EDITOR’s note
Dodd-Frank new rules for FX and commodities
In his comprehensive article on commodities, Alessandro Balsotti underlines the contiguity between the commodities and the FX markets. And as we dedicate an important part of this edition to the evolution of the retail FX industry and the commodities sector, new rules from the Dodd-Frank financial reforms are starting to affect both markets.
Te nearly one-year old reform, also known as the Wall Street Reform and Consumer Protection Act, mandates tighter restrictions throughout
the financial
world and requires the various regulatory agencies to issue their own rules. For retail currency trading, a handful of
most
regulators, recently
including the Office of
the Comptroller of the Currency and the Federal Deposit Insurance Corporation, have announced rules that mirror those issued by the Commodity Futures Trading Commission (CFTC).
New rules for the over-the-counter derivatives market won’t
just hit
big banks and firms, but also retail investors who buy short-term
others, such as Oanda, have chosen to continue offering those contracts but without leverage, so that they can be in compliance with the new law when it takes effect on July 16.
Another important consequence of the new law for retail traders is that they might soon have the possibility to trade currencies through big US banks that have deposits insured by
derivatives contracts to bet on the price movements of gold and silver. “We were seeing a lot of fraud in this area, and we felt that it needed to be regulated,” said NFA spokesman Larry Dyekman. Some firms
such
as
Forex.com have stopped offering over-the-counter gold and silver products to retail investors in the U.S.,
the FDIC. And as confirmed by Drew Niv, chief executive of FXCM “the biggest issue in retail FX is the lack of safety of customer funds”. So when big banks enter the retail FX space, this might give them a competitive advantage over brokers.
In Switzerland, where FINMA (the Swiss Financial Market Supervisory Authority) requests
that forex brokers Senator Chris Dodd and Representative Barney Frank
have a full banking license, the market went from a few hundreds of brokers to only a few authorized ones. In this edition we’ve interviewed Marc Bürki, CEO of Swissquote Bank, and Alain Broyon, CEO of Dukascopy Bank, who define the Swiss banking environment as secure and stable. Te acquisition
of ACM by Swissquote Bank and the banking license that Dukascopy obtained from FINMA give further protection to their clients and show that the Swiss regulator has now joined the U.S. CFTC and NFA, the U.K. FSA and the Australian ASIC in being an efficient force in the regulation of the Forex market in Switzerland.
Emmanuelle Girodet FX TRADER MAGAZINE July - September 2011 5
FX
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