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Trading Of Over The Counter Gold And Silver To Be Illegal Beginning July 15
One small step toward Executive Order 6102 part 2, and one giant leap for corruptcongressmankind.
From: FOREX.com <info@forex.com>
Date: Fri, Jun 17, 2011 at 6:11 PM
Subject: Important Account Notice Re: Metals Trading
To: xxxImportant Account Notice Re: Metals Trading
We wanted to make you aware of some upcoming changes to FOREX.com’s product offering. As a result of the Dodd-Frank Act enacted by US Congress, a new regulation prohibiting US residents from trading over the counter precious metals, including gold and silver, will go into effect on Friday, July 15, 2011.In conjunction with this new regulation, FOREX.com must discontinue metals trading for US residents on Friday, July 15, 2011 at the close of trading at 5pm ET. As a result, all open metals positions must be closed by July 15, 2011 at 5pm ET.
We encourage you to wind down your trading activity in these products over the next month in anticipation of the new rule, as any open XAU or XAG positions that remain open prior to July 15, 2011 at approximately 5:00 pm ET will be automatically liquidated.
We sincerely regret any inconvenience complying with the new U.S. regulation may cause you. Should you have any questions, please feel free to contact our customer service team.
Sincerely,
The Team at FOREX.com
So far we have only received this warning from Forex.com. We are waiting to see which other dealers inform their customers that trading gold and silver over the counter will soon be illegal.
It appears that Forex.com's interpretation of the law stems primarily from Section 742(a) of the Dodd-Frank act which "prohibits any person [which again includes
companies]from entering into, or offering to enter into, a transaction
in any commodity with a person that is not an eligible contract
participant or an eligible commercial entity, on a leveraged or margined
basis."
Some prehistory from Hedge Fund Law Blog:
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(“Act”) has changed a number of laws in all of the securities acts
including the Commodity Exchange Act. Two specific changes deal with
certain transactions in commodities on the spot market. Specifically,
Section 742 of the Act deals with retail commodity transactions. In
this section, the text of the Commodity Exchange Act is amended to
include new Section 2(c)(2)(D) (dealing with retail commodity
transactions) and new Section 2(c)(2)(E) (prohibiting trading in spot
forex with retail investors unless the trader is subject to regulations
by a Federal regulatory agency, i.e. CFTC, SEC, etc.). According to a congressional rulemaking spreadsheet, these are effective 180 days from the date of enactment.
We provide an overview of the new sections and have reprinted them in full below.
New CEA Section 2(c)(2)(D) – Concerning Spot Commodities (Metals)
The central import of new CEA Section 2(c)(2)(D) is to broaden the
CFTC’s power with respect to retail commodity transactions. Essentially
any spot commodities transaction (i.e. spot metals) will be subject to
CFTC jurisdiction and rulemaking authority. There is an exemption for
commodities which are actually delivered within 28 days. While the CFTC
wanted an exemption in which commodities would need to be delivered
within 2 days, various coin collectors were able to lobby congress for a
longer delivery period (see here).
It is likely we will see the CFTC propose regulations under this new
section and we will keep you updated on any regulatory pronouncements
with respect to this new section.
New CEA Section 2(c)(2)(E) – Concerning Spot Forex
The central import of new CEA Section 2(c)(2)(E) is to regulate the
spot forex markets. While the section requires the CFTC to finalize
regulations with respect to spot forex (which were proposed earlier in
January), it also, interestingly, provides oversight of the markets to
other federal regulatory agencies such as the CFTC. This means that in
the future, different market participants may be subject to different
regulatory regimes with respect to trading in same underlying
instruments. A Wall Street Journal article
discusses the impact of this with respect to firms which engage in
other activities in addition to retail forex transactions. The CFTC’s
proposed rules establish certain compliance parameters for retail forex
transactions, requires registration of retail forex managers and requires such managers to pass a new regulatory exam called the Series 34 exam.
We do not yet know whether the other regulatory agencies will adopt
rules similar to the CFTC or if they will write rules from scratch.
Next, from Henderson & Lyman:
The prohibition of Section 742(a) does not apply, however, if such a
transaction results in actual delivery within 28 days, or creates an
enforceable obligation to deliver between a seller and a buyer that have
the ability to deliver, and accept delivery of, the commodity in
connection with their lines of business. This may be problematic as in
most spot metals trading virtually all contracts fail to meet these
requirements. As a result, although the courts’ interpretation of
Section 742(a) is unknown, Section 742(a) is likely to have a
significantly negative impact on the OTC cash precious metals industry.
