secretary 

From: 

Sent: 

To: 

Mindy Yost [mindyyost@kc.rr.com] R4rds Section 

Saturday, May 16, 2009 4:15 AM I ~~l) q , ~~~~ \ ·. ~ 0 

Subject: RIN 3038-AC66 . c:::» ..., <.Q. ~ 

May 16, 2009 COMMENT 

Dear CFTC, 

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I would like to respond to your request for comments regarding RIN 3038-AC66: Ret.'i6ehdjusted 

Net Capital Requirements for Futures Commission Merchants and Introducing Bfok!"s. 

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The part of this change that I feel needs to be reconsidered is your recommendation that the ANC for 

IBs, involved in the Retail Forex market, to be increased to $45,000. 

I have issues with this for a variety of reasons, but primarily because it again illuminates the lack of 

understanding that the CFTC and NFA have over the very industry they are trying to regulate. It 

becomes more obvious almost daily that the CFTC and NFA are trying to eliminate Spot Forex as an 

investment option for retail traders, as evidenced recently by Rule 2-43(b) (which does nothing but 

ensure losses for retail traders and will give a Windfall profit to the brokers who act as counterparty to 

client trades), FINRAs recent attempt to reduce leverage to 1.5:1 (again a total lack of understanding 

of Spot Forex and using assumptions that it is brokered and traded like Futures contracts), and the 

way that the CFTC and NFA have tried to slide these changes in under the radar by eliminating Spot 

Traders from any of the discussion or process of developing the rule changes. 

In the text justifying the decision to raise the ANC for IBs, it is stated that purpose of the ANC is to 

ensure that: 

" ... IBs must meet the minimum financial requirements that the Commission may by 

regulation prescribe as necessary to insure that FCMs and IBs meet their obligations as 

registrants." 

and 

"The minimum ANC requirements of $30,000 for IBs and $250,000 for FCMs were adopted 

by the Commission over a decade ago, and are no longer consistent with the regulatory 

objective of requiring these registrants to maintain a minimum base of liquid capital 

from which to meet their current financial obligations, including obligations to 

customers." 

and 

"Therefore, the Commission's proposal to increase the minimum dollar ANC requirement of 

IBs to $45,000 merely harmonizes its regulations with NFA rules, which will simplify the 

capital calculations of IBs." 

Now, please consider that the NFAs definition of an IBis stated in the NFA web site as: 

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·"An 18 is an individual or organization which solicits or accepts orders to buy or sell 

futures contracts or commodity options but does not accept money or other assets 

from customers to support such orders." 

My points are these: 

1) The original ANC was developed OVER 10 YEARS AGO. Well, ten years ago, the Retail Spot 

Forex market was just beginning and at that time seemed to be taking a much different direction than 

what has actually developed. At that time, there were very few retail traders who actually traded for 

themselves and most retail forex was traded in managed accounts by brokers or money managers. 

What has evolved instead is a very popular investment niche that individuals enjoy participating in 

directly, with a huge cottage industry of information services, support, training, and supplemental 

industry businesses that are not directly linked to the actual brokers. 

2) The registrant category of IB (Introducing Broker) needs to be better defined AND an additional 

category of registrant needs to be added to be more applicable to what is currently going on in this 

market. 

3) The above excerpts imply to me that is was just easier for the CFT and NFA to copy what had 

already existed than to do the homework necessary to study the current situation of this industry to 

find logical regulatory solutions that make sense. 

4) The CFTC and NFA are again trying to fit Retail Forex into the box they have already created for 

Forex Futures -which is traded by a COMPLETELY different financial demographic of traders. 

I am a retail forex trader, and have been for many years. Two years: ago I started teaching other 

· people about the Forex market and how to trade it successfully. There were many reasons why I 

decided to do this, but one of the main reasons was because I saw the abuses going on by some 

Brokers (mostly the ones that act as counterparty to their clients' trades) in the way that "educational" 

services and training programs were being priced, provided and marketed. I decided that it would be 

much better for a student of Forex to have an independent education apart from the Broker who 

would be ultimately executing their trades. I also, of course, saw the potential for an ongoing income 

for myself from the small commission I would receive from the Broker when I gave them a new and 

qualified client. 

