Trading on GTS under the new
NFA FIFO Rules
On August 2, 2009 the NFA implemented Compliance Rule 2-43 (b) which states, "Forex Dealer Members (FDMs) may not carry offsetting positions in a customer account but must offset them on a first-in, first-out basis."
This new rule will directly impact the way traders manage risk, especially through the use of stop loss or take profit orders.
The FIFO (First-in, First-out) method for trading means that the oldest trade of an instrument will be the first closed, or reduced, when a trade is done in the opposite direction in that same instrument.
The FIFO (First-in, First-out) method for trading means that the oldest trade of an instrument will be the first closed, or reduced, when a trade is done in the opposite direction in that same instrument.
You will no longer have the ability to:
Hedge
Place stop-loss or limit orders against a particular ticket
Modify or close a trade that is not the oldest of a particular instrument
Hedge Place stop-loss or limit orders against a particular ticket Modify or close a trade that is not the oldest of a particular instrument
For more information & detailed examples:
General Overview Tutorial: Trading under FIFO on GTS
Live Demonstration Tutorial: Trading under FIFO on GTS
NFA Regulation FAQs
General Overview Tutorial: Trading under FIFO on GTS
Live Demonstration Tutorial: Trading under FIFO on GTS
NFA Regulation FAQs
What does First In, First Out – FIFO Mean?
In an effort to clarify the new "FIFO" rule, below is an example of trades that are executed in the order indicated.
| August 3, 10:00 | Ticket #1 | Buy EUR/USD | 1,000,000 |
| August 3, 11.34 | Ticket #2 | Buy EUR/USD | 500,000 |
| August 4, 08:30 | Ticket #3 | Buy EUR/USD | 350,000 |
| August 4, 09:15 | Ticket #4 | Buy EUR/USD | 650,000 |
| TOTAL Positions: | Long EUR/USD | 2,500,000 | |
August 4, 10:15 a market order to sell EUR/USD 1,200,000:
| Full close | Ticket #1 | Sell EUR/USD | 1,000,000 |
| Partial close | Ticket #2 | Sell EUR/USD | 200,000 |
| TOTAL Positions Closed: | Sell EUR/USD | 1,200,000 | |
Break down of remaining positions:
| Ticket #2 | Long EUR/USD | 300,000 | |
| Ticket #3 | Long EUR/USD | 350,000 | |
| Ticket #4 | Long EUR/USD | 650,000 | |
| TOTAL Positions: | Long EUR/USD | 1,300,000 | |