Forex traders file complaints in Parliament about new regulations

The restrictions that the Capital Markets Board (SPK) introduced on leveraged trading transactions (forex) have worried sector employees. Thus, they are filing complaints to the Parliamentary Petition Commission, saying that 3,500 of them will be wrongfully dismissed and 10,000 people, including their families, will be victimized.

The commission began addressing the issue as a result of complaints made by individual investors who lost money in the forex market last year.

Within the framework of the communiqué published on Feb. 10, the SPK lowered the maximum leverage ratio of forex transactions from 100:1 to 10:1, as well as imposing an obligation to have an initial deposit of at least TL 50,000 ($13,862) or equivalent currency to start transactions, aiming to protect investors and restrain speculators.

Following this, the Parliamentary Petition Commission received complaints from forex market employees on the grounds that they could lose their jobs.

In the complaints directed to the commission, it was suggested that the regulation would cause the forex market to disappear and that 3,500 educated and qualified personnel working in the capital market might lose their jobs due to the communiqué.

"In this case, about 10,000 people will be victimized along with their families. This

communiqu will make our well-designed and reliable forex market inoperative and cause investors and investor guarantees of TL 2 billion kept in Takasbank [the Clearing House of Turkey] to go abroad. It is also incompatible with the vision of the Istanbul Finance Center," a forex market employee said in the complaint.

What is leverage?

Leverage can be defined as borrowing a certain amount of money necessary to make investments. In the case of forex, the money is borrowed from a broker, the company providing forex services. Forex trading offers high leverage for an initial margin requirement; a retail investor can build up and control a huge amount of money. In other words, leverage in forex trading, magnifies gains and losses.

Assume that an investor has an account with an online forex broker, which provides the investor with the maximum leverage permissible in Turkey, which is currently 10:1. The leverage means that for every dollar the investor puts up, he or she can trade $10 of a major currency, if the investor has an account in the U.S. dollar. If the investor deposits $5,000 as margin, which is collateral or equity in the trading account, then she or he can put on a maximum of $50,000 in currency trading positions initially. Nevertheless, this amount will fluctuate depending on the profits and losses generated from trading. Prior to Friday's amendment by the SPK, an investor with $5,000 as margin had been able to put on a maximum of $500,000, as the permissible leverage was 100:1.