Interbank FX, is a major US broker, and it is lately growing very nicely outside of the US as well. What I find in particularly appealing in this broker is its emphasis on transparency and social elements in Forex – such as the performance page which shows Interbank FX’s real time performance allowing traders to see actual spreads and many other parameters. This finally brings transparency to the market which is dominated by banners stating that this or that broker has very low spreads or spreads “as low as” but when you actually check the numbers over time you get a completely different picture.
Interbank FX is also putting a big emphasis on a social aspect of forex trading and recently launched a Facebook app which I believe is an amazing method to expose yourself to a very large potential client base and get people more involved with forex trading and with learning what forex is.
With this, as well as the new CFTC leverage and IB proposed rules, in mind I took the opportunity to interview Todd Crossland, Chairman and President of Interbank FX. I divided the interview into three sections: the new CFTC rules, IBFX related questions and general questions about the market. I would like to thank Todd for taking the time to answer these questions which I’m sure many traders are keen on asking and understanding themselves.
CFTC Proposed Leverage Limitations
Question: Do you think the proposed CFTC regulations would make US brokers uncompetitive?
Answer: We at Interbank FX stand behind the belief that Forex traders should be given the freedom and right to choose the amount of leverage that is appropriate for their individual desired risk, and that this basic principle of ‘choice’ is in jeopardy by the proposed CFTC regulations.
We have always supported regulation and consider proper regulation one of the original three pillars that have permitted the development of the off-exchange retail foreign currency (Forex) industry, the others being trading software and the internet. We want to make it clear that we support the intention of the original 2008 farm bill. Where we disagree is in regards to the CFTC proposed increased margin required from 1% to 10% of the notional value of the trade.
We believe in a level playing field for the trading markets and the importance of customer choice. These proposed changes deny the customer the ability and you might say the right to manage their own money and assume risk as they see fit.
The off-exchange retail foreign currency (Forex) industry has been tremendously successful throughout its history and in our case, primarily customer driven under the CFTC and NFA ensuring a safe and secure trading environment. We believe in customer choice and the growth of Interbank FX has, we feel, demonstrated the fairness of our approach. If we did not provide a service that our customer both desired and felt was fair we would not be seeing the success we see today.
If this leverage rule were to pass, the FXDC believes up to 90% of US based business will move overseas.
Q: What is the most harmful part of the regulations – leverage or the IB backing?
A: The most harmful part of the regulations is certainly the proposed leverage limitation. This limitation, if passed, will drive most US retail customers to overseas brokers and could ultimately lead to the demise of every US Forex broker brought on by their inability to compete in the global marketplace. This demise of US brokers has the potential to result in the loss of thousands of US jobs, the loss of more than 1 billion US revenue dollars generated for the economy, and the endangerment of all of US retail traders. US retail traders would potentially move their accounts offshore, and in some cases, be trading through unregulated brokers where there may be no capital requirements, no registration requirements, and no oversight by any regulatory authority. These unregulated dealers usually aren’t concerned with marketing ethics, dealing practices and many times don’t have the customer’s best interest at heart. Alternatively, if any US brokers do survive the passing of the leverage limitation, the portion of US retail traders who might choose to stay with a US based broker will have to add 10 times the amount of capital to continue trading the same amounts. Many US retail traders simply do not have the resources to trade at these levels, and ultimately, the majority of smaller retail traders will be forced out of the industry.
Q: Why is the reaction to these proposed rules is much stronger than to the FIFO rule which was almost as harmful to the US forex industry?
A: The FIFO rule implementation, which limited the manner in which customers could open and close positions, in many ways brought about a mere inconvenience for customers. While it did most likely lead to a small portion of US customers taking their accounts abroad, the amount of customers which left US brokers due to the FIFO rule will pale in comparison to the amount that will leave if the proposed leverage limitation is accepted. Because the affect of this rule could potentially collapse an entire US industry, the reaction and pushback we’re seeing from the American public is much larger than the one we saw with FIFO.
Q: Why do you think the Forex Dealers Coalition (FXDC) does not include ALL US Forex brokers?
A: No firms were excluded from the FXDC.
Q: How can the average Joe the trader help oppose these rules?
A: Interbank FX, along with all other FXDC members encourages Forex traders to voice your concern for or against the proposal. Individuals can submit a comment to the CFTC by sending an email to firstname.lastname@example.org with “Regulation of Retail Forex” in the subject line. Remember: you must provide your address and contact information in the email in order for it to be considered by the CFTC. Also, individuals should be aware that the CFTC has the right to publish comments, and will publish your email on a public page on their website. The deadline for comments is March 13, 2010.
Also, with the identification number RIN 3038-AC61, you can submit your comments by any of the following methods:
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• Fax: (202) 418-5521.
• Mail: Send to David Stawick, Secretary, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, DC 20581.
• Courier: Same as Mail above.
Q: What do you think the US Forex industry will look like 5 years from now?
A: If the proposed leverage limitation is accepted, the US Forex industry will most likely be very different 5 years from now.
Interbank FX related questions:
Q: Where do you envision Interbank FX 5 years from now?
A: As mentioned, a lot of this depends on the leverage limitation outcome. However, we are hopeful this will not pass. We are on a fast moving train right now, and don’t plan on slowing down anytime soon. We’re currently in the process of opening up our UK and Australian sister companies, which will allow our traders more flexibility if in fact these leverage changes do go into effect. We also have the Middle East and Asia on our radar, and will continue to expand and open new offices around the globe as we see fit.
Our customer experience is constantly improving, allowing traders a greater share of voice. We strive for transparency, which will continue to thrive in the years to come.
Q: We sometimes see news of your US competitors acquiring overseas brokers, are you planning on doing the same? If so, on which geographies would you put your emphasis?
A: Interbank FX has filed an FSA application in the UK and we plan to open our office in the upcoming months. In addition, we’re also hoping to open an office in Australia in 2010 and in the future look to expand our business into Asia, the Middle East and beyond. Our customers are at the center of every decision we make, and we will allow them to continue to guide us in providing the best trading solutions for their needs.
Q: How is IBFX better than its competition and/ or how does it differentiate itself?
A: Our continued growth and success can primarily be attributed to the high regard in which we hold our clients. Our entire business model was designed around our customers, and we believe that this is the reason why they choose to come back to us again and again. If Interbank FX clients are not receiving market leading trade execution, risk management tools, world-class customer service and price transparency when they use our services, then we are not accomplishing what we set out to do in this industry. We believe we will continue to have a profitable company if we’re able to provide our customers with the tools, education and knowledge to facilitate successful trading.
General Forex market questions:
Q: Will the online retail Forex market keep growing at double digits in the coming years as well?
A: There are usually two conditions for one sector of the financial markets to maintain dominant: innovation and plenty of volatility. Forex trading has both. We believe that the market will continue to expand as traders become more familiar with this asset class. There is a segment of serious investors that are interested in international economics. These investors get involved in the Forex market as a way to trade as well as indulge their interests.
Q: Where do you think the center (geographically) of Forex will be in the medium-long term future?
A: Because of the dispersed nature of the market, it is hard to determine a geographical center. However, as countries like China and India start to open up to off-exchange retail foreign currency trading it is likely that there will be a substantial increase in the number of traders in those areas.