NFA’s rules designed to help customers in the U.S. but some traders are confused at the new rules and what it all means
The NFA recently imposed a rule (2-43 (b)) that will eliminate the ability of some dealers to offer stop-loss and limit orders. As a market-maker for forex, GFT is already fully compliant with this rule and will not be affected — you will still be able to place stop and limit orders with us.
Some dealers have gone as far as asking their customers to transfer their account overseas as to avoid the new NFA rule. At GFT, our customers can keep their account stateside and have full access to stop and limit orders through all DealBook® platforms.
The new rule also eliminates "hedging," which is really misunderstood when it comes trading currencies. Read the reasons why here.
Finally, some forex dealers have recently experienced a decline in net capital. As world-leading company, GFT has $80 million in net capital, which greatly exceeds the NFA’s minimum net capital requirement and is $20 million above the next largest U.S. forex dealer.
Read the facts from the NFA here.
Read the facts from GFT here.
Read other forex industry opinions here.
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Pound and euro pull back briefly in forex trading
Economic activity has shown signs of slowing again in Britain and in the euro zone as "economic green shoots" continue to wither. GFT’s Boris Schlossberg comments on the flagging economies on the other side of the Atlantic in FX360:
The stall in economic activity confirms our suspicion that the recovery trade is losing momentum as final demand remains lackluster. As we noted earlier the overall picture, “indicates stability, but little further improvement in both EZ and UK and does not augur well for risk currencies going forward.” The Aussie remains the one exception amongst the majors as Australia continues to benefit from Chinese demand.
On the news, the pound and the euro pulled back in forex trading slightly. The U.S. dollar is gaining some favor as a safe haven.
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While a recently adopted National Futures Association (NFA) rule is forcing some forex brokers to discontinue the use of stop and limit orders to protect positions, GFTannounced today that their platform is fully compliant with all NFA regulations and, as such, customers trading with GFT will not be affected.
Click here for more information >>
While a recently adopted National Futures Association (NFA) rule is forcing some forex brokers to discontinue the use of stop and limit orders to protect positions, GFTannounced today that their platform is fully compliant with all NFA regulations and, as such, customers trading with GFT will not be affected.
Click here for more information >>
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GFT traders not affected by rule
The NFA has enacted a new rule that will eliminate the ability of traders to hedge open trades. Many traders are nervous that they will no longer be able to place stop-loss or limit orders. As GFT has already been following this rule and will experience no changes. Customers with GFT will be able to continue to place stop-loss and limit orders.
There will be more information posted on FX360 shortly.
Euro in forex trading
The euro is falling to the U.S. dollar in currency trading on the FX market today. The euro is gaining in forex trading as China continues to say that it supports the dollar as the global reserve currency. And China does support the dollar. For now. (What China is doing for the long term is another story altogether.) For the short-term, China’s continued use of the dollar will continue to provide limited support for the dollar in currency trading.
Another issue affecting the euro in forex trading is economic data. Even though German employment saw some improvement, overall the euro zone is looking pretty grim. Yesterday’s enthusiastic rally is being overshadowed as forex traders moderate their optimism. GFT’s Boris Schlossberg reports in FX360 on the latest euro zone unemployment issues:
EZ unemployment rose to 9.5% from 9.3% projected as conditions in southern Europe deteriorated further. As we’ve stated before the risk of EZ unemployment rolls rising into the second half of 2009 remains quite high especially if German efforts at “short work week” arrangements begin to fail. Many analysts now expect the EZ rate to climb into double digits mirroring the labor conditions in US.
This renewed concern about the economy means that the U.S. dollar is once again ascendant in currency trading as a safe haven.
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Kathy Lien quoted on Reuters discussing euro-dollar
In todays article on Market Watch, Dollar slips versus euro as equities start quarter in the green Kathy Lien was quoted:
"If Trichet suggests that he has done enough, which we expect him to do, the euro-dollar could extend its gains," said Kathy Lien, director of currency research at Global Forex Trading. "If he openly talks about extending the size and scope of program, it would be bearish for the euro."
Read full article.
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Chinese quietly set about forex reserve diversification
Earlier this year, China made a rather strident call for a global reserve currency. This call was for the world to use International Monetary Fund "special drawing rights." Most countries scoffed at the notion, and, having planted the idea, China backed off. Even recently, China expressed its current support of the U.S. dollar as a reserve currency. But China isn’t one to just give up. China is patient, and takes the long view.
Earlier this year, China arranged a currency swap with Argentina. Additionally, China is looking to have its major finance centers settle loans in yuan. There is even an agreement with Hong Kong in the works for exchanges in the yuan. Clearly, China is looking forward to a day (and it may be two or three decades in the future) when the U.S. dollar may not be the dominant reserve currency. The Forex Blog offers this on the gradual change:
Even China has stated that its reserve policy will not feature any sudden changes. In sum, “It seems safe to say that the Chinese are pursuing a rather logical path. They will continue to accumulate dollar reserves, as doing so fits their three-adjective criteria [liquidity, safety and returns], while also pushing for international acceptance of an alternative to the dollar in a new global currency.”
This is smart thinking. China has been taking one solid step at a time as it builds toward economic superpower status. The country has been diversifying in recent months, buying energy concerns and looking to European investments. While America’s dominance has certainly lasted quite a while, China is looking toward the day when it make take her place.
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On the basis of its regular economic and monetary analyses, the Governing Council decided to leave the key ECB interest rates unchanged. The current rates remain appropriate taking into account all the information and analyses that have become available since our meeting on 4 June 2009.
Economic data helps euro in currency trading
The euro is moving higher in forex trading today as economic data coming out of the 16-nation euro zone strikes a more positive tone. One of the biggest helpers for the euro today in forex trading is German retail sales, which have improved. GFT’s Boris Schlossberg reports in FX360 on the economic data helping the euro in forex trading:
In Germany retail sales improved for the third month in a row rising 0.4% vs. 0.0% expected and helped to rally the EUR/USD 
towards the 1.4100 figure at the start of the European open. The data from the region continues to show slow but steady improvement and for the time being remains supportive of the recovery trade, but analysts remain cautious about the second half of the year given the continued rise in German unemployment.
Positive economic data out of China is also helping. With continuing signs that the global recession may be coming to an end, the euro is gaining support in forex trading — especially against low-yielding safe haven currencies like the yen, franc and dollar.
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