Putting Forex Shops Out of Business
Published by EminiAddict under Trading Resources on July 1, 2009
FXCM clients received this email. Looks like the CME has more power then we thought. They have launched mini FX futures contracts to compete with the bucket shops. They haven’t been liquid.. I’m sure they will be soon though.
Dear Client:
Our industry’s self regulatory organization in the United States, the National Futures Association (NFA), has informed all Forex Dealer Members, which includes FXCM, that it has adopted new Compliance Rule 2-43 regarding forex trading.
Read Compliance Rule 2-43(b)
This rule requires that orders be executed First In, First Out (FIFO). FIFO requires that when multiple positions are held in the same currency pair, the position which was first opened will be the first to be closed. Stop loss and limit orders do not comply with FIFO.
The NFA’s stance is that FIFO provides more transparency to customers, offering a more accurate picture of the P/L than viewing the results of individual positions. This brings the forex market more in line with the practices of the futures and equities markets.
How are FXCM LLC Clients Affected?
The result is that forex traders will no longer have the ability to place stop-loss or limit orders. Nor will traders be able to modify or close trades from the ‘Open Positions” window. This major new rule will go into effect after July 31, 2009. Therefore, any existing stop-loss and limit orders will be removed from FXCM LLC accounts after July 31.
FXCM has always encouraged active risk management through the use of stop-loss and limit orders. Stops and limits are two entry orders that are linked to an individual open position. If a stop or limit order is triggered the other is canceled. FXCM has introduced a new feature called OCO (One Cancels the Other) entry orders, which will provide traders with the same functionality as stop and limit orders except that they are not linked to any position. For additional information, please visit the “NFA FIFO (First in, First Out) Rules” forum on DailyFX. We will be holding live question and answer sessions within the DailyFX forum.
