MFGlobal & PFG Best, we're rooked without your help

D

dangerkitty

This isn't just two companies that went bankrupt, it's an industry problem. You may trade options, ETF's or whatever and may very well be covered in the case of loss but many thousands of us are in a world of hurt.

Your fellow traders involved with MF Global and PFG Best need your support. The Commodity Customer Coalition has posted contact information for all senate members of the agriculture committee who oversee the regulators / exchanges involved in our industry, trustees and judges involved.

Please take a moment and contact the senator nearest to your location, let them know how you feel about the losses that we have suffered.

There's a senate hearing this morning, all the key players will be there including the CFTF, CME, NFA and others. The CCC has direct feeds to the live hearings and replay information. Congressional records are usually left open for comments afterwards too.

Heres the CCC webites link, http://customercoalition.org

The moral support alone would have tremendous value, alot of us are feeling as empty as our violated trading accounts. The bond and relationships of traders is unique in the world, I'm sure there will be many who contribute a voice in support.
 
Last Thursday the CFTC held a public hearing to determine what steps should be taken to repair the damage done by the bankruptcies of PFG and MF Global. I’d like to share with everyone some of the highlights of the hearing:

Better Accounting Standards: There was much discussion of auditing standards for both Regulators of FCM’s and the CPA’s who audit FCM’s. There was general agreement these standards need to be raised. FXCM believes FCM’s should be required to use a top accounting firm to avoid the kind of accounting issues that plagued PFG.

Additional Disclosure Requirements: An extensive discussion on FCM transparency was held and it is clear that FCM’s are going to have to make more disclosures of their books to regulators and to the public. The question is how much is to be disclosed? On the one hand there was testimony from FCM’s like Vision who publish their balance sheet on their website and on the other hand were those who were concerned that too much disclosure could lead to possible “bank runs” by investors. FXCM believes investors should be able to see a company’s audited financial statement once a quarter. Too many investors are forced to fly blind when they choose a Futures Commission Merchant or Forex Dealer. No trader should be subjected to this kind of risk post-PFG.

Insurance: Commissioner Bart Chilton released his proposal for a futures insurance fund on the same day of the hearing. Towards the end of the Roundtable the topic turned to insurance and John Roe of the Commodity Customer Coalition once again made a forceful case for a fully insured fund for the futures industry. As of now, Commissioner Chilton’s proposal does not include retail forex, but there is no reason that it shouldn’t. FXCM supports insurance for the futures/forex industry.

The CFTC will now deliberate into October before announcing their proposals. We encourage everyone to comment using the link below:

http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1250
 
Just read a very interesting comment letter to the CFTC by James Gellert of Rapid Ratings:

http://comments.cftc.gov/PublicComments/ViewComment.aspx?id=58346&SearchText=

Mr. Gellert makes the following comment about the benefits of FCM’s being required to disclose their audited financials:

Would Mr. Wasendorf have been as ready to invent financials if his customers had demanded full, audited balance sheets and income statements all along? Would Mr. Wasendorf have been able to compose such reports with sufficient skill as to withstand rigorous third-party examination over twenty years? Rapid Ratings recalls that, by applying large numbers of interrelated calculations to the published reports of Enron, our firm was able to detect vivid inefficiencies entirely inconsistent with the investment grade ratings that Enron enjoyed from the larger rating agencies – inefficiencies that later turned out to have been the result of commingling accurate and fabricated reporting lines.
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Mr. Gellert’s point about the difficulty of forging financial documents using the kind of standards that publicly traded companies use is well taken. Had PFG been forced to use such standards Wasendorf’s scam would have likely been caught long before July of 2012. Furthermore, ratings agencies like Rapid could break down the data in a manner that average investors could more easily understand. Although, we disagree that only ratings agencies be allowed to see such data. We believe any trader who opens an account with a FCM or Forex Dealer should be able to judge for themselves a firm’s financial health.

You can make your feelings known to CFTC by posting comments here:
http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1250
 
Two new developments in the last few days indicate that regulators are trying to get out in front of the safety of funds crisis that has gripped the futures/forex industry. However, these reforms may not extend to the retail forex market.

On Friday the National Futures Association approved a new rule requiring all Futures Commission Merchants to grant real-time, online access to FCM bank accounts. This rule is in response to Russ Wasendorf’s bank statement forgeries which had fooled regulators for 20 years. The language specifically references FCM’s and we are currently checking to see if Retail Foreign Exchange Dealers (RFEDs) will have to comply with the rule as well. FXCM’s position is that RFEDs need to be more transparent, which is why we also support a rule requiring all FCMs/RFEDs to fully disclosure their financials to the trading public.

