Offsetting transactions - NFA rule 2-43(b) - page 2

I'm sure you're right. But I'm also waiting to be told that the issue only applies to grid systems, and other things which place both long and short orders. The implications look as though they could be wider than that.

It hinges on this bit of the rule: "A customer may, however, direct the FDM to offset same-size transactions even if there are older transactions of a different size". By the sounds of it, if the older transactions are of the same size, then the oldest must always be closed first.

Therefore, in MetaTrader, you could do an OrderClose() of your most recent order for e.g. 0.20 lots and actually end up closing your first order for 0.20 lots. Does your code currently contain an assumption that the order which has been closed is the one you asked to be closed? What happens to your code if that assumption no longer holds?

Similarly, it sounds to me as though the rule may require stop-losses to operate independently of individual orders. An older order could potentially get taken out at the stop of a newer, same-size order.

It's supposedly in the interests of consumer protection. Placing a buy order and a sell order isn't quite the same as placing a buy order and closing it (leaving aside the extra spread). In the event of a major failure of market liquidity, you might only be able to close one of your two positions, or the spread might widen to an enormous degree. However, that's only a problem on the basis that you're not allowed to buy and sell to yourself, pairing off your positions, or to use something like MetaTrader's OrderCloseBy().

I wasn't sure a few years ago, when I wrote about the NFA prohibition against CFDs, but now I'm completely sure they are on the verge of bankrupting the entire american fx industry. Very soon noone will want to be their client anymore. I don't think it ever happened, in the history of markets, that a regulatory body to ban a strategy. Yes, they modify market participation conditions, documents circuit, and margins. But NEVER strategies. Who knows what they will come with tomorrow? Probably a notice saying you're limited to a trade a day. This means the american retail fx environment is not anymore a stable business environment. And this is the first duty of a regulatory body.

This is the so-called NFA mission:

As a congressionally authorized self-regulatory organization, NFA's mission is to provide innovative regulatory programs and services that ensure futures industry integrity, protect market participants and help our Members meet their regulatory responsibilities. NFA is committed to making decisions and taking actions that reflect the highest level of service excellence for our customers: NFA Members and the investing public.

So, they "protect market participants" -> by forbiding them to hedge risks ?

"Highest level of service" -> How, by imposing commie-like restrictions ?

Perhaps now this will pass and remain unpunished. But any next "notice" may pull the trigger. Brokers will see accounts being closed. A capital outflow will follow, to the few foreign brokers that have a good reputation and allow US customers. And when CNN will look into why "retail fx brokers around the country lost 30% of user accounts"...someone will point the finger to NFA (and to the CTFC, behind it). Either heads will fall, or the industry will go down. 

Good God, glad I'm not american.

I think people should go to court immediately and stop this insanity (or dishonesty?). This new ridiculous rule will disrupt many strategies and produce forced losses to thousands of traders. Life will become tougher for the retail traders (obviously, good for the market makers). Who knows if these ignorants (or swindlers) didn't pocket money to issue such an absurd rule? Have anyone noticed that compliance rule (a) charges THE CLIENTS for MARKET MAKERS not honouring prices?

You ever notice that hardly any ship on the open ocean is registered in the United States. There's a reason for that. It won't be long before the US based Forex shops pack up and move to friendlier countries too.

At least I won't get hauled off to jail for say that, though. So it's not all bad living in the US :)

I wonder what percentage of traders out there use strategies that are affected by this new rule?

If I were to pick a number, I would probably say 2% or less. This is from looking through the various strategies described in various places on the internet, but it is possible though I have not been paying enough attention. :)

I'm sure about that too. But what next? If they are let to ban strategies and trading styles, the whole idea of trading becomes a joke.

You're almost certainly right provided that a close or a stop-loss is still allowed to close a specific order even if there are older transactions of the same size, despite the wording of the summary of rule 2-43(b).

I am new here but have been trading Forex for over 2 years now. As one who uses both EA's and manual systems that involve hedging, I am deeply disturbed by this ruling.

There seems to be a clear and contrived movement to hurt the retail trader and restrict the ability to profit from the Forex market. Assuming we make up only about 5-10% of the total market (according to brokers), I don't really understand why the rules are being changed. How could we possibly have any significant impact on such a huge market?

Further, I do not want some bureaucratic arm of the US government "protecting me from myself"!

In my case, I already have an account with a US broker that is not affected by any of the regulations put forth by the NFA. In fact, they have adjusted their business model specifically to help traders THRIVE instead of losing.

For more than two months now, I have been happy with spreads, execution and customer service. Even the CEO of the company has been willing to speak with me! The broker is Gallant FX and I will be using them exclusively for any of my hedging strategies.

Mark

Don't get your panties in a bunch. Offsetting trades, or hedges are really just a fiction provided by the designers of MT4 for our convenience. It's easier to think in terms of a hedge then a flat position, but we are truly flat when we buy and then sell the same pair. The real problem is that many EA's and manual trading systems use offsetting trades. These will not be useful after May 15 in the US. So what do we do? We can modify our EA's using something of an accounting nightmare to keep track of our fictional hedge, we can forego all systems that require offsetting trades, or we can lobby for the MT4 designers to build in the accounting system needed to continue the fiction while in fact using one-sided trading. I vote for lobbying. I don't think I can do the accounting in my EA's, and some are commercial so I don't have the source. It's either move to another country or give up on MT4.

I think I would be very very careful of a broker that is not a member of the NFA.