US FX Traders Must Repatriate Funds - Consequences?

[maxr 10]

Hi: I watched in interesting webinar last night on the forthcoming US FX changes, which as I understand them correctly, are:

 

* US traders with spot FX accounts outside USA must repatriate their accounts by 18th October.

* US FX brokers will stop allowing their clients to hedge - i.e. you will no longer be able to have opposing positions in the same pair.

* FIFO order sequencing will be put in place.

*Introducing brokers must be registered.

*Leverage changes - discussed in another thread, so lets leave that.

 

Apparently, banks providing spot FX trading acccounts are not affected by this legislation, and CitiBank has an account called FxPro which appears designed to allow clients to do many of the things the legislation sets out to stop - with a $250K guarantee.

 

What changes do you see resulting from this - do you think traders will move to bank run trading accounts like the Citi offering, do you think some traders will move to Futures instead of spot FX (as I understand it, US traders can still trade Futures offshore), and will these changes affect you personally?

 

Max

[sptraderrlc 10]

Was this an archived webinar and if so where can we find it?

 

Thanks

[maxr 10]

They've archived it at:

 

TradersChoiceFX - Newstrading Webinar Recording

 

Just want to make it clear that I have no relations with http://www.traderschoicefx.com who are an introducing broker, and that they obviously have their own agenda in providing this webinar (ie to sign up FX traders to their services) - however it's quite informative. Seems to be an issue with sound for the first minute or so, should be OK after that, click on the icon for full screen or it plays in a tiny window on the web page that opens from this link.

 

Max

[iversonne 10]

that cannot be realised, just misinformation

[maxr 10]

Iversonne - do you mean you can't get that link to work? The video plays automatically, I've just checked it - but they do seem to have a problem with the sound up to about 1 min 35 seconds.

 

If you're saying funds will not have to be repatriated or it can't be done, then have a look at the info on the CFTC website http://www.ctft.gov, here's the FAQ on the new 'Final Retail Foreigh Exchange Rule'.

 

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/forexfinalrule_qa.pdf

 

Here's a link to a page on another site with a copy of a letter sent out to forex.com clients telling them what will happen to their accounts:

 

http://www.forexhedgingstrategy.net/meta-trader-repatriation-part-two.html

 

Max

Edited October 12, 2010 by maxr
correct inaccurate links

[sptraderrlc 10]

Thanks Maxr and others for your info. Very helpful. Further research indicates that you can still trade fx futures without your foreign account being repatriated, or, find a foreign dealing desk and platform that does not have a US connection of affiliate.

[maxr 10]

Further research indicates that you can still trade fx futures without your foreign account being repatriated...

 

That's interesting, how do you do that - trade FX with an offshore (from USA) bank?

 

...or, find a foreign dealing desk and platform that does not have a US connection of affiliate.

 

I wonder how easy it is to find a big, well capitalised, well regulated FX broker outside USA with some sort of account guarantee, which isn't either are an offshoot of or affiliated to US brokers.

 

Max

[sptraderrlc 10]

According to the new Barney Frank-Christopher Dodd tax on the trader law, the FX futures market is NOT included in this law, only the spot currency pairs trading. You can still trade the FX futures off shore.

 

I am talking with a couple of contacts off shore that operate dealing desks that claim their lawyers have found a loophole for US residents to trade spot fx off shore. I guess we'll see. I'll post when I find out. Can't say where it is right now.

 

I presume their would be some additional risk with off shore trading. I always keep a minimum account to trade there so if they do go south, it won't hurt so much. I withdraw consistant profits to keep it small enough to handle, should it happen.

 

Thanks for responding to all of this. Nice to have folks to talk with around the globe.

[josch 10]

There are a lot of banks and brokers ie in the EUR zone, who offer FX trading. Having no relations with any of them, because I'm non US resident and trading in the US, you may have a look at

 

Forex Broker im Vergleich auf Broker-Test.de

Forex Trading Online | Trade FX, CFDs, FX Options at Saxo Bank

Online forex trading with leading online forex broker Tadawul FX

 

and there are many others too.

 

josch

[cunparis 10]

I'm in the process of setting up an account with Oanda. Are they affected by this? It looks like they're in the US but I'm not sure.

[josch 10]

Oanda is incorporated in Delaware, US. So they are an US broker.

 

josch

[iversonne 10]

What is wrong with Obama and his advisors?

 

I mean what the fuck; 50:1 leverage!!!!!!!!!!!!!!

 

Now other people all over the world are going to become wealthy while we lose money.

[maxr 10]

As sptraderric says above, FX futures appear not to be covered by this legislation. Perhaps that will give a boost to the FX futures market liquidity - does anyone know why the electronic CME FX futures have to close for an hour per day? It would be more convenient if they didn't.

