The Financial Industry Regulatory Authority (FINRA) issued a Regulatory Notice requesting comment on a proposed rule prohibiting any member firm from allowing a customer to: (i) initiate any forex position with a leverage ratio of greater than 1.5 to 1; and (ii) withdraw money from an open forex position that would cause the leverage ratio for such position to be greater than 1.5 to 1. FINRA stated that it has “observed a potential migration of retail forex activity” from futures commission merchants to broker-dealers and proposed the limits to better protect investors. According to FINRA, requiring greater initial deposits for retail forex will reduce the likelihood that small exchange rate fluctuations will cause drastic investor losses and will help reduce the risks of excessive speculation in these products.
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