Hot off the NFA Web Site

Notice I-09-10

April 13, 2009

Effective Date of NFA Requirements Regarding Forex Orders

NFA has received notice that the Commodity Futures Trading Commission has approved new NFA Compliance Rule 2-43 regarding forex orders. The prohibition on carrying offsetting transactions will be effective for any positions established after May 15, 2009. The requirements regarding price adjustments will become effective as to all customer orders executed after June 12, 2009.

Offsetting Transactions

New Compliance Rule 2-43(b) requires an FDM to offset positions in a customer account on a first-in, first-out basis, thereby prohibiting a trading practice commonly referred to as “hedging.” A customer may, however, direct the FDM to offset same-size transactions even if there are older transactions of a different size. Rule 2-43(b) is effective for any positions established after May 15, 2009. Offsetting positions that were established prior to the effective date do not have to be liquidated, but once either position is closed out after May 15, it may not be reestablished as a hedge.

Price Adjustments

For orders executed after June 12, 2009, Compliance Rule 2-43(a) will prohibit an FDM from adjusting executed customer orders, with two exceptions. The first exception is where the adjustment is done to settle a customer complaint in favor of the customer. The second exception is where an FDM exclusively operates a “straight-through processing” model and the liquidity provider with which it entered into the automatic offsetting position changes the price of an executed order with the FDM.

Pursuant to the new rule, an FDM that adjusts an executed customer order based on an adjustment by a liquidity provider must provide notice to the affected customer within fifteen minutes of the customer order being executed. The notice must state that the FDM intends to cancel or adjust the order and must include documentation of the price adjustment from the liquidity provider. The FDM must either cancel or adjust all customer orders executed during the same time period and in the same currency pair or option regardless of whether they were buy or sell orders. All cancellations or adjustments of executed customer orders must be reviewed and approved by a listed principal of the FDM who is also an associated person. Such review must be in writing and include the documentation from the liquidity provider, and the written review and documentation must be provided to NFA at forex@nfa.futures.org. Finally, any FDM that may elect to cancel or adjust executed customer orders based upon liquidity provider price changes must provide customers with written notice of that fact prior to the time they first engage in forex transactions.

A copy of new Compliance Rule 2-43 is attached for your convenience. NFA’s submission letter to the CFTC contains more detailed explanations of the changes, and you can access an electronic copy of the letter at:

http://www.nfa.futures.org/news/PDF/CFTC/CR2_43_ForexPriceAdj_112408.pdf

Questions concerning these changes should be directed to Edward Dasso, Managing Director, Compliance (edasso@nfa.futures.org or 312-781-1551) or Lauren Brinati, Senior Manager, Compliance (lbrinati@nfa.futures.org or 312-781-1215).

Part 2 - RULES GOVERNING THE BUSINESS CONDUCT OF MEMBERS REGISTERED WITH THE COMMISSION
* * *

RULE 2-43. FOREX ORDERS.

(a) Price Adjustments

(1) A Forex Dealer Member may not cancel an executed customer order or adjust a customer account in a manner that would have the direct or indirect effect of changing the price of an executed order except when:

(i) the cancellation or adjustment is favorable to the customer and is done as part of a settlement of a customer complaint; or
(ii) if a Forex Dealer Member’s platform exclusively uses straight-through processing such that the Forex Dealer Member automatically (without human intervention and without exception) enters into the identical but opposite transaction with another counterparty (creating an offsetting position in its own name) and that counterparty cancels or adjusts the price at which the position was executed.

(2) With regard to cancellations or adjustments made pursuant to section (a)(1)(ii), a Forex Dealer Member must:

(i) provide written notification to the customer within fifteen (15) minutes of the customer order having been executed that it is seeking to cancel the executed order or adjust the customer’s account to reflect the adjusted price provided by the Forex Dealer Member’s counterparty, as applicable, and the written notification must include documentation of the cancellation or adjustment from the Forex Dealer Member’s counterparty; and
(ii) either cancel or adjust all executed customer orders executed during the same time period and in the same currency pair or option regardless of whether they were buy or sell orders.

(3) Notwithstanding section (a)(2)(ii), a Forex Dealer Member may choose to honor transactions in which customer orders resulted in profits for the customers but must do so with regard to all similarly situated customers.
(4) Cancellations and adjustments to executed customer orders must be reviewed and approved by a listed principal that is also an NFA Associate. Such review and approval must be documented by a written record, must include any supporting documentation, and must be provided to NFA in the manner requested by NFA.

