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Posts Tagged ‘Gold Trading’

By Claudia Assis
MarketWatch
June 22, 2011, 10:24 a.m. EDT

Forex.com, a large retail foreign-exchange operation, on Friday told clients it will discontinue its gold and silver over-the-counter products marketed to retail investors who are U.S. residents. It asked investors to close their positions by July 15. Read a related blog post on Forex’s move and brokerage’s reaction.

“It is our interpretation that we just can’t offer it legally” in response to regulatory provisions in the 2010 Dodd-Frank Act that kick in after July 15, said Alicia Brown, a spokeswoman for Gain Capital, the parent company of Forex.com. Get full coverage of Dodd-Frank.

The allure of gold as an alternative to paper currencies has helped propel the precious metal to record highs, alongside a surge in retail currency trading. Read more on retail currency trading.

Trading gold and silver over the counter — bypassing a futures exchange — offered investors a chance to enter a highly speculative, leveraged market that also left many investors at risk of fraud, according to one trade group.

“In order to trade, it needs to be done in a exchange, or it can’t be done at all,” said Dan Driscoll, a vice president with the National Futures Association.

The industry group asked Congress for such changes, due to numerous cases of fraud in such contracts. Doing business with a futures exchange offers retail investors more protections and transparency, he said.

Firms that “continue to offer these run the risk of government action,” Driscoll said.

After July 15, commodities transactions between retail investors that are leveraged and not delivered in 28 days, must be conducted in a “designated contract market,” a board of trade or exchange designated by the CFTC, according to the new rules.

Contracts fully paid for or delivered within 28 days, and commodity futures contracts trading on an exchange such as the CME Group CME
-0.13% and others, will not be
affected. Read more on gold futures.

Forex.com knew the requirements were scheduled to come into effect this July, a year after the act passed, and prior to the letter to clients Friday disclosed its intention to cease the products in filings, Gain Capital’s Brown said

FXCM, another large retail foreign-exchange firm, has not offered the over-the-counter precious metals investments. There were clients that “on occasion” would ask for such products, but ultimately FXCM decided not to offer it, said spokeswoman Jaclyn Sales.

“Our bread and butter is (foreign-exchange) products,” she said. “We looked into it … and decided not to move forward” particularly after the Dodd-Frank Act passed, she said.

Read the entire article HERE.