Here too, it is essential that those who offer to be a counterparty to
OTC metals transactions seek professional help to discuss possible
operational and regulatory contingency plans.
The actual rule language exempts a transaction if it "results in actual delivery within 28 days or such other longer period as the Commission may determine by rule or regulation based upon the typical commercial practice in cash or spot markets for the commodity involved;" Alas, the commission has decided not to intervene and keep the exemption status window so small as to affect virtually all exchanges which transact in the gold and silver spot market.
Elimination of OTC Forex
Effective 90 days
from its inception, the Dodd-Frank Act bans most retail OTC forex
transactions. Section 742(c) of the Act states as follows:
…A person [which includes companies]
shall not offer to, or enter into with, a person that is not an
eligible contract participant, any agreement, contract, or transaction
in foreign currency except pursuant to a rule or regulation of a Federal
regulatory agency allowing the agreement, contract, or transaction
under such terms and conditions as the Federal regulatory agency shall
prescribe…
This provision will not come
into effect, however, if the CFTC or another eligible federal body
issues guidelines relating to the regulation of foreign currency within
90 days of its enactment. Registrants and the public are currently being
encouraged by the CFTC to provide insight into how the Act should be
enforced. See CFTC Rulemakings regarding OTC Derivatives located at the following website address,
under Section XX – Foreign Currency (Retail Off Exchange). It is
essential that OTC forex participants seek professional help to discuss
possible operational and regulatory contingency plans.
Elimination of OTC Metals
As
for OTC precious metals such as gold or silver, Section 742(a) of the
Act prohibits any person [which again includes companies]from entering
into, or offering to enter into, a transaction in any commodity with a
person that is not an eligible contract participant or an eligible
commercial entity, on a leveraged or margined basis. This provision
intends to expand the narrow so called “Zelener fix” in the Farm
Bill previously ratified by congress in 2008. The Farm Bill empowered
the CFTC to pursue anti-fraud actions involving rolling spot
transactions and/or other leveraged forex transactions without the need
to prove that they are futures contracts. The Dodd-Frank Act now expands
this authority to include virtually all retail cash commodity market
products that involve leverage or margin – in other words OTC precious
metals.
The prohibition of Section 742(a) does not apply,
however, if such a transaction results in actual delivery within 28
days, or creates an enforceable obligation to deliver between a seller
and a buyer that have the ability to deliver, and accept delivery of,
the commodity in connection with their lines of business. This may be
problematic as in most spot metals trading virtually all contracts fail
to meet these requirements. As a result, although the courts’
interpretation of Section 742(a) is unknown, Section 742(a) is likely to
have a significantly negative impact on the OTC cash precious metals
industry. Here too, it is essential that those who offer to be a
counterparty to OTC metals transactions seek professional help to
discuss possible operational and regulatory contingency plans.
Small Pool Exemption Eliminated
Pursuant to Section 403 of Act, the “privateadviser” exemption, namelySection 203(b)(3) of the Investment Advisers Act of 1940 (“Advisers Act”), will be eliminated within one year of the Act’s effective date (July 21, 2011). Historically, many unregistered U.S. fund managers had relied on this exemption to avoid registration where they:
(1) had fewer than 15 clients in the past 12 months;
(2) do not hold themselves out generally to the public as investment advisers; and
(3) do not act as investment advisers to a registered investment company or business development company.
At present, advisers can treat the unregistered funds that they advise, rather than the investors in those funds, as their clients for purposes of
this exemption. A common practice has thus evolved whereby certain
advisers manage up to 14 unregistered funds without having to register
under the Advisers Act. Accordingly, the removal of this
exemption represents a significant shift in the regulatory landscape, as
this practice will no longer be allowable in approximately one year.
Also
an important consideration, the Dodd-Frank Act mandates new federal
registration and regulation thresholds based on the amount of assets a
manager has under management ("AUM"). Although not yet underway, it is
possible that various states may enact legislation designed to create a
similar registration framework for managers whose AUM fall beneath the
new federal levels.