(5) A customer order is considered executed upon the earlier of the customer receiving notification of the execution price from the Forex Dealer Member or when the position established by such order is identified in the customer’s account, whether electronically or otherwise.

(6) If a Forex Dealer Member may cancel or adjust an executed order under the circumstances provided for in section (a)(1)(ii), the FDM must provide customers with written notice that the Forex Dealer Member may cancel or adjust executed customer orders based upon liquidity provider price changes prior to the time they first engage in forex transactions with the Forex Dealer Member. The notice may be included in a customer agreement.

(7) Any provision in a customer agreement or any contract between a Forex Dealer Member and a customer that reserves to the Forex Dealer Member the right to make price or equity adjustments to a customer account except as allowed by this Rule is prohibited.

(b) Offsetting Transactions

Forex Dealer Members may not carry offsetting positions in a customer account but must offset them on a first-in, first-out basis. At the customer’s request, an FDM may offset same-size transactions even if there are older transactions of a different size but must offset the transaction against the oldest transaction of that size.

Where are the forex jobs?

As a CEO of a small firm working in the forex space, I have spent the last two years reviewing, studying, analyzing, and “googling” the forex or currency trading space. I’ve been on the web in some form or fashion since 1995 and have witnessed the profound changes in efficiency in just about all things surrounding the web. That efficiency makes research, information gathering, and connecting far more easy than ever before. I wanted to share some details regarding research I’ve conducted recently.

Careers in Forex or in the foreign currency brokerage business are relative rare. Let me cite some examples.

Current openings surround, in most part, the areas of software development. These are programming positions. These positions are integral to the currency trading industry in that without powerful technologies, the currency markets as we experience it as retail investors would not be possible.

Positions in the space include Release Manager, SharePoint Developer, Production Support Analyst, Senior Software Developer, Email Marketing Manager, Interactive Creative Director, and Internships.

A couple of the rare sales positions are described below:

Client Services/Sales - Multiple Positions Available

This entry-level position is ideal for anyone seeking to gain hands-on experience in the financial services, online trading and/or brokerage industries - and offers unlimited advancement potential.

In response to our rapid growth over the past years, we seek motivated, organized, team-oriented individuals to provide assistance in account opening and operational support to the firm’s rapidly growing customer base of professional and individual forex traders.

Responsibilities Include:

* Being part of a team dedicated to handling all aspects of the customer experience.
* Facilitate outbound opening of new accounts for potential clients who already indicated interest in our platform and provide support for existing customers.
* Handle incoming sales inquiries and client issues via phone, email and live, interactive chat.
* Not a cold calling sales position

Sales Account Executive:

The Sales Account Executive is responsible for converting warm leads (potential clients) into live trading accounts. All leads are persons already interested in our products and the firm utilizes a customer service oriented soft-sell approach (no cold calling). The Account Executive will be responsible for familiarizing potential clients with the firm’s products and services as well as educating them about the Forex market.

Responsibilities:

* Drive new account sales by demonstrating the benefits of our products and services.
* Build and maintain relationships with prospective clients.
* Keep abreast of market and industry events.
* Attend events in the US and abroad to pitch our offering to prospective clientele (travel is optional).
* Assist clients through the account opening process.

Qualifications:

* 1 – 3 years of sales experience (Financial services, telecom, healthcare, etc.).
* Interest and understanding of financial markets.
* Strong technical skills, understanding of windows-based applications.
* Must have or obtain a Series 3 license within two months of employment (training and sponsorship provided).
* Must have excellent oral and written communication skills.
* Must be ready to take initiative and want to grow with the firm.
* Second languages are a plus (Chinese, Japanese, Spanish, Arabic, Korean, French, etc.).

Compensaton:

* Competitive base salary, commensurate with experience.
* Performance-based commission structure.
* End-of-year discretionary bonus.
* 401K with matching , group health, dental, life and other fringe benefits.

Forex Dealer FXCM shows 15 positions across the country currently available.

When researching the financial markets for positions relating to forex, most of the positions available are offered by large FCM’s and involve programming or sales positions. If one happens to have established a true history of successful currency trading, i.e. pulling the trigger on trades and making profits, that person will have a strong chance of landing positions in numerous major markets. I’m not talking about the successful running of Fap Turbo here or making returns on your $10,000 trading account.

