CHICAGO, January 15, 2010

RE:      CFTC Seeks Public Comment on Proposed Regulations Regarding Retail FOREX Transactions

PFGBEST supports the CFTC's proposed rules regarding Retail Forex Transactions but hopes that leverage will remain the same to avoid unintended negative consequences of job losses to foreign competitors.

PFGBEST is pleased to offer strong support of the CFTC as it has provided clear guidance and a comprehensive scheme of regulatory requirements to govern retail foreign exchange trading in the United States.

Once again the CFTC has provided clear regulatory guidance that in the past has made it the premier regulator of the derivatives industry. 

In particular, the CFTC has fixed the regulatory capital requirement to $20 million plus 5% of liabilities that exceed $10 million, reinforcing its serious intent to protect customer interests.

PFGBEST will provide comments to the proposed rules to assist in making forex regulations similar to other derivative rules that have provided market integrity and customer protection in the futures industry.

One key component of the proposed rules that PFGBEST will comment about concerns a likely unintended negative consequence.  A leverage structure change in retail forex margining from 100 to 1 to 10 to 1 will force a great majority of forex business to be done offshore and thousands of U.S. jobs would be lost in the derivatives industry to European and other foreign competitors.  Worse, U.S. forex customers would not be protected by the CFTC.  PFGBEST feels that U.S. forex customers deserve the best protection available. It was clearly not the intent of the Congress to destroy the U.S. retail forex industry when the CFTC was given the authority to create rules for retail foreign exchange.  Congress made it clear that the industry was to be policed, not abolished.  The 100 to 1 leverage structure was changed from 400 to 1 earlier this year when the NFA submitted rules which the CFTC approved.  This governance created clear guidance and market protection while keeping the United States competitive with the offshore competitors even though it was a higher requirement.

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the publication in the Federal Register of proposed regulations concerning off-exchange retail foreign currency transactions. The proposed rules follow the passage of the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, 122 Stat. 1651, 2189-2204 (2008), also known as the “Farm Bill,” which amended the Commodity Exchange Act in several significant ways. In particular, the Farm Bill:

• clarified the scope of the CFTC’s anti-fraud authority with respect to retail off-exchange foreign currency transactions;

• provided the CFTC with the authority to register entities wishing to serve as counterparties to retail forex transactions as well as those who solicit orders, exercise discretionary trading authority and operate pools with respect to retail off-exchange foreign currency transactions; and

• mandated minimum capital requirements for entities serving as counterparties to such transactions.

“These proposed rules for retail foreign exchange trading are important steps in implementing the additional consumer protections authorized in the 2008 Farm Bill,” CFTC Chairman Gary Gensler said. “The Commission looks forward to receiving and considering the public’s comments on this important issue.”

Pursuant to this authority, the Commission is proposing a comprehensive scheme that would put in place requirements for, among other things, registration, disclosure, recordkeeping, financial reporting, minimum capital, and other operational standards. Specifically, the proposed regulations would require the registration of counterparties offering retail foreign currency contracts as either futures commission merchants (FCMs) or retail foreign exchange dealers (RFEDs), a new category of registrant created by the Farm Bill. Persons who solicit orders, exercise discretionary trading authority and operate pools with respect to retail forex would also be required to register, either as introducing brokers, commodity trading advisors, commodity pool operators, or as associated persons of such entities. As was the case prior to the passage of the Farm Bill, “otherwise regulated” entities such as financial institutions and SEC-registered brokers or dealers remain able to serve as counterparties in such transactions under the oversight of their primary regulators.

The proposed regulations also include financial requirements designed to ensure the financial integrity of firms engaging in retail forex transactions and robust customer protections. For example, FCMs and RFEDs would be required to maintain net capital of $20 million plus 5% of the amount, if any, by which liabilities to retail forex customers exceed $10 million. Leverage in retail forex customer accounts would be subject to a 10-to-1 limitation. All retail forex counterparties and intermediaries would be required to distribute forex-specific risk disclosure statements to customers, and comply with comprehensive recordkeeping and reporting requirements.

Comments regarding the proposed regulations may be submitted by any of the means listed in the Federal Register release and should be received by the Commission within 60 days of the date of publication.