Accredited Investor Qualifications
Section
413(a) of the Act alters the financial qualifications of who can be
considered an accredited investor, and thus a qualified as eligible
participant (“QEP”). Specifically, the revised accredited investor
standard includes only the following types of individuals:
1) A natural person whose individual net worth, or joint net worth with spouse, is at least $1,000,000, excluding the value of such investor's primary residence;
2) A
natural person who had individual income in excess of $200,000 in each
of the two most recent years or joint income with spouse in excess of
$300,000 in each of those years and a reasonable expectation of reaching
the same income level in the current year; or
3) A
director, executive officer, or general partner of the issuer of the
securities being offered or sold, or a director, executive officer, or
general partner of a general partner of that issuer.
Based on
this language, it is important to note that the revised accredited
investor standard only applies to new investors and does not cover
existing investors. However, additional subscriptions from existing
investors are generally treated as requiring confirmation of continuing
investor eligibility.
On July 27th, 2010, the SEC
provided additional clarity regarding the valuation of an individual’s
primary residence when calculating net worth. In particular, the SEC has
interpreted this provision as follows:
Section
413(a) of the Dodd-Frank Act does not define the term “value,” nor does
it address the treatment of mortgage and other indebtedness secured by
the residence for purposes of the net worth calculation…Pending
implementation of the changes to the Commission’s rules required by the
Act, the related amount of indebtedness secured by the primary residence
up to its fair market value may also be excluded. Indebtedness secured
by the residence in excess of the value of the home should be considered
a liability and deducted from the investor’s net worth.
h/t Ryan
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OK..I asked this last night and then noticed my post was deleted. So I brought that up and that post was deleted. Please someone hurry and tell me what this means cause I think gold is gonna be in a world of hurt for a bit but then it will be a buying opp like never before.
My bet is this Dodd Frank regulation was known for little while now, everything is priced in already and nothing going to be changed or otherwise affected in terms of a Gold/Silver pricing.. (Paper/Physical) I remember same large noise about 1:50 Forex leverage cut and other regulations, many was freaking out, but at the end I don't even notice any affect of this as a trader since I don't use so much leverage anyways..
P.S: Large traders and institutions (with networth 1mil and more),
sill can use same leverage
And few retail traders with 1000$ accounts will not affect the Market
In any way.
A lot of trading desks will be obliging delivery with cash settlements, because the paper trading houses hold no bullion whatsoever. The COMEX or an ETF may be able to oblige with physical.
So you might actually see a stampede out of these speculative positions and into either physical, over-priced ETFs trading at a premium to NAV, or mining assets, which have traded on an under-valued basis against gold for years.
"The prohibition of Section 742(a) does not apply, however, if such a transaction results in actual delivery within 28 days, or creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver, and accept delivery of, the commodity in connection with their lines of business."
The dumb fuck who (or should I say 'that') wrote the above paragraph should take a course in English grammar.
…between a seller and a buyer that have the ability to deliver…
should read…
between a seller who has the ability to deliver and a buyer [willing to accept delivery]…
And please don't junk me just because you are as illiterate as the the DC clown responsible for this totally nonsensical garbage.
the run to phyzz is gonna start snowballing here...even without the Silver Viral Project.
Good luck Blythe at making it through July without a default! Bwahahahaha.
http://silverdoctors.blogspot.com/2011/06/silver-viral-project-guidebook...
There it goes again. Webmaster must hate my freaking guts cause every post I make just goes poof. ZH..You were the last place I thought this BS would happen. My bad.
YouTube - ?Twilight Zone Opening THEME MUSIC 1962 Rod Serling?
OK...
So I'm tuning into the beginning of the NBC coverage of the US Open Golf Championship at Congressional CC...
They do one of the usual 'hokey', image filled, intos (which are supposed to jerk the last of your emotions out of the nether regions of your gonads)...
So what do they do?
Well, the 'soundtrack' (behind the usual montage of historic & patriotic shots), is a bunch of schoolchildren voices... reciting the "Pledge of Allegiance"...
"I pledge allegiance
to the flag
of the United States of America
and to the republic
for which it stands...
then... CRICKETS (just the backgound orchestra music playing)
pause...
with liberty & justice for all"...
---
WTFF?
They not only did this ONCE... But it was repeated TWICE (the same way), in the montage...
Whatever people...
---
On this Fathers Day... Take pride in the fact that you live in a country (and can pledge your allegiance to):
The "liberty and justice for all" (brought to you [NOT BY GOD ALMIGHTY - or anyone that "all knowing or powerful"]), but by a banking cartel run by Zionists...
---
JPM & the usCONgress... Keeping the world safe from evil terrorist minded grannies speculating with their "tea" sets since 1913...
Yes...I saw/heard that same thing as well and my mind ran on like yours.
