The July 21, 2010, President Barack Obama signed the “Dodd-Frank Wall Street Reform and Consumer Protection” in the legislation in response to the widespread clamor for changes in the financial system. It was a historic event, and who asked not seen major reforms since the Great Depression.
By law, your main goal is:
To promote the financial stability of the United States to improve accountability and transparency in the financial system, to stop “too big to fail” to protect the American taxpayer to end the bailouts to protect consumers from predatory financial services, and for other purposes.
In response, financial institutions are preparing for the worst. They are doing everything possible to operate the way things are going to agree with the new rules. So for the next year or two, do not be surprised when you see some alteration changes the game in the currency market as well.
I’m not scared and say that the CFTC is going all Steve Jobs-strict foreign exchange transactions at retail. However, I have to warn you that there is a suggested some rules that can wheel of their feathers.
The event is aimed primarily at the regular counter derivatives such as forwards, futures and options. To do this, legislators have proposed the creation of clearinghouses to promote transparency and ensure that business transactions run smoothly. A disadvantage is that it is very likely to mean that banks will have to spend extra for these intermediaries. Consequently, additional costs can be passed on to consumers and translate the retailers paying higher margins!
Another proposal mentioned in the past is the idea that a cap should appeal to 50:1 for the major currency pairs and for no more than 20:1. What this means is that you will not be able to take advantage of the limits of leverage of 200:1 and 100:1, which could hinder their potential profitability.
In addition, aces in the U.S. Congress I also believe that brokers should have capital requirements. This may cause some riders to close or merge with other runners. If your account becomes one of the corridors, you may have to go through the tedious process of signing documents, ensuring that you can withdraw the funds or, worse, having to switch to a new broker.
The most important question to ask if it is, these changes are good or not for the forex market
The clear and obvious effect is the restrictions that will make the Forex traders. As noted in the section of Psychology for Investors, high liquidity, high leverage and relatively flexible regulations are part of the reason why operators choose to dive into the currency markets. While the proposed restrictions are intended to “protect consumers from themselves,” which seriously hampers those who actually know what they are doing and can handle the fast pace and know how to properly take advantage of high leverage available in the Forex market.
On the other hand, we must consider the bigger picture here. More regulation leads to an industry more transparent, which is good for newbies and the uninformed. We do not want people getting ripped off and talking about our beloved community stroke Forex now, right?
Finally, the new rules are being applied in the hope that they will reduce the possibility of a financial crisis later in the road. There will always be people who are greedy and will try to find loopholes to “beat” the system, but stricter regulations in place, the damage that your actions may cause financial markets as a whole will be limited.