NFA bars James C. Morton, former principal of GlobeFX Club Inc., from acting as principal for a period of five years

November 25, Chicago - National Futures Association (NFA) has barred James C. Morton from acting as a principal of an NFA Member for a period of five years and also ordered him to pay a fine of $10,000 in the event that he reapplies for NFA membership or associate membership. Morton was a principal of GlobeFX Club Inc. (GlobeFX), a former Commodity Pool Operator located in Homestead, Florida, which NFA permanently barred from NFA membership in September 2009 for providing false and misleading information to NFA and failing to cooperate in NFA's investigation of the firm's operations. See previous press release.
The Decision as to Morton, which was issued by an NFA Hearing Panel, accepted a settlement offer submitted by Morton and was based on an NFA Complaint filed in June 2009, which charged Morton with failure to supervise GlobeFX's business operations and forex activities. The complete text of the Complaint and Decision can be found on NFA's website.
NFA is the premier independent provider of innovative and efficient regulatory programs that safeguard the integrity of the futures markets.

Forex Regulation in the US

The regulatory bodies in the United States are the CFTC and the NFA. The CFTC determines the rules regulating the commodity brokerage industry, and its stated mission to investors, trader and the public from unethical practices in the commodity and financial futures and options markets. In addition, the CFTC is responsible with creating the regulatory environment that will foster a free market environment that fosters competition. The CFTC has the authority to close any unregulated entity in the retail forex industry.

The NFA is another regulatory body that enforces adherence to certain capital requirements, and maintenance of a sound financial structure by its members. It also requires that member firms actively supervise their employees, agents and affiliates to prevent fraud and unlawful activities.

Since not all forex brokers are members of the NFA, it is important to seek those that offer the added transparency of membership, in order to minimize the risks associated with fraud and similar illegal acts.

Forex Regulation in Australia

The Australian Securities and Investment Commission (ASIC) regulates forex trading in Australia. All legitimate brokers providing retail forex services must be registered with this body which enforces capital requirements. Australian law requires that any foreign exchange broker acquire an Australian Financial Services License, or be licensed with the Reserve Bank of Australia.

Forex Regulation in Switzerland

Our advice for beginning traders is to be wary of forex brokers which are only active in Switzerland or are only registered with Swiss Authorities. Many scammers have been exploiting the reputation of Switzerland as a banking center by registering their fake companies with the Swiss authorities who are very lax about the regulation of the retail forex industry.

The main regulatory body in Switzerland is the Swiss Federal Banking Commission (SFBC). But many scammers choose to register their firms with one of the private regulatory institutions such as Organisme d'autoregulation fonde par le GSCGI, Polyreg and Association Romande des Intermediares Financiers, as these bodies only concern themselves with money-laundering issues, and are generally very lax on customer protection.

It is expected that the Swiss Federal Banking Commission will bring all forex brokers under its own supervisory structure by establishing a body similar to the US NFA, but until that plan is in effect, retail customers of forex brokers in Switzerland are basically unprotected against fraud.

Forex Regulation in the United Kingdom

Forex brokers are regulated by the Financial Services Authority (FSA) in the United Kingdom. Apart from its usual supervisory duties, FSA rules require that client deposits be segregated from the funds and accounts of the brokerage firm. In other words, in case of bankruptcy due to fraud, or mismanagement, the customers funds are safe. The advantages of this requirement are self-evident.

Forex Regulation in the EU

In the EU, retail forex brokers are regulated by the authorities of the nations in which they are operating. So far, there is no central regulatory body which supervises the activities of retail brokers on an EU-wide scale. Standards vary from nation to nation, but in general it is a good idea to choose brokers regulated by the institutions of nations like Germany or France, over those located in Greece, Portugal or Hungary, for obvious reasons.

FIFO Rule Update - BEST Direct MT4 ECN Forex Broker
As you are all aware the NFA has made a new rule that prohibits registered Forex Dealer Members from carrying offsetting positions past end of day ("no -hedging"). The rule will also require all positions to be offset in the order they were opened beginning August 1, otherwise known as 'First In First Out' (FIFO). There has been wide speculation among trade groups and more specifically Non Regulated Forex Brokers offshore what these changes may bring, to clients and Expert Advisors. Below is an email generated by the NFA to each of its Members, assuring that indeed it is not the interest of the NFA to eliminate vital risk management tools like Stop Loss and Take Profit orders. Furthermore, they will discipline any Member that is misleading investors with false information. It is of PFGBEST's and the NFA opinion that clients be able to continue to use these order types as a means of risk management.
The 'No-Hedging' rule has been in effect since May 15, and as many of you can attest the implementation of this rule by PFGBEST has had little affect on client strategies. The FIFO rule implementation on the other hand will likely cause most NFA Regulated FDM's to change the way their MetaTrader 4 platform operates because the MT4 Backoffice doesn't have the flexibility to offset positions in a FIFO manner as required by the NFA and retain all order functionality. There have been parties who have propagated fear among investors about 'not being able to use Stop Loss and Take Profit orders'. BEST Direct MT4 and PFGBEST.com made a decision 1 ½ years ago when we began integrating our Straight-Through-Processing environment to our proprietary Backoffice. This will allow us to comply with regulations and continue to offer BEST Direct MT4 in the capacity we do today. Clients will be able to continue to use their Expert Advisors and trading strategies with out having to make any adjustments. Stop Loss and Take Profit orders will be fully functional, including Trailing Stops.
PFGBEST will be holding Webinars to educate clients on the process that will be in place in our Backoffice. Please feel free to join us to fully understand how PFGBEST is approaching this issue. Clients of PFG will be notified by their brokers and by email of all upcoming instructional Webinars. We look forward to continuing to offer MT4 in a capacity that gives clients the tools to remain successful within a stringent U.S. regulatory environment.

