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There is a rumour doing the rounds that there could be a bit more than meets the eye to the new CFTC proposals to reduce leverage for retail forex traders from 100:1 to 10:1. The rumour involves a turf war. The two rival gangs are futures brokers and foreign exchange brokers. The futures brokers are the Old Boys Club, the currency exchange brokers are the cocky new children on the block. Both are registered at the NFA, both are regulated by the CFTC, but currently there’s just one winner – the currency exchange brokers.

Foreign exchange brokers ‘ growth skyrocketed while futures commission merchants at best stagnated. It is surmised that twenty percent of foreign exchange trading in Japan is now done by folk like you and me, small people, who were formerly excluded from this game. A major Long Island based forex broker claims 150,000 live trading accounts and $600 million in client funds. So the Old Boys Club, the futures brokers in Chicago, observed as new currency exchange start-ups grabbed more of their market share each day. The forex fellows so effectively combined leading edge technology ( the web ) with assertive marketing that they leapfrogged the competition puffing on their cigars in dark wood-panelled rooms.

Few of the Futures brokers incorporated forex broker and added foreign exchange to the mix of their offer to the general public. It wasn’t enough. They were stagnating in terms of growth while forex brokers were booming. So what did they do? Here’s my educated guess. Let us take a look at the history.

at first the Futures modernisation Act ( that regulated both futures and forex traders ) had the best interest of the foreign exchange trader and financier at heart as it brought some much wanted regulation into a wiseguy heaven. Except it didn’t stop there.In fact they went on regulating and regulating and regulating. In reality the CFTC took more regulatory actions against a few forex brokers in a couple of years than they took against all of the rogue old boys in their many years of not always proud and moral existence! And still the regulatory screws tightened.

All these regulations about worldwide spot foreign exchange trading were legislated in the US Farm Bill of 2008 and the authority so vested in the CFTC. Farm Bill? That is’s right, bushels of corn and forex – to the regulator it was one and the same. Find a bit strange? I do.