President Bush vetoed the Bill on Wednesday night, but that apparently will cause no more than a short-term delay. According to Drew Niv, chief executive of FXCM, the Bill will lead to the creation of retail FX dealer category, recognising that the OTC is a proper market and not just a pool where sharks swim. It will also close the Zelener loophole that limited the CFTC’s jurisdiction by limiting the regulator to futures, not spot.
The new Bill will also clamp down on what introducing brokers are allowed to do and claim. Perhaps the most significant change is the increase in the adjusted net capital that firms will have to post to do business. Over the next year this will be increased in $5 million increments from its current level to $20 million, turning the US from what was once one of the easiest places to set up a trading platform to one of the hardest, in terms of cost. No other jurisdiction presently requires such a high capital requirement.
Once passed, the legislation will undoubtedly help the CFTC and the National Futures Authority achieve their aim of forcing poorly capitalised companies out of the market.