PipStop

I've recently started a free subscription to Stocks, Futures and Options Magazine. I'd suggest all of you getting your own free subscriptions, too (If you live state side that is).

There is a healthy dose of Forex related articles and ads in the magazine, which is free because it relies on the advertising revenue, much like Currency Trader Magazine does - but with one BIG difference. Instead of delivering an electronic PDF copy of the monthly magazine, it is delivered straight to my mailbox in full glossy splendor.   

I just received my first copy (March 2008) and see that there is actually published by Wasendorf & Associates, Inc., which also controls Forex, Futures, and Options broker PFGBEST.com, which helps to explain the scale at which this publication is created. It also is interesting how other brokers have purchased ad space in the magazine, and how PFGBEST.com's ads have premium placement over the others'. Curious to say the least.

Russell Wasendorf Sr. the publisher of SFO and the president and CEO of PFGBEST.com authored a very honest and open article about regulation of Forex Broker Dealers in the United States.

In it he reviews some history and shares background of FX market regulation. He argues that raising adjusted net capital requirements for brokers is not necessarily the elixir to perfect regulation of Forex brokers.

He makes an argument that many are not willing to make publicly. Wasendorf states:

According to the most recent financial data published by the CFTC (as of press time), 78 of the 155 registered FCMs have net capital of less than $20 million. The suggestion that half the FCMs are somehow less legitimate because they are not big is an absurd assumption to me.

On Dec. 22, 2007, the adjusted net capital for Forex Dealer Members (FDM's) was raised to $5 million, and the talk is raising it further to $20 million.

Wasendorf makes the point that if we further reduce competition that we could end up seeing more North American business go abroad. In Europe, the Federal Financial Supervisory Authority requires member FX dealers to have a net capital of approximately $72,500.

That's a scary number in my mind, there must be a happy medium between European and North American standards, but what this article did was make me think, and it a read for all in the FX industry.