THE END: 15 JULY 2011

[IdahoCopper]

If anyone has more info on this please forward.

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: 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 period as the Commission may determine by rule or regulation based upon the 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.

[TXBullion]

Wow. I would like to see more info. Thanks fo posting this important info

[IdahoCopper]

Here is a link:

Forgot to give the link: http://www.zerohedge.com/article/tradin ... ng-july-15

[TXBullion]

Anyone done any independent Verification on this?

[avidbrandy]

Well that didn't last long. As I recall, Forex.com only started allowing USD/AUX trades back in 08 or so.

It seems the law disallows buying precious metals on margin, with the exception being when it is actually delivered.

[Market Harmony]

this is bad bad bad. It limits the players in the market. It opens the door to more collusion. It takes away the common man's ability to be in the market.

Making any market "exclusive" is manipulation. Making any market "inclusive" is freedom.

[Copper Catcher]

Explain more what this means to the average person wanting to buy gold or silver from their local shop or online...Does it mean anything? I am confused...

Has the SHTF as of July 15th and we are just starting to smell it?

[Market Harmony]

I don't think this is referring to "over the counter" as in coin shop physical bullion transactions. OTC is like the stock market. Today, any guy can call up his broker and tell him to buy any number of futures contracts that he wants. I think this bill is referring to that particular type of transaction for now. But, you never know about the future.

This is not a privilege that any law should be able to take away. $10,000 or $10 million, you should be able to have some skin in the game

[avidbrandy]

Yea as far as buying at a coin shop, etc. this shouldn't have any affect I think. This is just in regards to people who trade on margin (I put 10 bucks in and can trade like I have a 100. Or in Forex, 500). Those people won't be able to trade gold as a speculative investment. I think this would lower gold a bit but that's just a guess, and I wouldn't expect it to be much as it only applies to individual investors. "all retail cash commodity market products that involve leverage or margin"

Again, this specific thing does not affect anything most of us do or discuss. I don't however, see what benefit is supposed to come of it, which makes me wonder if it is the start of something that would affect what we do. For now I can only speculate, or apparently, I can't.

[Sheikh_yer_Bu'Tay]

Without a doubt, this is government intervention. This really helps the big guys and really screws the little guys.

It is like the foxes are guarding the chicken house (always have). Only now, the foxes have started taking steroids.

[theo]

As others have said, this won't have any direct effect on those buying coins from dealers or of off EBay. What it seems to do is make it very difficult for "unaccredited" (read small) investors to invest in the PM futures market. This, of course, is a thinly veiled attempt to suppress the paper prices of silver and gold by removing buying pressure from the market. Of course, dealers who sell physical PMs still use the paper prices as a price discovery tool. I believe these regulations (along with more soon to follow) will widen the gap between the paper and physical price of PMs (especially silver) until the paper prices are as relevant as the administration's "save or created" jobs numbers.

[Lemon Thrower]

OTC means off exchange. DF is trying to get derivatives onto an exchange and into a clearinghouse. this is the 1 year anniversary and some provisions of DF take effect automatically at this time. I suspect this is an overly narrow interpretation but I do know that the entire banking industry has been begging for clarification so i am not surprised some shops are doing this. whether this is required remains to be seen. MH is correct that this limits who can write a contract, which will make spreads (difference between bid and ask) go up.

[inflationhawk]

If buying pressure is removed by no longer allowing leverage to be utilized via the OTC market that would certainly seem to imply spot prices would be driven lower. Prices for precious metals, whether for physical ownership or through paper assets, are derived from the spot price.

When hedge funds were forced to liquidate their leveraged holdings due to margin calls and credit issues in 2008 that certainly led to decreased spot prices at least temporarily. This could provide an opportunity to purchase at a discount in the coming months as regulation changes rarely trump true demand in the long run.

It does seem very confusing to me and uncertain though.

[Sheikh_yer_Bu'Tay]

If buying pressure is removed by no longer allowing leverage to be utilized via the OTC market that would certainly seem to imply spot prices would be driven lower. Prices for precious metals, whether for physical ownership or through paper assets, are derived from the spot price.

When hedge funds were forced to liquidate their leveraged holdings due to margin calls and credit issues in 2008 that certainly led to decreased spot prices at least temporarily. This could provide an opportunity to purchase at a discount in the coming months as regulation changes rarely trump true demand in the long run.

It does seem very confusing to me and uncertain though.

My first impression was this would drive the price up. I hope you are right. I still want to keep stackin' those shiny little gems.

Ultimately, PM's have got to zoom to the moon, or we PM hoarders are the dumbest of fools.

[Lemon Thrower]

If buying pressure is removed by no longer allowing leverage to be utilized via the OTC market that would certainly seem to imply spot prices would be driven lower. Prices for precious metals, whether for physical ownership or through paper assets, are derived from the spot price.

When hedge funds were forced to liquidate their leveraged holdings due to margin calls and credit issues in 2008 that certainly led to decreased spot prices at least temporarily. This could provide an opportunity to purchase at a discount in the coming months as regulation changes rarely trump true demand in the long run.

It does seem very confusing to me and uncertain though.

you are right about direction but wrong about magnitude. little guys buying OTC bareley move the needle. the real effect is to reduce competition among those offering these products/derivatives, which results in a higher markup.

[beauanderos]

If buying pressure is removed by no longer allowing leverage to be utilized via the OTC market that would certainly seem to imply spot prices would be driven lower. Prices for precious metals, whether for physical ownership or through paper assets, are derived from the spot price.

When hedge funds were forced to liquidate their leveraged holdings due to margin calls and credit issues in 2008 that certainly led to decreased spot prices at least temporarily. This could provide an opportunity to purchase at a discount in the coming months as regulation changes rarely trump true demand in the long run.

