Dodd-Frank Ban on Trade of Precious Metals to Go Into Effect Tomorrow
Currency trading site Forex.com sent out the following notice to traders this week, informing them that the Dodd-Frank Act's ban on the over-the-counter trade of precious metals will be going into effect tomorrow.
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. As a result, all open metals positions must be closed by July 15, 2011 at approximately 2pm EST.
We encourage you to wind down your trading activity in these products in anticipation of the new rule. Any XAU or XAG positions that remain open at approximately 2pm EST on July 15, 2011, will be automatically liquidated.
This Dodd-Frank provision, though ostensibly intended to curtail over-the-counter derivatives trading of the sort that led to the financial meltdown when AIG was unable to meet its obligations, significantly limits the freedom of smaller traders and investors to participate in the precious metals market. According to my source in the foreign exchange community, the prohibition on trading gold against the dollar and other currencies has got traders riled up and suspecting ulterior motives.