 

For those who may be thinking of opening accounts to start FX trading and aren't up to speed with the changes, here's a quick summary by an introducing broker (usual disclaimer - I have no connection with this firm and I'm not recommending their services):

 

http://www.traderschoicefx.com/broker-newsletter/newsletter5.html

 

Max

[cunparis 10]

As sptraderric says above, FX futures appear not to be covered by this legislation. Perhaps that will give a boost to the FX futures market liquidity - does anyone know why the electronic CME FX futures have to close for an hour per day? It would be more convenient if they didn't.

 

I believe they close 15 minutes at least that's how it is with ES.

 

And the close is after the US stock market close so it's not a period of high liquidity anyway.

 

I much prefer futures for scalping. But for swing trading the futures are too leveraged. So that's where forex can be very nice. One can start risking $1 and slowly work their way up.

[maxr 10]

I believe they close 15 minutes at least that's how it is with ES.

 

CME Globex futures (ie 6B GBPUSD etc) are different from ES, here's the contract spec market hours:

'Sundays: 5:00 p.m. – 4:00 p.m. Central Time (CT) next day. Monday – Friday: 5:00 p.m. – 4:00 p.m. CT the next day, except on Friday - closes at 4:00 p.m. and reopens Sunday at 5:00 p.m. CT.'

 

i.e. shut 4-5pm CT Mon-Fri and 4pm Fri-11pm Sun CT. As you say, not a high liquidity period, but long enough for the occasional significant gap.

 

for swing trading the futures are too leveraged...

 

CME do e-mini JPYUSD and EURUSD and E-micros on the major pairs, but the e-minis aren't very liquid and the E-micros don't seem to have caught on at all.

 

Max

[WorldTrader 10]

I think you can trade as a US Person FX spot, but only with brokers that do not have a US division. So, if they are not regulated by the US in any way, they don't need to repatriate. Keep me posted on what you find out for a good overseas FX broker..sptraderric

[robertm 10]

I noticed IB's HK site now has a big warning that opening an account with the HK office means falling under US Laws. I asked a rep about it, he didn't even reply, they must be losing large numbers offshore now.

 

There are plenty of Non-US based brokers in Europe you could hunt around though. My rep at a US futures broker I sometime use was trying to get me to swing my FX trading over to them, I bought up they US based broker question, they said they could just swing it via another country instead. Thankfully I'm not a US resident though, the tax laws are out of control. On one hand they do things like this, while freely allowing manipulation of the tax system at other levels (fancy making your board meeting a 3 day boat cruise? or tax deductible dinners and opera tickets? all easy done within the US tax system).

 

The issue with spot FX is it can be used to funnel funds from any point in the globe to any other point and avoid/reduce tax and detection in the process. Thus this could be a result of anti terror laws or some such thing and not just tax related. The land of the free!

[maxr 10]

I'm researching UK FX accounts myself (I'm a UK citizen based in UK), so I just phoned IB's UK sales office to see if there are any changes to their UK operation - voicemail on all 3 lines.

 

Why is overseas US retail FX such an issue when Futures and Stock trading appears not to be - is it much bigger?

 

Off topic, we Brits were used to feeling overtaxed, but with a 28% Capital Gains Tax rate (over a £10,000 annual tax free allowance), plus tax free financial Spread Betting (if you can find a broker who allows you to make any money), I don't think we do too badly at the moment.

 

Max

[SIUYA 11]

 

Off topic, we Brits were used to feeling overtaxed, but with a 28% Capital Gains Tax rate (over a £10,000 annual tax free allowance), plus tax free financial Spread Betting (if you can find a broker who allows you to make any money), I don't think we do too badly at the moment.

 

Max

 

clearly you are not part of the mass exodus of hedge funds leaving due to the high taxes

[maxr 10]

I don't think l'll worry about paying tax when I'm making so much money I don't need to worry about it :haha:

 

I got seriously off topic there, anyone care to get us back on it?

 

Max

[WorldTrader 10]

I just heard that FinFX is a good broker that US clients can use like before..has anyone heard of them?

[maxr 10]

www.finfx.fl is a broker based in Finland, which is an EU member, so should have whatever client guarantees EU membership provides. They do normal accounts and ECN style accounts via Integral from US$2500. NO, I'd never heard of them, but they appear to be advertising specifically to attract US clients, because they list the things you guys can no longer do with a US broker, but can with them, on their front page.

 

Max

[WorldTrader 10]

Thanks Max. The guy I heard about them from yesterday spoke with the owner for 30 minutes and he was impressed. I will check them out.

[PipHog888 10]

Do you have a link for the Oanda you're trying to set up? Do you have any links to Oanda outside of the US?

[nazia1230 10]

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