It does seem very confusing to me and uncertain though.

you are right about direction but wrong about magnitude. little guys buying OTC bareley move the needle. the real effect is to reduce competition among those offering these products/derivatives, which results in a higher markup.

by inference... if little guys barely move the needle... then why would the lack of that minimal volume have greater than a minimal impact resulting in the higher markup as you surmise? I will admit my ignorance in advance on this topic, but I would think this could divert some more of the precious metals money pool into both mining equities and physical. Again, the impact might be minimal, but I would imagine that could be beneficial rather than detrimental to price. Do a cannonball dive into an olympic-sized pool and you'll barely cause a ripple, but do one into an above-ground doughboy and you'll cause the sides to flex.

[neilgin1]

its intensely bullish....cornered gamblers the lot of 'em.....buy with both hands. Silver's on its way to $100 plus the ounce, and thats the first real stop, up to 300 to 400.

i dont care what anybody says, its currency insurance, and anybody with eyes can see the fiat is wrecked. nuffsaid from me, neil

[pennypicker]

Coinflation.com has an article outlining the ramifications of July 15.

[moboman]

Ultimately, PM's have got to zoom to the moon, or we PM hoarders are the dumbest of fools.

I hate to disagree with you but, nothing would make me happier than if the economy recovered and PM's dropped to record lows. I'd rather look like a dumb fool and have "fixed" US than live in a world where we need to rely on PM's.

The reason we're here is because we are being prepared for anything.

[Thogey]

Ultimately, PM's have got to zoom to the moon, or we PM hoarders are the dumbest of fools.

I hate to disagree with you but, nothing would make me happier than if the economy recovered and PM's dropped to record lows. I'd rather look like a dumb fool and have "fixed" US than live in a world where we need to rely on PM's.

The reason we're here is because we are being prepared for anything.

+1

Bully!

[moboman]

I just like to think of it like an insurance policy.

I also like to collect, so just tell people you're a coin collector or that it's just an investment.

Either way, PM's have never been worthless so it can't be too bad of an investment. I cant say the same for GM or Delta stock........ they go to 0 yet there are still planes flying and cars rolling off of the assembly line. The worse part yet is that new people own new shares of stock and former stock holders get the shaft. Who's the dumb fool that invested in a bankrupt company .

Just bring something like that up when someone gives you a hard time for buying coins or pms.

[argent_pur]

I just like to think of it like an insurance policy.

I also like to collect, so just tell people you're a coin collector or that it's just an investment.

Either way, PM's have never been worthless so it can't be too bad of an investment. I cant say the same for GM or Delta stock........ they go to 0 yet there are still planes flying and cars rolling off of the assembly line. The worse part yet is that new people own new shares of stock and former stock holders get the shaft. Who's the dumb fool that invested in a bankrupt company .

Just bring something like that up when someone gives you a hard time for buying coins or pms.

There are some here who have a goodly portion of their assets in PM's, gold and/or silver. That presents somewhat of a conflict of interest (or conscience) when it takes hard times to see those metals rise in price. You may benefit personally should things get worse, but that's just it...things do get worse, many more people and families suffer. Not that the PM holder is responsible in any way, he/she is merely planning ahead for what is outside their control. If this situation presents an issue for your psyche, tilt your holdings toward silver, which doesn't necessarily require bad news to rise.

Also, it would be safe to say (I think) that most people here are of the Austrian variety, economically speaking. Not that Austrians always find the negative in everything, but that viewpoint would not give you much to look forward to right now with everything going on. Very logically, we're preparing for a full-blown currency crisis. But, it may not happen the way we think, or happen at all...seems that it makes some sense then to hold other irons in the fire, which many here do

[Know Common Cents]

My understanding is that COMEX is unaffected. Please correct me if I'm wrong. Thanks.

[biglouddrunk]

This might actually drive the price up a little bit of the actual metal. The small players might go after the physical commodity. I would guess there is far less silver and gold than what is traded. I have always been waiting to see a big price difference in spot and bullion. It will happen someday too. There will be a shortage of silver lets say which will make people in ETFs ask for delivery which will cause the shortage to increase. It will be like a run on the bank. I wish investors understood when they invest in GLD they are trading one paper money "US currency" for another piece of paper "ETF saying I own an ounce of gold". At least the US has a big military to backup there paper, these ETFs are backing up there paper the same way AIG backed up there credit default swaps.

[Sheikh_yer_Bu'Tay]

Ultimately, PM's have got to zoom to the moon, or we PM hoarders are the dumbest of fools.

I hate to disagree with you but, nothing would make me happier than if the economy recovered and PM's dropped to record lows. I'd rather look like a dumb fool and have "fixed" US than live in a world where we need to rely on PM's.

The reason we're here is because we are being prepared for anything.[/quote]


moboman,

I agree, and disagree with you at the same time. I am not sitting around hoping for the collapse of our economy. I used to tell people: "I hope you are right and I am wrong". I don't bother anymore. My investments into PM's are three fold:

1.) A secure store of wealth to provide for the years I am too feeble to work anymore. I hope things go so well my children inherit most of it!

2.) A hedge against inflation and/or monetary collapse. This is a subject we discuss a lot here.

3.) A very smart investment in economic growth. No matter where in the world there is a growing economy, there will always be a need for metal commodities. Be they PM's, or base metals.

I see metal commodities as a winner, no matter what the economy does. I am, however, befuddled by Ag's engineered "correction". I simultaneously am glad for it so I may acquire more, yet I am ready for it to be over so I may buy into another commodity I want even more: Agricultural land with proven mineral reserves.