FOREX prohibiting US Residents from OTC Metal Trades

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#1 Fri, Jun 17, 2011 - 8:28pm
shaunster
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FOREX prohibiting US Residents from OTC Metal Trades

Hey peeps, can someone please give me some insight as to why FOREX will be prohibiting US residents from OTC trading of PM's? The problem I have with this is the plain language of "US Residents". Does this exclude entities such as corporations? What impact will this have? Any thoughts?

And why is it that I received this AFTER FRIDAY closing!?

From Forex.com:

We wanted to make you aware of some upcoming changes to FOREX.com’s product offering. As a result of the Dodd-Frank Act enacted by US Congress, a new regulation prohibiting US residents from trading over the counter precious metals, including gold and silver, will go into effect on Friday, July 15, 2011.

In conjunction with this new regulation, FOREX.com must discontinue metals trading for US residents on Friday, July 15, 2011 at the close of trading at 5pm ET. As a result, all open metals positions must be closed by July 15, 2011 at 5pm ET.

Edited by: shaunster on Nov 8, 2014 - 5:09am
Fri, Jun 17, 2011 - 9:12pm
SilverSurfer21
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I discovered this recently as

I discovered this recently as well, I was using a test Etoro account and they allow you to trade spot silver gold and oil prices. Went to open a real account and discovered that in the US you could only trade Forex, trading spot silver/gold is illegal under Dodd-Frank legislation. It's a shame too, b/c with all the leverage you could make a decent amount if you buy at a bottom.

Some places such as Nadex are begininng to offer binary options and bull spreads, but it looks really bad and the profit is capped. You're better off learning options trading and trading SLV or other ETF's in my opinion. 

Fri, Jun 17, 2011 - 9:27pm
CookieMonster
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slv

yes but according to the text of the law slv is a product not based on taking delivery of a commodity, so if you were trading it on margin, or trading AGQ, it should be illegal as well.

if they don't ban zsl and agq which are two products that totally screw you with their decay, then i think a equal protection class action is warranted.

or just put your money into mining shares, that would get those valuations rolling again.

CookieMonster
Fri, Jun 17, 2011 - 9:34pm
Eric Original
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Some weird F'n shit goin'

Some weird F'n shit goin' down, man.

This isn't a metals blog anymore. It's a right wing circle jerk, masquerading as a metals blog.
Fri, Jun 17, 2011 - 9:57pm
pailin
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possible downstreams?

I can foresee some immediate and down the road effects that are favorable to EE. If this is as wide-reaching as we're guessing, to include GLD and SLV, then it would take gold and silver off the financial news, greatly reducing competition (in the headlines view of general public) with the inflation dollar. So the only players in the space will be physical contract folks, right? There should still be plenty of action there, so then they'll get COMEX to 100% margin. That will wreck the futures market as all the traders disappear leaving only industrial buyers and seller and some speculative middlemen, but not many. Then they smash the contract price (and thus spot too) with massive short-selling to get all the physical folks to puke up their holdings or create wild volatility on low volume followed by a fixed dollar/gold marker and a gov't mandated swap-in payable in fiat (to encourage the swap) ala FDR, or better yet with low rate bonds...solving the whole Fed stops buying problem and funding Treasury with the nation's private savings?

Talk about a strong dollar policy! And the other fiats will tank as their citizens rush to either the dollar or (for the smarter folks) gold and silver in those countries that continue to allow paper ownership. At a minimum this will suck most of the volume out of the market, leaving the rest of the world to try and keep the party going.

We need to think carefully how this would affect CEF, PHYS and PSLV as well. With them being Canadian, maybe the US exchanges can't make us give up our positions but they may just de-list them? Or maybe we would have to liquidate too unless we hold enough shares to redeem? I bet few of us have enough PHYS or PSLV shares to redeem.

To the intelligent man or woman, life appears infinitely mysterious, but the stupid have an answer for everything. -Edward Abbey
Fri, Jun 17, 2011 - 10:03pm
JoeyJoeJoe
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:S

I don't know what to think at the moment... just to say the EE are truly master manipulators :S

Fri, Jun 17, 2011 - 10:10pm (Reply to #5)
shaunster
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You're right Pailin

Yep I can agree. This has implications, I just can't tell what they are. I can see your point on the long term, I just can't look beyond what is factual because that means becoming emotionally involved <sarc>.