The point of this post or article is to discuss careers in forex. So where are the entry points? I believe they are to be found in the regulations. Visit the NFA, or National Futures Association and you’ll find that this hugely significant industry is being regulated like so many other industries by a government dead set on protecting us from ourselves. This regulatory environment leads to opportunities. If companies are now required to have licensed and recognized individuals on staff in order to live in certain profitable revenue streams, you have an opportunity. Your past experience as a financial services professional may be helpful in the space. Instead of a series 7 or 63, you’ll find a series 3 and 30 are called for. The industry isn’t regulated by the SEC instead being regulated loosely by the CFTA and the National Futures Association. The entities has a certain degree of power to make the lives of out of compliant entities very tough. Become familiar with their regulations and you’ll have important talking points when it comes interview time.

If companies seek educators, NOT traders, then a huge number of opportunities exist. If sales opportunities exist where training may be offered, huge opportunities exist. Last but not least, the market, specifically the currency or forex market is well developed enough to offer a plethora of free training opportunities that will get you to a certain stage. The best example on line is that offered by http://babypips.com. The best onsite and relatively agenda free training is currently being funded and provided by forex.com or Gain Capital. Visit their site for a complete schedule of upcoming live events.
Careers in forex exist outside of the obvious short list. You have to look, research, and be willing to meet your prospective employer half way.

Good luck on your journey into the world of forex.

Sherman Mohr is CEO of Currency Investors Group, LLC and resides in Brentwood, TN.

Interview with a full time currency trader

As I considered this day’s post, I thought one of the hottest topics today surrounds our supposed “tough” times. Few moments go by without us hearing of some financial burden we have to bare. One of the best ways for an average person to take control of his or her financial future is with today’s currency markets.
You’ll learn something about how to succeed through the following interview with Davis Bell.

Thank you for taking some time with me today Mr. Bell. What is your background prior to developing an interest in forex or foreign currency training?

“I graduated college in 2004 and went to work for an organic fertilizer company. The man who was the owner of that company was also a full time trader and that is where I first was introduced to Forex. I did not start trading at that time. I actually started my own fertilizer company called TurfSystems and ran that for 2½ years.”

How long have you been trading foreign currency?

“I have been actively trading currency full time since 2006.”

Did you take any formal training?

“I did take classes with another trader. Mostly I learned what not to do as a trader. The system I was trading then, I no longer use, but it had some valuable tools.”

What is the most important lesson you’ve learned as someone who literally makes a living trading his own account?

“I think the most important thing I have learned is humility. It is a great privilege to be able to work for yourself and control your financial future but greed and fear can easily take that privilege away from you. The other important thing I learned was that anyone can learn to trade. You just have to follow rules that you set for yourself and NEVER break them. Easier said then done.”

What do you feel the typical profile is of the successful trader?

“Going back to the rules thing, it is the most important. Every trader that I speak to that has been successful has very strict money management rules that they never ever stray away from. They also do not get greedy. They are happy with what the market gives them and do not try to capture every move in the market.”

Could you explain for the audience what the difference is between a trader and an investor?
“I think the main difference is that a trader takes an active responsibility for his or her financial situation. They have a plan for their money. Investors tend to not have an exit strategy when the market no longer goes their way and just watch with fear as the market takes back all of their gains.”

How do you explain coming out from behind the screen, where you were completely successful, and taking an active role as Chief Trading Officer for a forex training firm?

“I get this question a lot and the real reason is that I love to teach and show people that they can learn how to trade. With Currency Investors Group, I feel we can deliver the much needed money management and mind-set rules that have not been really taught in the trading education world.”

Is there anything else you would want to add?

“I would just like to say, if you have ever wanted to learn how to trade currency but were afraid that it was too difficult or that you were not smart enough. Don’t worry, you can learn to trade. It is the single best home based business you could ever do.”

Davis Bell is a graduate of Middle TN State University and a full time currency trader. Davis hales from Dalton Georgia.

New tool brings additional transparency to forex markets

Okay, so you’ve been trading for a while now. You are proud of your accomplishments and may want to show the world how incredibly smart and successful you are.

Are you familiar with MT4Stats? Without a tool to “prove” to the world that you know how to trade an account, you are nothing but a lot of hot air. Forex students, traders, and sophisticated investors, you know, the ones you want to pitch a hedge fund to, are the most skeptical folks in the world. With good reason I would ad.

