FOREX Will Suspend Precious Metals Trading July 15, 2011
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Thread: FOREX Will Suspend Precious Metals Trading July 15, 2011

  1. #1
    XCR Guru Sean K.'s Avatar
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    FOREX Will Suspend Precious Metals Trading July 15, 2011

    http://www.zerohedge.com/article/tra...inning-july-15

    Trading Of Over The Counter Gold And Silver To Be Illegal Beginning July 15
    Tyler Durden's picture
    Submitted by Tyler Durden on 06/18/2011 13:23 -0400



    One small step toward Executive Order 6102 part 2, and one giant leap for corruptcongressmankind.

    From: FOREX.com <[email protected]>
    Date: Fri, Jun 17, 2011 at 6:11 PM
    Subject: Important Account Notice Re: Metals Trading
    To: xxx

    Important 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.

    More here:

    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.
    "Necessity is the plea for every infringement of human liberty. It is the argument of tyrants; the creed of slaves."-William Pitt the Younger

  2. #2
    XCR Guru Sean K.'s Avatar
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    Re: FOREX Will Suspend Precioius Metals Trading July 15, 2011

    http://www.ncc-1776.org/tle2011/tle624-20110619-06.html

    Hang 'Em High
    by L. Neil Smith
    [email protected]

    Bookmark and Share

    Attribute to L. Neil Smith's The Libertarian Enterprise

    The headline at zerohedge.com reads, "Trading Of Over The Counter Gold And Silver To Be Illegal Beginning July 15". The story, by a Tyler Durden, goes into details of legislation I was unaware of until now, legislation that's about as evil as any legislation can possibly get.

    Thanks to a vile act stealthily foisted on the American Productive Class by soon-to-be former Senator Christopher Dodd and an unspeakably despicable Barney Frank, under a blatantly unconstitutional law shoved through the United States Congress, a new regulation prohibiting U.S. residents from trading precious metals over the counter—including gold and silver—will extrude itself into effect on Friday, July 15, 2011.

    In conjunction with this new regulation, FOREX.com has announced that it must discontinue metals trading for U.S. residents on Friday, July 15, 2011 at the close of trading at 5pm Eastern Time. As a result, all open metals positions must be closed by July 15, 2011 at 5PM.

    Durden makes reference to Executive Order 6102, signed on April 5, 1933, according to Wikipedia, by Franklin Delano Roosevelt, third worst president of the United States, "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates" by American citizens. The order, in blatant violation of the Ninth Amendment, as well as Constitutional prohibitions against "illegal takings", criminalized the American public's ability to own gold as an investment vehicle. Appropriately, Durden calls the new Dodd/Frank legislation 6102 Part 2.

    In my view, based on my experience of history and human nature, the only worse legislation Congress could pass would be the complete prohibition and confiscation of privately-owned weapons. This law may actually be a trial balloon to accomplish that. In any case it clearly constitutes a criminal breach of the public trust, and a direct attack on the individual and family's ability to remain independent of state oppression and survive the carefully-engineered collapse of the economy they're eager to bring about so they can rescue all of us to death.

    What can we do? Two things. First, those in a position to do it should seek an injunction against the enforcement of this regulation, while grounds are sought to bring criminal charges against Dodd and Frank.

    Yes, I'm well aware that there is a self-serving section of the Constitution, Article 1, Section 6, that offers slimeballs and scumbags like Dodd and Frank immunity from punishment for the criminal acts that they are guilty of. In the short run, libertarian lawyers must discover some way around that—or else what the hell good are they?

    Second, in the longer run, that section of the Constitution must be repealed because it is one of the major causes of the mess we find ourselves in today. In addition, a penalty clause must added to the Bill of Rights, providing a life sentence for politicians who violate it.

    How about this?

    Any official, appointed or elected, at any level of government, who attempts, through legislative act or other means, to nullify, evade, or avoid the provisions of the first ten amendments to this Constitution, or of the Thirteenth Amendment, shall be summarily removed from office, and, upon conviction, deprived of all pay and benefits including pension, and sentenced to imprisonment for life.

    Two observations: it isn't really necessary for either of these measures—repeal of Congressional immunity or a Bill of Rights penalty clause—actually to pass into law. If they merely become credible threats, reported and discussed here, there, and everywhere, Dodd and Franks' more timorous colleagues will compel them to back off.

    Of course we keep working to pass them, anyway.

    Second, a great many individuals criticize my proposed penalty clause because it doesn't call for the public executions of criminals, convicted under due process of law of violating the highest law of the land.

    They may have a point.
    "Necessity is the plea for every infringement of human liberty. It is the argument of tyrants; the creed of slaves."-William Pitt the Younger

  3. #3
    XCR Guru Sean K.'s Avatar
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    Re: FOREX Will Suspend Precious Metals Trading July 15, 2011

    My guess is this is a scare tactic by FOREX to try and get a rush on gold/silver going......but I wouldn't put anything past Frank/Dodd.

    Anyone have any more sources that Frank/Dodd are actually pushing for reinstatement of 6102?
    "Necessity is the plea for every infringement of human liberty. It is the argument of tyrants; the creed of slaves."-William Pitt the Younger

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    XCR Guru Difranco's Avatar
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    Re: FOREX Will Suspend Precious Metals Trading July 15, 2011

    This legislation is only for "Paper" Gold and does not affect the average person buying / selling physical bullion at their local dealer.

    It's designed to prevent speculation and buying non-existant paper gold.
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    A truth’s initial commotion is directly proportional to how deeply the lie was believed. When a well-packaged web of lies has been sold gradually to the masses over generations, the truth will seem utterly preposterous and its speaker a raving lunatic.

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    Re: FOREX Will Suspend Precious Metals Trading July 15, 2011

    Pardon me I think I had something crazy in my ear, but I wouldn't totally rule it out, it has happened in the past
    We are concerned here with either real traitors or complete imbeciles. But imbecility, raised to this degree, is equal to treason."

  7. #6
    Super Moderator Underground's Avatar
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    Re: FOREX Will Suspend Precious Metals Trading July 15, 2011

    I've got a bunch of paper gold for sale cheap if you want to get in on that before the 15th. How many sheets you want?



    That guy, he said I should be oblong and have my knees removed. But I don't trust him, he plays the banjo.

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    Re: FOREX Will Suspend Precious Metals Trading July 15, 2011

    "Over The Counter" is a term used in the financial industry.... it sounds like retail sales like "over the counter medications" to a non industry insider but all that it means is 'unregulated trades'.
    Visit Minute of Angle Forums
    A truth’s initial commotion is directly proportional to how deeply the lie was believed. When a well-packaged web of lies has been sold gradually to the masses over generations, the truth will seem utterly preposterous and its speaker a raving lunatic.

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