Here's the thing on the short term though.

Obviously these restrictions do not apply to the Asian market - so yeah I would expect some raiding... How in the world are they going to keep the two in check? I had a basic understanding that our OTC would offset theirs.. This is like giving a chess player two moves to our one. I mean I hate to make this sound like a battle of the markets, but these implications alone are enormous. 

Second, what happens on July 15th? Will there be a turnover when things liquidate. Like a sudden surge in miners? All these FOREX, et al accounts are going to go somewhere. 

And yes, this WILL have an effect on CEF, PHYS, and PLSV - I would not be surprised if they are delisted. There more they rig the market the bigger the problem will be - and that is looking sooner rather than later.

If you never did, you should. These things are fun and fun is good. ~ Dr Seuss
Fri, Jun 17, 2011 - 10:17pm
shaunster
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Slv Gld bye bye

As cookie said above, and I think Level pointed out in the other forum.. My understanding of the bill is a product based on not taking delivery. 

Basically I think this is going to revert to the miners and drive it with thunder. Unless I am completely missing something here.

Time to go damage my kidneys and relax under the moon. Have a good weekend all. 

If you never did, you should. These things are fun and fun is good. ~ Dr Seuss
Sat, Jun 18, 2011 - 7:17am (Reply to #8)
Hammer
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http://www.investmentlawgroup

"I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works." - Alan Greenspan, October 2008 WTF ! Now you tell us !!!
Sat, Jun 18, 2011 - 9:23am
uptofreedom
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ummm, I'm still rubbing the

ummm, I'm still rubbing the sleep out of my eyes, not sure what to make of this... Is this as majorly fucked up as it sounds? Like declaring-war-on-the-little-guy(again), the-sky-is-falling fucked up? 

Sat, Jun 18, 2011 - 9:35am (Reply to #9)
Sterling
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This is my favorite part of

This is my favorite part of the link you provided (in the conclusion)

"From this point forward the forex market will look a lot more like the more heavily regulated securities and commodities markets."

I'm not sure if this is commentary by the law firm or if it came directly from Dodd-Frank but I found it funny!

Can I offer you a drink? How about this expensive prostitute?
Sat, Jun 18, 2011 - 10:01am (Reply to #10)
atlee
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The Chicken Little Event

I just know I should stay out of this but I have a few minutes to kill.

 Your interests betray your reason. Those who want mining stocks to benefit from fresh capital inflows want the story to be true. Those who only buy physical and think the price will rise faster if that is the only option want the story to be true. Others are simply alarmists. Do a Google search and you will find that you are the only ones wringing your hands over this.

(actually you don't even appear in the search)

It deals with OVER THE COUNTER DERIVATIVE SWAPS. 

So in addition to false flag and black swan events we now have the always popular chicken little event. Maybe you should take an hour or so and read the whole act rather than pick out a few paragraphs to apply your excellent legal interpretation skills to so that you may shock and amaze your friends.

Here is the good news...there is a fresh shipment of tin foil hats arriving and they are earmarked for your brigade.

Sat, Jun 18, 2011 - 10:31am (Reply to #12)
uptofreedom
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Say what?  I didn't say I

Say what? I didn't say I wanted anything, only asked if this was as fucked up as it sounded. I take it your answer to that is "No"? Sounded to me like another ploy to restrict the options available to small investors. If you're saying I shouldn't be worried about that please tell me why instead of trying to make me feel like an idiot for asking the question.

Sat, Jun 18, 2011 - 10:42am (Reply to #12)
shaunster
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Thanks Atlee

Atlee thank for your interpretation of this - I was kind of hoping to get your take. I opened the thread yesterday after I received the email (who likes to get an email like that on a Friday after close?). What you say is a better way to interpret this. So thanks.

I did read the whole Frank-Dodd link above. Not to cherry pick anything in there... It's ridiculous at best though. If nothing else the timing, and broader powers of regulation.

I'm just trying to learn this - like everyone else. I opened a forex account, spent countless hours catching up to speed and learning things outside the scope of just stacking... Then Friday it felt like I got the rug pulled out from under me. Again, I am more concerned about the wording - which implies the little guy should be squeezed out - while corporations are seemingly exempt. This isn't about it just being OTC transactions..

