While everyone is trying to figure out what's up with the dollar, there's still a lot of stuff going on in the Forex world lately.  Here are some highlights:

»  An interesting report from Greenwich Associates reported that currency trading experienced an unprecented boom in 2008.  More...

»  FXCM opened an office in Dubai.   Those guys are growing like weeds.  I think that's more than 45 offices worldwide.  More...

»  Want more proof that FXCM wants to dominate worldwide?  The are now opening a desk in Germany.  More...

»  Now there’s an online community based in Boston’s historic North End where forex traders can collaborate, share strategies, educate one another about the opportunities and risks of currency trading, and exchange kudos (or sympathy notes). It’s called Currensee.  More...

»  Kishore Mahbubani, Dean & Professor at the Lee Kuan Yew School of Public Policy answered the question, "Are China's U.S. Dollar reserves at risk of inflation?" on BigThink.  More...

»  Interbank FX President and Chairman Todd Crosland was named Utah Business Magazine's CEO of the Year.  More...

Lately, I've been reading a lot about CFTC's new regulation requiring Forex brokers to modify their trading platforms to prevent traders from holding opposite positions on the same currency pair.   Whether you agree or disagree with the new policy, the fact is CFTC has spoken.

I read Thomas Sexton's letter to CFTC on December 9, 2008 explaining NFA's rationale for the Compliance Rule 2-43(b): Offsetting Transactions. In it he stated, "Ten of 17 FDMs surveyed offer the strategy to their customers, although for most it is a very small part of their business. Of these ten, six actively promote it on their web sites, while another one merely indicates it is available.

Several of the FDMs told NFA that they had not offered the "hedging" strategy until their customers requested it. Although many of the FDMs admit that customers receive no financial benefit by carrying opposite positions, some FDMs believe that if they do not offer the strategy they will lose business to domestic and foreign firms that do."

If the FDMs polled by NFA thought that hedging was important to either their self interests or their customers, I think they would have taken a more vigorous position opposing NFA's proposed changes. I really think the horse has left the barn and that the faint public outcry I am hearing is striving after wind. If CFTC's policies are going to be changed, the objections need to come from the FDMs, whose opinions carry more weight than the retail trading public.

In light of the current economic climate there is mounting pressure on CFTC to tighten its regulatory reins. I think we can expect more of the same domestically and (if you're paying attention) also abroad.

FOREX (Foreign Exchange Market) trades are not reported to the IRS the same as stocks and options, or futures.  FOREX trades are considered by the IRS as simple interest and the gain or loss is reported as “other income” on Form 1040 (line 21).  No special schedules or matched trade lists are necessary.

For a detailed discussion on filing your taxes for your FOREX trades see the GreenTraderTax Currency Education topic.

January 5, Chicago - National Futures Association (NFA) has permanently barred One World Capital Group LLC (One World) and its principal, John E. Walsh from NFA membership. One World is a Futures Commission Merchant and Forex Dealer Member located in Winnetka, Illinois. The Decision, issued by NFA's Business Conduct Committee, is based on a Complaint filed in September 2008.

The Committee found that One World and Walsh failed to cooperate with NFA in an investigation of One World's activities, provided false and misleading information to NFA and failed to supervise its preparation and maintenance of books and records. Additionally, the Committee found that One World failed to maintain required minimum adjusted net capital and failed to maintain books and records.

The Decision is one of a series of actions taken against One World and Walsh. In June 2007, the Committee issued a Complaint against One World and Walsh charging them with various violations, including failure to meet minimum adjust net capital requirements and maintain adequate books and records. Although One World settled the Complaint by agreeing to pay a fine of $100,000 and an additional fine of $50,000 unless certain conditions were met, One World has not made any payments to date. See previous press release.

Additionally, NFA issued a Member Responsibility Action (MRA) against One World and Walsh in November 2007 based, in part, on complaints received by One World's forex customers. The MRA charged that One World and Walsh had failed to demonstrate that One World had sufficient capital to comply with its minimum net capital requirement and discharge its liabilities to customers. See previous press release.

In December 2007, the Commodity Futures Trading Commission (CFTC) also filed an action against One World and Walsh in federal court in Chicago charging them with failing to demonstrate compliance with capital requirements and failing to maintain required books and records. The Court entered a temporary restraining order against One World which froze One World's assets, prohibited One World and Walsh from destroying books and records and ordered the firm to cease doing business.

The Commodities Futures Trading Commission (CFTC) has always had the power to set a minimum Adjusted Net Capital for FOREX dealers who, unlike futures brokers, hold customer funds and could potentially expose customers to their own financial risk. 

In just ten days, on October 31, 2008, FOREX firms with less than $10 million in capitalization will be forced cease operating as a retail FOREX broker by CFTC.  Firms will be further tested on January 17, 2009 when the minimum capitalization required will be increased to $15 million and again on May 16, 2009 when the minimum goes to $20 million.  In addition, the capitalization requirement for firms which offer 100:1 leverage or more will double to a minimum of $40 million.

The table below lists FOREX companies that were under the $10 million minimum as of the August 2008 FCM report to CFTC.

FOREX Broker	Adjusted Net Capital
ADVANCED MARKETS INC	6,786,042
BACERA CORPORATION	5,412,516
BGC SECURITIES	7,217,795
CMC MARKETS (US) LLC	8,543,520
COMMONWEALTH FOREIGN EXCHG INC	1,460,669
COMTRUST INC	858,090
EASY FOREX US LTD	9,824,509
FARR FINANCIAL INC	2,051,386
FIRST CAPITOL GROUP LLC	992,101
FOREX CLUB FINANCIAL COMPANY INC	7,558,421
FRIEDBERG MERCANTILE GROUP INC	8,147,408
FUTURES TECH LLC	841,242
GATEWAY CAPITAL L.L.C.	893,775
GENESIS FUTURES LLC	540,419
HOTSPOT FXR LLC	9,942,771
ICAP FUTURES LLC	5,525,109
IKON GLOBAL MARKETS INC	9,544,902
INTEGRATED BROKERAGE SERVICES LLC	2,203,246
ITG DERIVATIVES, LLC	2,576,391
LBS LIMITED PARTNERSHIP	790,164
LINN GROUP  ( THE )	3,007,532
MG FINANCIAL LLC	5,393,739
OPEN E CRY LLC	1,830,041
PUMA FINANCIAL LLC	1,602,274
ROBBINS FUTURES INC	577,482
SNC INVESTMENTS INC	697,461
TCA FUTURES LLC	873,022
TOWER RESEARCH CAPITAL EUROPE LLC	2,723,790
TRADEMAVEN CLEARING LLC	729,242
TRADITION SECURITIES AND FUTURES INC	806,703
VELOCITY FUTURES LP	1,042,158
WHITE COMMERCIAL CORPORATION	2,611,456
WSD FINANCIAL USA, INC	1,272,821
YORK BUSINESS ASSOCIATES LLC	1,163,800

Source: CFTC