It's called brainwashing the Youth of our Nation and disconnecting them from the nation's history. Diabolical really...like how they "modify" history of all kinds to shape minds and warp those too innocent to suspect. I'm no believer in God....but those things should not be changed. It falls congruent with alot of wording in the Constitution (the Republic was founded by men and women that had a large portion of "believers" within their ranks....this should never be discounted IMO).
That being said....there's is no such Republic in existence today....been missing for a very long time (same amount of time that a second revolution's been needed)
Sorry Simon Black...."Stay and Fight" or not....the country is not what it should be...what it was meant to be....change forever promised, but never delivered. Steps and solutions of all kinds should be attempted....that is if you care to call yourself a patriotic American.
@ francis_sawyer....I'm glad you made mention of that moment in time. Happenings like that make me sick....sorry ZH (rant and venting on Sunday)
@AgShaman
I think I'm like you...
I posted this NOT as some message that we should be underwriting a particular diety...
Instead...Simply as a message that, these days, the MSM are 'full fledged' participants in:
- subversion
- or basically being pussies
I can't tell which...
All I can say... Is that there is PROBABLY NOTHING MORE STEEPED IN THE MESSAGE OF TRADITION & HONOR than the USGA... It's what they're all about... That IS their message (vs. other sports)...
So... If a telecast, involving the USGA National Championship, deems fit to go with the "new wave" of Pledge of Allegiance (and chooses to FEATURE it - for that matter)...
Well - Welcome to the country that you & I were probably not born in...
These aren't intended to be jingoistic sentiments... I'm just trying to figure out where I live...
FS - (I had to seize the opportunity to point that out in REAL TIME)
francis_sawyer,
Well said...I concur with your treatise...and wouldn't screw it up by adding to it.
Thanks for droppin' some lines on the subject.
Well it seems like this means that everyone holding a long the "easy" way has to sell it. Hopefully you get a pullback in the price, and then you are supposed to buy the physical.
This could be great... get to buy more cheap!! Thanks dodd-frank!
I guess gold will hit $5,000 sooner then expected.
That's "Better then Expected" as far as I'm concerned. These policies remind of (sort of) the Nixon price controls of the early 1970s...when removed oil and PMs soared through the roof....some 800% if I remember correctly. I have to agree with the economists (and history) that you simply cannot control market forces for very long.
That's a fact.
Add to all this the fact that Greece (and many other EU nations) are in deep financial crisis) will only add a rush to hard assets like the PMs.
GL!
It wasn’t even close; the straw poll at yesterday’s Southern Republican Leadership Conference gave Ron Paul 40% (612) of the total vote; former Utah Governor John Huntsman (who didn’t attend) was second with about one-fourth of the vote (382); Michele Bachmann (R-Minn) placed third with 12% of the vote; and businessman Herman Cain and former Massachusett Governor Mitt Romney (who didn’t attend) followed respectively.
In his speech, Paul said the U.S. economy has been in a “severe slump” for a decade and, in spite of a population growth of 30 million people, no new net jobs have been added.
“We’re slipping and sliding. It’s always been moderated by more handouts, more entitlements.”
Please End The Wars Now. Thousands of PEOPLE are DYING!!!
http://youtu.be/OUSu06xr004
Thank you.
Bam! There is goes again. My post removed. OK who ever you are..Email me and we can talk about this like men.
OK so my cntr F function doesn't seem to work. But still I swear they are out to get me. I know what they know and they don't want the cat out of the bag just yet. Grrr Cats.
Your posts aren't getting deleted. Your question about what does this mean, fallout wise? I'm not 100% clear, but it looks to me like just more red tape that will keep the average US citizen out of this particular aspect of the game, and make things more difficult for the smaller funds. Probably will make it easier for concentrated shorts to overpower free market forces. Just another swift boot to the can, and less options for the losing class.
HELLLOOOOO CANADA!!!!!!!
Paper PMs just opened in Asia. Both edged up on open (silver up nearly $0.50 USD). Phew..... For now.
Who needs QE3 when we have the much more ritzy QEP?
http://tradewithdave.com/?p=7036
Dave Harrison
www.tradewithdave.com
Wow, the USA going full socialist communist now in 3..2..1..
erm: please update your lexicon. Your american conditioning is showing.
`Stalinism` is not `communism` is not `socialism`, and if you think those three are equivalents you`re either a dupe, a fool, or a combination of the two in 3...2...1...
ooooo, we're really scared.