com/foreign-exchange-contracts-included-farm-bill-debates

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Thanks! Archer fan?

Thanks!

Archer fan?

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CookieMonster
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sorry dude

i shouldn't have posted that w/out reference to the article or my post on the main blog.

what i meant to say was this is selective enforcement by targeting the otc metals, as congress was originally worried about scams involving currency as well as oil and agriculture. the case it's based on is a boiler room currency scam where the guy was trading futures w/out cftc supervision, so the department of agriculture got concerned, too. just seems very paternalistic to target forex and not derivatives from proshares that carry less, but a still damaging amount of margin...

i will don my tinfoil hat now...

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Sockeye
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shaunster

shaunster

it starts Friday next month in July.  Right now we are in June.  I was confused by that initially.  But there is one more month of trading in forex silver and gold.

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Sockeye
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Forex

rckt wrote:

jessescrossroadscafe.blogspot.com

He is saying that anything over 10:1 leverage will be illegal and I think he is looking at this document:

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/forexfinalrule_qa.pdf. 

Looks like you can get 10:1 leverage on XAG and XAU at Oanda.  I think I could be ok with that.

I do not think this will be allowed.  There are so many regulations. 

I would personally be more than pleased with 10X leverage which was not regulated.  I really dont think it wise to trade much above 10X anyway. 

The thing I found strange was the absence of mention of foreign currency trading.  But at the same time it appears all forex will be closed down to Americans.

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rckt
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10:1 Leverage

CookieMonster wrote:

I didn't realize it was 10:1 leverage as the text of the law on the seeking alpha article just used the words margined.

But the farm bill section referred to there referred to all commodities so sucks that they are using part of the farm bill to attack precious metals.

This is all very confusing.  I guess you are referring to: 

"Section 742(a) of theDodd-Frank act which "prohibits any person [which again includes companies]from entering into, or offering to enter into, a transaction in any commodity with a person that is not an eligible contract participant or an eligible commercial entity, on a leveraged or margined basis."

and the document I linked to above goes over how entities can register to be eligible to serve as counterparties to off-exchange retail forex transactions with the 10 to 1 leverage requirement.

speconomist
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  I would like to clarify

I would like to clarify something about the price discovery mechanism: OTC precious metals trading doesn't affect spot price, is the other way around.

In other words, not being able to trade with forex .com won't have any consequence on spot prices of gold and silver, therefore, not affecting at all the price-discovery mechanism.

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nad123
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forex regulations

If anyone has a solution for still being able to trade with this dumb restriction coming in july please post. so frustrating!

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Trading

nad123 wrote:

If anyone has a solution for still being able to trade with this dumb restriction coming in july please post. so frustrating!

Well I do not know what you consider a solution.  But you can obviously trade on the commodities markets.  they do have small contracts of gold and silver.

You can also trade up to 3X leverage in ETF's and can increase leverage substantially by using options on them.  For example there are very liquid options on SLV.

http://www.marketwatch.com/investing/fund/slv/options

and even options on the 2X  AGQ

http://www.marketwatch.com/investing/fund/agq/options

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uptofreedom
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It's only forex.com so far...

nad123 wrote:

If anyone has a solution for still being able to trade with this dumb restriction coming in july please post. so frustrating!

It's sounding like the forex.com email was just their interpretation of Dodd-Frank, not any actual provision kicking in.  They may cease to allow pm's to be traded on their platform, but other forex brokers may still permit it, albeit with reduced leverage.  How it's going to end up is unclear, with the interplay between Dodd-Frank and the upcoming CTFC rules it's hard to tell what's authoritative, what rules kick in when and what their effects will be.   Wait and see is all I can say, this might end up being a non-factor for the time being...

nad123
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Re: forex.com

Thanks for the responses. to my understanding, it is all platforms that will be banning gold and silver trading for all US residents. does anyone use a different platform that lives in the US which will allow trading commodities after july 15? thank you.