With MT4STATS.com you have the ability to establish an account and then, without giving up your identity, share your MT4 platform trading results. The forex market is famous for its transparency and this is a great example of how a system, a software program may be used to further the industry’s move to transparency.

Read this from the MT4STATS.com site:

“The features of MT4 Stats are stunning and very easy to setup for any trader using the Metatrader platform.
You simply register, use the received activation code by email, setup the publishing config in Metatrader and you are already done. You don’t need to worry about publishing your real name anymore, your real account number, and not even your broker will be displayed! It’s all free and you get your own subdomain as well (http://username.mt4stats.com).

MT4 Stats was founded in 2008 by Hans Bodewes due to increasing demands for a service which was capable of publishing and sharing realtime trading results to others. However, there were a lot of Metatrader traders around who did not want to reveal their real name on the web, or competitors in the trading world, nor they want to have the account number and broker which they are using to be published.

MT4 Stats was born, and has setup a free FTP server for everyone their trading accounts. Before this, traders could only upload and publish it if they had their own webserver. Now MT4 Stats does it all, and any Metatrader trader can use the service for free. The MT4 Stats web- and ftp servers are hosted by the outstanding and well known Acceleratic.nl hosting company who keeps the server up running for all of you.

Right now MT4 Stats has over 6000 active accounts, thousands of unique visitors every day, and millions of views every month. I try to keep the ads as minimal as possible, only to cover the hosting costs which you can imagine are huge with all the massive traffic. I think that I have achieved my goal in helping out a lot of traders using the Metatrader 4 platform to publish and share their results.”

Hans has provided a service here that I believe provides some significant opportunities. If I were buying or reviewing a bot. like our company does on occasion, I would insist that the trading of the tool be run through this system so I see it. If I am hiring a trader, I require his MT4STATS.com results. If I am marketing a bot, I could utilize this system to showcase results.

There are a hundred more uses and with 6000 active accounts, I don’t pretend to know all the ways the system is helping the trading community. I do know this. Your desire for transparency, truth, and honesty amidst the hype in the forex market just got easier to satisfy. Thank Hans for a great tool.

Sherman Mohr is CEO of Currency Investors Group, LLC, a forex education and career development firm headquartered in Brentwood TN.

Forex Trading and Technology

Foreign Currency Trading or Forex Trading has become possible over time thanks to technology. Traditionally, retail investors’ only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets. This is made possible in great part thanks to technological innovations that allowed personal computing and the internet to play a role in market access.   Technology in trading had to address all of the following challenges. MetaQuotes Software lists the most important as:

Challenge 1) Coverage of financial markets.   The trading platform MetaTrader 4 (MT4) covers all brokerage and trading activities at Forex, Futures and CFD markets.

Challenge 2) Multicurrency basis.  MT4 is a system is designed on a multicurrency basis. It means that any currency can serve as a general currency used in the operation of the whole complex in any country and with any national currency.

Challenge 3) Economy and productivity.  Implemented data transfer and processing protocols are notable for their economy. Development of MT4 made it possible to support several thousands of traders through a single server with the following configuration: Pentium 4 2 GHz, 512 DDR RAM, 80 GB HDD. New protocols reduce both the demands on datalink and their operational cost.

Challenge 4) Reliability. In the case of damage to the historical data, the complex has backup and restoration systems. Also, the implemented synchronization allows to restore damaged historical databases within several minutes with the help of another MetaTrader 4 server. In other words, redundancy.

Challenge 5) Safety. To provide safety, all the information exchanged between parts of the complex is encripted by 128-bit keys. Such solution guarantees safekeeping of information transferred and leaves no chance for a third person to use it. A built-in DDoS-attacks guard system raises the stability of operation of the server and the system as a whole.         A new scheme of system working operation was created especially for DDoS-attacks resistance. With its help, you can hide the real IP-address of the server behind a number of access points (Data Centers). Data Centers also have a built-in DoS-attacks protection system; they can recognize and block such attacks. During distributed attacks at the system, only Data Centers are attacked; MetaTrader 4 Server continues its operation in regular mode. Thus, Data Centers increase the system’s stability to DoS and DDoS attacks. The implemented mechanisms of rights sharing make it possible to organize the security system with more effectiveness and to reduce the probability of ill-intentioned actions of company staff.

Challenge 6) Multilingual support.  MetaTrader 4 supports different languages, and a MultiLanguage Pack program is included into distributive packages. It provides translation of all program interfaces into any language. With the help of MultiLanguage Pack you can easily create any language and integrate it into the program. This feature of the system will bring MetaTrader 4 nearer to end-users in any country of the world.

