Tuesday, July 21, 2009

Forex Crunch

Forex Crunch

Will Traders Switch Forex Brokers on New NFA Rules?

Posted: 20 Jul 2009 11:04 PM PDT

The new NFA rules are will be in effect in about two weeks. The anti-hedging rules implies new limits on trading software. It might cause many US traders to shift to foreign brokers or to search for a broker that doesn’t make things hard. It might trigger traders to switch fore

The National Futures Association  made new anti-hedging rules, or at least that’s what they thought. Instead of making simple regulations, they introduced the confusing “First In First Out” rule, where the first position that’s opened must be closed before newer positions. Here’s a clarification by James Chen.

While the NFA regulators might think they made a smart move, many forex traders are aggravated by this rule (like here), and many brokers are struggling to implement these rules in their software systems.

Some software providers might not make it on time. For instance, people who use EAs (”Expert Advisors”) on Meta Trader 4 might see them break when the new regulation kicks in. But also traders that make only simple trades will find new limitations in their software which will be confusing.

Possible Scenarios

  • Some traders will be frustrated with the software change without being fully aware of the new regulations - they might think that another forex broker will supply a better service. The new NFA regulations might be the trigger to switch brokers.
  • Other traders might go for a foreign broker - these strict NFA rules don’t apply abroad. I’m not certain about the legality of this move, but I’ve seen this option on some brokers’ sites. They offer the trader to smoothly switch to a foreign subsidiary.

In the NFA’s struggle to ban hedging, they cause a lot of confusion and turmoil among American forex traders.

In the long run, a dynamic market for forex brokers will increase the competition. Forex brokers might work harder to offer better spreads and better service. Let the games begin.

Forex Daily Outlook - July 21st 2009

Posted: 20 Jul 2009 02:00 PM PDT

The dollar began the week with a small drop. It’s direction will be dominated today by the first part of Ben Bernanke’s testament. In addition, there’s a rate decision in Canada and other interesting figures. Let’s see what’s on the menu for today.

Australian Monetary Policy Meeting Minutes start the day. We’ll get to see what’s on the minds of the RBA members, holding the highest rate in the West.

Swiss Trade Balance surplus is predicted to squeeze to 1.87 billion.

In Britain, Public Sector Net Borrowing is predicted to fall to 15.7 billion. For more about GBP/USD, read the British Pound Outlook.

In Canada, it’s a big day with a new rate decision. The BOC isn’t expected to change the Overnight Rate. Traders will listen to the tone of the BOC Rate Statement. Will they express optimism or pessimism?

For more on the loonie, check out the Canadian Dollar Outlook.

The main event is Ben Bernanke’s testament in front of the House Financial Services Committee. His words about the current economic conditions will shake the greenback across the board.

That’s it for today. Happy forex trading!
Posted by Abdelrahman Ellithy at 5:03 AM

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