forex street

MG will have no difficulty accommodating this change if the proposal does pass. MG Financial as a group has ample capital to satisfy the new Net Capital requirement. Retail FX is just one part of the group's business and a reallocation of investments has already been initiated. Already as of the end of July, MG has increased its Net Capital to be in excess of the new proposal. This proposal to increase the Net Capital Requirement came out in the middle of June; however, the basis of information that caused the panic is the two months old Financial Reports (as of April 2007) when MG had over 120% of the requirement at that time. MG has always been above the Net Capital Requirement as set by the NFA but there is no reason to have more cash tied up than 120% of Net Capital to satisfy regulatory requirements. One needs to understand that in running a multi-faceted company, it is not prudent business practice to tie up capital for regulatory reasons just for “show”.


MG is certainly not opposed to increased Net Capital Requirements but it seems that everyone is only concentrating on the first part of the NFA proposal (the new Net Capital Requirement), and completely overlooking the very important second part. Along with a higher Net Capital, the new proposal also calls for the use of proper and uniform accounting methods.

It has always been our position at MG that enforcement of proper financial accounting and internal controls is the most important means to verify and ensure the FCM’s ability to operate. When you are dealing in a highly leveraged industry, no amount of money will ever ensure safety. Many “big” firms have failed in the past and many more will fail in the future. The reason for their failure was not necessarily a lack of adequate capital but the fact that they incurred more risk than their financial condition would allow. Some of these firms misrepresented their financial condition to the public.