Challenge 7) Application Program Interfaces.  MetaTrader 4 Server API makes it possible to customize the work of platform to meet many custom requirements. API can solve a wide range of problems, such as creating additional analyzers for finding a trend of monthly increase of traders, creating applications of integration into other systems, extending the functionality of servers, and finally,  implementing its own system work control mechanisms.

Challenge 8 ) Integration with web-services. To provide traders with services of higher quality, the system supports the integration with web services (www, wap). This feature allows realtime publishing of quotations and charts on any site, dynamic tables containing contest results and much more.

Challenge 9) Flexibility of the system. The platform possesses a wide range of customizable functions. One can set all parameters, from trade session time to detailed properties of financial instruments of each user groups.

Challenge 10 ) Subadministration.  Subadministration mechanisms allow leading many Introducing Brokers(the heart of the training business in forex trading) on one server quite easily. For processing all accounts and orders of the clients of IBs, an FCM will need one server only.

Once these issues began to get solved by companies like Metaquotes, platforms could be built that would allow for smaller institutions and individuals to become involved in software driven trade execution.

The next cottage industry surrounded how to translate what large institutional money managers had experienced as success into the systems where traditional individual investors and traders lived and traded. Now that we as an industry had great software to use in the execution of trades, there needed to be training, methodologies, systems, and so on made available to the masses that wanted to learn how to trade foreign currencies. A new set of challenges now begins to pop up.   The software systems delivered are great platforms for automated trading systems or mechanical trading systems. Some of these systems have had extremely profitable short term runs. They are conducive to online marketing and provide internet marketers the kind of short term results that make online marketing hype too much to resist.   Once these “EA’s” (Expert Advisors) began to get marketed through affiliate programs, review sites, and other sophisticated web marketers, the forex hype machine was in full swing.   A second new challenge that continues to rock the forex world surrounds the continual marketing of managed accounts by companies that bring no real track record to the trading of foreign currency accounts. There are individuals out there that are so good at marketing the potential returns of the market that when they find an equally greedy investor that doesn’t want to really learn or take responsibility for his own account, they get a limited power of attorney signed and start to trade that individuals money. In return for standing in the upside gains, they execute trades. Hopefully, more winning trades than losing ones. Most of the Ponzi schemes present in the world today seem to surround foreign currency trading in some form or fashion. This inability of greedy individual investors to control their own funds leads to burdensome regulation on those companies that just want to train, trade, and introduce other traders to FCM’s or Forex Dealers.   The most common challenge presented to the wannabe forex trader now is the learning curve associated with a new trading vocabulary, learning a new software set up for forex trading, and the fundamentals associated with learning to trade foreign currency.     How does one most efficiently navigate the learning associated with becoming a profitable forex trader? There are many answers. Lots of free training exists, as long as you interpret “free” training as “reading”. There are some great free seminars offered by some of the bigger companies in the forex space. There are some issues with those offerings, first, you have to be in the city where they are held. Secondly, you have to be prepared to use the system they demonstrate for you. The ubiquitous trading platform known as MT4, is not typically shared by one of the bigger forex dealers offering this free training.   Opening up any trading platform for the first time is said to bring out a feeling that you’ve opened up the dashboard to the Starship Enterprise. It can feel overwhelming.    Go to setting up the system for efficient trading and you’ll find it’s impossible without knowing where you want to go. In other words, how could you expect to set up your trading platform properly if you don’t have a clear handle on how you plan to trade?   How will you then know how to load the mechanical trading system you may use? How will you get set up for each trade? One question certainly leads to the next.   There are companies in the forex training space that are leading the way in trading platform training, technical analysis training, online fundamentals, and other industry specific trainings. The best forex basics coursework online in the industry is offered by http://babypips.com. It teaches great across the board fundamentals but includes no technology training. Technology is what makes today’s trading possible.   There is a necessary marriage of both required. Learn the fundamentals for sure. Learn the capabilities of MetaTrader4. Find systems and methods for simple positions in the market that allow for the capturing of profit with minimal risk of capital. You Can Trade Currency!

Stand by for updates soon. One company the author has identified has launched a Technology/Training Package that includes an array of common solutions woven together that serve to take away most of the hurdles associated with entering the forex trading market.

Forex Training? I have more questions than answers.