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my understanding

My understanding is that all companies are banned from trading gold and silver derivatives in USA.   There might be a door open for an american company to do some trading but it will all have to be approved by CFTC per the new law.

It looks like all trading in the USA will have to be regulated by CFTC and approved first.  With very strict rules.  I doubt any derivatives will be approved for now.  You will have to use Globex at least for now or Comex etc.

Ask the question again in a few weeks or months as more is learned about the situation.  But right now things look bleak.

Implementation of the new law is not understood.  There are many questions that will have to slowly be worked out. 

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finally OANDA, thanks God I am not U.S. citizen

Dear XXXX XXXXX,

As a result of the recently enacted Dodd–Frank Wall Street Reform and Consumer Protection Act, U.S.-based retail forex dealers such as OANDA are prohibited from offering leveraged trading in precious metals to retail clients after Friday, July 15, 2011. 

As a client trading with our OANDA Corporate (U.S.) Division, you will not be able to trade our four precious metal pairs (XAU/USD, XAG/USD, XAU/JPY, XAG/JPY) on a leveraged basis, effective end of day July 15, 2011. Leveraged trading in other currency pairs will remain unaffected, with the same margin requirements.

We are working hard to minimize the impact of this restriction on our clients’ trading. For example, if you are not a citizen or resident of the U.S.A. you will be able to transition soon to our OANDA Europe Division without needing to close your open positions. We will send a detailed email soon with instructions on how to migrate your account.

We sincerely regret any inconvenience caused by this change in legal requirements. If you have any questions, please do not hesitate to contact our Customer Service Team at frontdesk@oanda.com.

We appreciate your business with OANDA. 

uptofreedom
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wow...  I wouldn't have

wow...  I wouldn't have minded the leverage restriction, as long as the banks had to abide by it too leverage limits would be healthier for the market.  Losing the window to the world market is what bothers me the most, that and the fact that they're putting up walls for us small-enough-to-fails and leaving 'em down for the too-big-to-fails.  I'm stunned.  This isn't freedom.

FU Dodd.  FU Frank.  Both of youse can eat shit.

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I am under the impression

I am under the impression an American can use forex from another country.  So if you go to canada or mexico you can trade from there.  Not a simple easy fix. 

I am also under the impression that if you sign the paper claiming that you are worth more than million $$ excluding your house that you will be allowed to trade forex from usa with companies that properly register and are allowed to offer forex.  But those companies will have to be american companies under the jurisdiction of the CFTC.  So that will take some time. 

One big change is that the CFTC will not allow companies to advertise big profits without using a full up Disclosure Document with all the trades listed.  The client would have to sign the disclosure document just like with any other CTA or CPO etc.  Which is impossible so it will be shut down.  If the company claims profits in any advertising that hits USA like over the internet they will be in trouble.  So I do not see companies bothering with USA after this.  Maybe a new small USA company might try to fill the nitch. 

I have not seen this CFTC change mentioned anywhere because it is not in the new bill.  But it is normal CFTC rule.  There is no way that anyone under CFTC control or need for approval will be allowed to advertise any profits without a full up CFTC approved Disclosure Document that is constantly updated and constantly rejected by CFTC.   The company will be under constant notice that they must stop operations because the Disclosure Document has some minor problem and it will take 2 months to review the new change to the document.  It will financially kill any small company that tries.

Another trick is to look at the company financial situation and levy a fine as stiff as possible to put the company out of business or keep it on the brink of failure.    That the fines are outrageous they will claim it is the cost of doing business. 

Probably the best bet is to go to a foreign country where people still have some freedom and trade from there.  getting your money out of the usa is probably a good move anyway.  this country is going down the black vortex hole.  The old USA is dead and long gone.  We are just waking up to the reality and accepting the truth.  The Federal Reserve sucked America dry and killed it with corruption of the money.   I really feel bad for the young people.  They are walking into the abyss.

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