To: NFA Member FDMs
Re: Communication with the Public Relating to NFA Compliance Rule 2-43
NFA has become aware of false or misleading blog entries and e-mails to customers stating or implying that NFA has banned stop orders and limit orders. As you know, Compliance Rule 2-43(b) does not prohibit either type of order but simply requires that executed stops and offsetting limit orders be applied to the oldest open position or, at the customer's direction, to the oldest open same-size position.
Please ensure that neither your employees nor any firms or individuals that introduce forex business to or manage forex accounts carried by your firm are spreading misleading information about the effect of Compliance Rule 2-43. As you are aware, under NFA Compliance Rule 2-36(d), an FDM is subject to discipline for the activities of persons who solicit, introduce, or manage customer accounts. Therefore, NFA will not hesitate to file an enforcement action against any FDM with an introducer or account manager that initiates, spreads, or condones statements that convey false information.

PFGBEST has 28 currency pairs that traders are able to trade mini lots 0.10, half-standard 0.50 and standard lots 1.00 in the same account providing the account has sufficient margin.  Margin is 100:1. The MT4 ECN has 9 major banks providing their best bid and offers on all 28 pairs. The ECN then pulls the best bid and offer in each currency pair and displays this information for the forex trader.  With PFGBEST's proprietary MT4 ECN bridge the banks do not see any pending orders of the forex traders. The bridge acts as a blockade allowing forex traders to trade using EAs or "Robots". For more information visit www.pfgbestdirect.net/mt4.htm

PFGBEST Acquires Alaron Customer AssetsCHICAGO, May 21, 2009 – PFGBEST® today announced it is purchasing the customer assets of Alaron. It will be formed into a new division called ATD, a division of PFGBEST.Both companies have been leaders in the futures industry for 20 years, through the evolution of online trading that helped level the playing field for retail futures market participants even as institutional use of futures, options and forex for risk management continued to grow exponentially.PFGBEST will transfer Alaron customer accounts as seamlessly as possible. Financial details of the transaction were not disclosed.“There are so many synergies, and we believe there will be significant benefits to Alaron customers,” said PFGBEST President and Chief Operating Officer Russ Wasendorf, Jr.  He said Alaron and PFGBEST share a timeline as powerhouses in retail futures trading. “Alaron was founded in 1989 and PFGBEST (formerly PFG, Inc.) was incorporated in 1990. This is a marriage of two family businesses that stake their reputation on providing personal, professional and courteous customer service, believe in the need for ongoing education, and offer research and innovation in trading products, systems, and multi-asset-class and alternative investment choices for individual and institutional investors.”Steven Greenberg, CEO, President and Chairman of the Alaron Board of Directors, stated that there are compelling reasons why futures and options customers, brokers, and prospects will see multiple benefits from the joining of the two companies.  “Both Alaron and PFGBEST have been advocating on behalf of retail futures market participants for 20 years. The ability to leverage PFGBEST proprietary online trading systems, free to all customers, is an important win:win for Alaron brokers and customers. Now, multiple electronic trading platforms spanning futures, forex, and options – coupled with a unique suite of managed accounts and managed forex products – enhance opportunities for portfolio diversification for our combined client base.” About PFGBEST:

PFGBEST is the second-largest non-clearing U.S. Futures Commission Merchant, with customers, affiliates and brokerage offices in more than 80 countries. It was incorporated as an FCM in 1990 under the name PFG, Inc.  It offers a range of trading and investor products and services for retail investors as well as for commercial and institutional clients. The company is a leader in sustainable investing through diversified products including managed funds, futures, forex, options, full-service and discount brokerage, trader education, research, and direct online futures trading through its BESTDirect™ platform, and numerous other platforms and applications.  Please visit www.pfgbestdirect.net