But here is the point to this: I created a system whereby it is a win/win/win situation for all involved. 

For the Student: I provide Forex trading education to individuals for FREE and for as long as it 

takes them to master the skills needed for successful trading BEFORE they go into live trading. I 

teach a much more involved program than they could buy from a Broker at any price. My program 

includes not only an introduction to Forex, but fundamental and technical analysis, money 

management, risk management, and trade management. My students work with me for a minimum 

of 3 to 6 months (or longer) prior to trading live and never before they have proven to both me and 

themselves that they will be successful. And, they are never under any financial obligation at any 

time, and are never pressured to in any way to open a live account. I do NOT recommend trades; I 

merely teach people how to find the situations that will most likely present an opportunity for a 

profitable trade. (You will NOT find this to be the case when the Broker sells them in a "training" 

program.) 

For the Broker: By the time my student opens a live account, the Broker knows that they are getting 

a new client that is educated in Forex trading and is competent to trade. 

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For Myself: "If I have done a good job and produced a confident, successful trader, THEN and only 

then am I compensated by a small commission from the Broker from that individuals trading. My 

commissions come from a portion of what the Broker already charges in the Spread. I don't know 

how I could have come up with a program that could be more fair to all than that. 

What you are doing by increasing the ANC requirement is pushing me out of this market as an 

independent trainer. The NFA's rules for IBs are ridiculous enough already. In the first place, I only 

made a total last year of $27,000 in total commissions. To comply with everything the NFA requires, 

i.e. Registration Fees as an IB AND as an AP, audited financial statements, dual locations, Series 

Exam fees, and now the new ANC, it would cost me almost 3 times what I made last year! How 

ridiculous is that? So, what you will have instead is one less good, honest (and FREE) training 

alternative for individuals who are interested in learning Retail Forex as an investment option. 

The definition of IB is, as the NFA states, "An 18 is an individual or organization which solicits or 

accepts orders to buy or sell futures contracts or commodity options but does not accept 

money or other assets from customers to support such orders. " 

I DO NOT: 1) Solicit Orders, 2) Accept Orders, 3) Accept Assets, 4) Trade managed accounts for 

others, or 5) Recommend trades. And, since I have no financial obligation to my students, then WHY 

should I need, as the CFTC Rule states, "to have a base of liquid capital to meet financial obligations 

to my customer"? Also, when my students go into live trading, they are THE CLIENT OF THE 

BROKER, not MY CLIENT, so isn't it the Broker who has the financial obligation to the individual at 

that point? 

· Why don't you add a category that makes some kind of sense for individuals like me? I really 

DO NOT fit into any of the Registrant categories that the NFA and CFTC now have outlined. I am 

~::NOT aCTA as I do not recommend trades, I am NOT a CPO as I do not manage other people's 

:-money or trades, and I am NOT an IB in any way, shape or form as I am in no way a "broker''. So 

, :why should I be mandated to fit into one of these categories just to be able to receive a "finder's fee" 

from a Broker for sending them a qualified client? 

I realize that the self-regulatory arm of the CFTC is the NFA. But, the NFA's focus has for years been 

on Forex Futures, and they are so engrained into that forte, that they simply do not understand that 

Retail Spot Forex is different, is traded by a different element of traders, and the rules that apply to 

one are NOT necessarily reasonable for the other. (By the way, the NFA's On Line Learning 

Programs regarding Forex not only give WRONG information, but it is so contorted it is a disgrace to 

the NFA and the CFTC should be ashamed to have it on their web site.) 

The CFTC should CREATE A NEW ENTITY to regulate Retail Spot Forex, and staff it with people 

who are of this industry, who care about this industry, and would be able to make rational regulations 

for it. But what is going on from the NFA and CFTC currently regarding Spot Forex is a joke and you 

folks need to start listening to the people who trade and understand this market. Maybe then we 

could have regulators that would be working for the benefit of the TRADER, which should be the 

primary focus to begin with. 

Sincerely, 

Mindy Yost 

mindyyost@kc. rr.com 

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