given our brokers are not NFA regulated this shouldnt effect them should it?The National Futures Association (NFA) has a new ruling which goes into effect on May 15, 2009. It addresses the practice of “hedging” in forex trading, which is the act of holding both long and short positions in the same currency pair at the same time. Here is what the NFA had decided:
Basically, what this means if you attempt to go long and short the same pair at the same time you will be end up with no position - your broker will offset them against each other and you’ll have no trade left open. For those who trade with brokers like Oanda, this is no change at all as that’s always been the case. Traders with other brokers who have allowed “hedging” will see that change shortly.Offsetting Transactions
New Compliance Rule 2-43(b) requires an FDM to offset positions in a customer account on a first-in, first-out basis, thereby prohibiting a trading practice commonly referred to as “hedging.” A customer may, however, direct the FDM to offset same-size transactions even if there are older transactions of a different size. Rule 2-43(b) is effective for any positions established after May 15, 2009. Offsetting positions that were established prior to the effective date do not have to be liquidated, but once either position is closed out after May 15, it may not be reestablished as a hedge.
From the NFA’s April 13 press release.From the NFA’s April 13 press release.
If you’re not aware, NFA is the industry organization to which forex brokers in the U.S. belong now that the CFTC has been given regulatory authority over forex trading (FDM stands for Forex Dealer Merchant). It does things like setting the minimum capital requirements for the brokers. The bottom line is that between the CFTC and NFA forex brokers are no longer unregulated in the U.S.