 About Alaron:Alaron, founded in 1989 in Chicago, provides electronic and pit-based futures trading and asset management services to institutions and retail clients on five continents. Alaron built upon its core business by integrating global trading systems and analysis techniques used by professional traders. Its suite of products and services spans execution and account management tools, and important proprietary research.  Alaron is synonymous with customer service, investor education, and electronic innovation, including analytics software. Media contact: Patricia Campbell, 312-775-3411, pcampbell@pfgbest.com

  [¶ 7011] SECTION 11. FOREX DEALER MEMBER FINANCIAL REQUIREMENTS.
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[Adopted Effective December 1, 2003. Effective dates of amendments: November 30, 2005; July 31, 2006; August 9, 2006; February 13, 2007; March 31, 2007; May 7, 2007; December 17, 2007; December 21, 2007; and October 31, 2008.]

(a) Each Forex Dealer Member must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

 

(i) $10,000,000 through January 16, 2009, $15,000,000 from January 17, 2009 through May 15, 2009, and $20,000,000 from May 16, 2009 forward;

(ii) 5% of all liabilities owed to customers (as customer is defined in Compliance Rule 2-36(i); or

(iii) For FCMs, any other amount required by Section 1 of these Financial Requirements.

 

(b) A Forex Dealer Member may not include assets held by an affiliate (unless approved by NFA) or an unregulated person in its current assets for purposes of determining its adjusted net capital under CFTC Rule 1.17. An affiliate is any person that controls, is controlled by, or is under common control with the Forex Dealer Member.

For purposes of this section and section (c), a person is unregulated unless it is:

(i) a financial institution regulated by a U.S. banking regulator;

(ii) a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority;

(iii) a futures commission merchant registered with the U.S. Commodity Futures Trading Commission and a Member of NFA;

(iv) a retail foreign exchange dealer registered with the U.S. Commodity Futures Trading Commission and a Member of NFA;

(v) an insurance company regulated by any U.S. state;

(vi) an entity regulated as a foreign equivalent of any of the above if regulated in a money center country as defined in CFTC Regulation 1.49; or

(vii) any other entity approved by NFA.

 

(c) A Forex Dealer Member may not use an affiliate (unless approved by NFA) or an unregulated person, as defined in section (b), to cover its currency positions for purposes of CFTC Rule 1.17(c)(5).

(d) Each RFED must file financial reports with NFA for each month-end, including its fiscal year-end, within 17 business days of the date for which the report is prepared. All financial reports must be filed on the forms required by CFTC regulations, and all financial reports except those required to be certified by a Certified Public Accountant must be filed electronically using an electronic media approved by NFA.

(e) For purposes of this rule:

(1) "Forex" has the same meaning as in Bylaw 1507(b);

(2) "Forex Dealer Member" has the same meaning as in Bylaw 306; and

(3) As used in section (c), "currency" refers to open foreign currency positions with counterparties regardless of whether those counterparties are eligible contract participants as defined in Section 1a(12) of the Act.

 

PFGBEST MT4 ECN  Forex Trading Platform
Adds 8 New Currency Pairs and Now Offers Mini-sized Contracts on 28 Currency Pairs

CHICAGO, February 26, 2009 – PFGBEST today announced that its BESTDirect  MT4 ECN forex trading platform has extended its advantage in the electronic forex trading industry by adding a number of additional currency pairs and mini-sized currency pairs to its system. The BESTDirect MT4 is a true ECN MT4 platform.
“Here again we have responded to pent-up demand from brokers and traders for a forex platform with convenient and fast, direct access to the huge liquidity in foreign exchange markets, by supplying forex contracts that they want to trade,” said PFGBEST President and Chief Operating Officer Russ Wasendorf, Jr.
Adding these currency pairs to the array of contracts that can be traded on MT4 satisfies the need for world monies to trade beyond the seven “majors”, or most actively traded and liquid of the currencies. The majors are EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD.  Now, the PFGBEST MT4 electronic forex trading platform offers 21 additional currency pairs, and mini-sized contracts on all 28 pairs.

To try out the BESTDirect MT4 platform at no charge, go directly to

http://www.pfgbestdirect.net/mt4_ecn.htm

To contact the BESTDirect MT4 team directly, send an e-mail to

customerservice@pfgbestdirect.net.

 

About PFGBEST:

PFGBEST is the second-largest non-clearing U.S. FCM, with customers, affiliates and brokerage

offices in more than 80 countries. It offers a range of trading and investor products and

services for retail investors as well as for commercial and institutional clients. The company

is a leader in sustainable investing through diversified products including managed funds,

futures, forex, options, full-service and discount brokerage, trader education, research, and

direct online futures trading through its BESTDirect platform, and numerous other platforms and

applications.  Please visit www.pfgbestdirect.net