If you never did, you should. These things are fun and fun is good. ~ Dr Seuss
Sat, Jun 18, 2011 - 12:45pm (Reply to #13)
atlee
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Apologies to you uptofreedom

not directed at you uptofreedom. Not trying to make anyone fell like an idiot. apologies if I did.

here is the definition of OTC

Over-the-counter (OTC) or off-exchange trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted with exchange trading, which occurs via facilities constructed for the purpose of trading (i.e., exchanges), such as futures exchanges or stock exchanges
Sat, Jun 18, 2011 - 12:59pm
atlee
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explanantion

Uptofreedom

Look it is about trading precious metals in foreign currencies. When you turn something like that over to the blog and ask them to answer it for you, you provide fodder to the alarmists and ulterior agenda seekers. New people visit this blog and see that stuff and it hurts the credibility of this blogs message. If my language is too strong for you I will attempt to sugar coat it for you in the future. NOT!

It really wasn't directed at you. It was to those who were already jumping to conclusions with no attempt to try an understand it themselves.

Sat, Jun 18, 2011 - 1:25pm (Reply to #15)
Maximillion
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Thanks for clarification

Thanks for clarification Atlee, so what's your take on Harvey O page https://harveyorgan.blogspot.com/ re

'The latest reduction in margin requirements for gold is a blatant attempt to siphon speculator interest away from July silver prior to option expiration and first notice day...'

ie how do you see this affecting silver price next week?

Sat, Jun 18, 2011 - 1:51pm (Reply to #16)
Sockeye
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Good News

Good News

It is my understanding that you can open an account and sign a statement that your net worth is over a million dollars and then you can continue to trade silver and gold on the forex. 

{edit} [ reading over this https://www.investmentlawgroup.com/content/view/227/127/ it appears that you will need to have $10 million in assets and maybe more problems. Dam government is making things hard. ]

This makes you exempt from some regulations for regular people. 

If you did not claim that on your original account, you might have to open a new account. 

They do not make you prove it. So just sign the agreement. You do give up some rights of course. It means you can not be a baby who crys when you lose. I am not sure what the difference is. the net worth might be exclusive of your home. so be careful it you are talking to someone. dont claim all your equity is in your house. 

Maybe someone can check this out and report back to us.

I am almost always wrong. But the fun in life is those few times when I am right.
Sat, Jun 18, 2011 - 1:52pm
Sockeye
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I think I remember what it

{edit} [ reading over this https://www.investmentlawgroup.com/content/view/227/127/ it appears that you will need to have $10 million in assets and maybe more problems. Dam government is making things hard. ]

I think I remember what it is. You can not claim after you lose that you were a newbie and got taken by the salesman buying what you did not understand. You sign that you understand the risks and will not cry that you are a super newbie at investing.

Newbies have a tendency to scream that some salesman told them they would become rich and they sent in their money and lost. The CFTC finds that a pain in the ass. So you sign the big boy agreement that you have a million dollars and are knowledgeable about investments and off you go into the big times. But you better not cry.

It is a standard CFTC form. get it and sign it and trade the gold and silver. Ask first. and report back here. 

I am almost always wrong. But the fun in life is those few times when I am right.
Sat, Jun 18, 2011 - 2:23pm (Reply to #5)
Captain Silver
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@pailin

pailin wrote:

I can foresee some immediate and down the road effects that are favorable to EE. If this is as wide-reaching as we're guessing, to include GLD and SLV, then it would take gold and silver off the financial news, greatly reducing competition (in the headlines view of general public) with the inflation dollar. So the only players in the space will be physical contract folks, right? There should still be plenty of action there, so then they'll get COMEX to 100% margin. That will wreck the futures market as all the traders disappear leaving only industrial buyers and seller and some ........ <snip>

Dammit, and I was having a good weekend!

Our monetary system has been hijacked by morons! Abandon ship!!!!
Sat, Jun 18, 2011 - 2:52pm (Reply to #16)
uptofreedom
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fair enough, atlee...  I can

fair enough, atlee... I can see how my post looks kinda alarmist. Had been awake for all of 5 minutes, checked my twitter stream out of habit, saw the Lew Rockwell headline and came here to see what y'all made of it. My initial reaction was alarm, tbh, but that's why I couched it with the "still rubbing the sleep out of my eyes" bit and asked a question rather than making a statement... 

Btw, where'd you see that it's just trading pm's in foreign currencies that's being effected? 

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