The U.S. futures regulator issued a final rule late Monday for the retail foreign exchange market, which included relaxing an earlier proposal that would slash leverage available to investors participating in these transactions.
The U.S. Commodity Futures Trading Commission rule put in place requirements for retail foreign exchange products, including registration, disclosure, record keeping, financial reporting and minimum capital standards.
A key change in the rule, which goes into effect on October 18, will allow the National Futures Association to put in place leverage rules as long as they require investors to place a minimum 2 percent security deposit in the case of major currencies and 5 percent of the notional value of the transaction for all other currencies.
The agency said it will periodically review these parameters to determine if they need to be adjusted.
The CFTC earlier proposed limiting leverage for retail customers on forex transactions to a ratio of 10-to-1, which was criticized by dealers, lawmakers in Congress and others who feared it could push investors into overseas markets with less protection.
These rules of the road will help protect the American public in the largest area of retail fraud that the CFTC oversees: retail foreign exchange, CFTC Chairman Gary Gensler said in a statement.
This marked the first final rule the CFTC has published from the Dodd-Frank financial reform bill that went into effect in July. The CFTC has organized its to-do list into 30 topic areas it must address during the next year.
(Reporting by Christopher Doering and Roberta Rampton)