Saturday, March 06, 2010
The CFTC (Commodities Futures Trading Commission) is apparently intent on reining in the amount of leverage available to those who trade in the FOREX markets and, according to this story($) in today's Wall Street Journal, someone in Michigan is none-too-pleased.
An attempt by regulators to protect investors from volatile global currency markets has triggered an uproar among lawmakers, currency dealers and thousands of small traders.Indeed! In fact, why have any government limits on leverage at all?
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.
Todd Lambrix, a currency day trader in Flint, Mich., is one of the many small investors opposing the CFTC plan. Mr. Lambrix has $5,000 in his currency account and often uses 100-to-1 leverage to trade currencies. Three years into trading foreign exchange, he said, he has learned how to control risk by setting enough technical limits that automatically close out trades. Last year, he broke even. "What right do you have to tell me that I can't spend my money on things I choose?" he said.
If some FOREX trading company wants to allow Mr. Lambrix to have 1,000-to-1 leverage or, for that matter, 1,000,000,000-to-1, aside from the possibility that a million Mr. Lambrixes might destabilize international currency markets, why should the government stop him?