The second development came last Thursday at a meeting in Chicago, as reported by the WSJ, in which the CME was reportedly “softening” its opposition to an insurance fund for futures traders. Again, however, no mention of extending such protections to retail forex traders was made.

http://online.wsj.com/article/SB10000872396390444508504577593424033950042.html?mod=googlenews_wsj

While both of these development are positive, the negative aspect to them is that retail forex may very well be over looked. This is why we are strongly encouraging the trading public to contact the CFTC and leave comments about the need to further protect retail forex traders. Traders can leave comments using the link below:

http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1250
 
Reading through the comments at the CFTC a number of good points have been brought up regarding the need for additional protections.

Alex Winters made the following comment to the CFTC: http://comments.cftc.gov/PublicComments/ViewComment.aspx?id=58421&SearchText=

Forex traders should be considered in these rulings. PFG and MF Global hurt both Forex and Futures traders during their collapse. I submit that any protections offered to futures traders also be extended to forex also. While insurance would be the best protection the emerging forex industry shares the same (and more) insecurities. For this industry to survive and prosper we must be able to trust that brokers that hold our funds are solvent especially since past CFTC rulings (50:1 leverage) require that we deposit even more of our money with brokers when we have no way auditing their financial health.
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The CFTC's requirement a few years ago that traders put up more margin to trade retail forex leads to the logical conclusion that regulators put in additional protections (disclosure of company financials, better accounting standards, insurance) since retail forex traders now have more capital at risk. This is a pretty powerful argument and I would encourage traders who leave comments with the CFTC to make it.
 
The CFTC has recently closed the comment period that was associated with the Public Roundtable on PFG:

http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1250

This could mean that CFTC is nearing a decision and is about to announce their planned reforms. Comments and suggestions can still be sent to the CFTC however by emailing secretary@cftc.gov.

FXCM is recommending that all FCM’s and forex dealers publicly publish their financials once a quarter and employ a top ten accounting firm. We encourage retail forex traders to share these and other suggestions with regulators by emailing them directly. Thousands of PFG customers traded retail forex with PFG and their voices should be included in any discussion designed to increase customer protections for NFA regulated firms. Furthermore, providing insurance to futures traders and not forex traders would be a further insult to injury for those currency traders at PFG and any future forex traders caught up in an insolvency. Make your voice heard today.
 
Quote from dangerkitty:

This isn't just two companies that went bankrupt, it's an industry problem. You may trade options, ETF's or whatever and may very well be covered in the case of loss but many thousands of us are in a world of hurt.

The moral support alone would have tremendous value, alot of us are feeling as empty as our violated trading accounts. The bond and relationships of traders is unique in the world, I'm sure there will be many who contribute a voice in support.
More...

First they came for the socialists,
and I didn't speak out because I wasn't a socialist.

Then they came for the trade unionists,
and I didn't speak out because I wasn't a trade unionist.

Then they came for the Jews,
and I didn't speak out because I wasn't a Jew.

Then they came for the futures traders who had their money taken,
and I didn't speak out because I still had my account money.

Then they came for me,
and there was no one left to speak for me.

Free speech will never harm us as much as silence. Good luck.
 
We've been told by the NFA that the instant "view only" bank account access that FCM's must now grant to the NFA is not applicable to Forex Dealers. In short, NFA is not requiring forex dealers provide the same instant bank account access that Futures Commission Merchants provide. This is the clearest sign yet that regulators are not planning to extend any additional customer funds protections to the retail forex community.

The stated reason is that since retail forex funds are not legally required to be "segregated" they are not in the same category as the seg funds that FCM's hold on deposit. This has long been an issue involving the Commodity Exchange Act which grants seg funds to on-exchange contracts but does not have a word to say about retail foreign exchange because nobody was trading forex online in the 1970's when these laws were passed.

This logic will likely be used for additional proposals such as insurance where we can now expect retail forex to be excluded as well. This is why financial disclosure for retail forex firms becomes even more important. With retail forex dealers not being included in the safety of funds discussion currency traders are now solely left to their own due diligence when it comes to picking a broker.

We still encourage you to email secretary@cftc.gov to let regulators know that retail forex should not be excluded. If no one speaks up then regulators can assume that retail forex need not be a priority.
 
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