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Who can explain the new CFTC rules for brokers?
AS I understand it, we here in the US, will have a max leverage of 50:1 for majors and 20:1 for exotics. Also, all US companies that wish to offer FOREX to "retail" customers will have to register with the CFTC, thus fall under their jurisdiction. This means we will no longer be able to use US brokers like GALLANTFX anymore and have the luxury of 400:1, hedging and no FIFO. Also, if I am understanding this correctly, if your FOREX "brokerage" has a US presence and a presence overseas, they will have until the end of the year to move all US customer accounts back to the US "servers", so that the US retail traders can be subject to the CFTC'c rules. What I am not clear about is this: suppose I have a broker that is offshore, and they do not have a US "office", will the US gov't try to make it so that WE, U.S. traders, will not be able to use their services w/o stiff penalties to the foreign brokerage? Anyone who has been waiting for IBFX to open in London can see why it isn't happening!!
about 1 year ago
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James Bibbings wrote a good overview of the CFTC rules in this FXStreet news article: http://www.fxstreet.com/education/m....
In regards to US residents being able to trade with overseas affiliates or entities, there's still much uncertainty surrounding this that the NFA/CFTC will need to clarify. I think Robert Green of Green Trader Tax does a pretty decent job in his latest blog post from Sept. 1 outlining why the uncertainty exists http://www.greencompany.com/blog/in.... He outlines it pretty well with one of the first sentences "Congress and regulators have thrown the forex trading industry a huge curve ball and we are all scurrying to get answers to important questions.".
about 1 year ago
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Answers (2)
Here's another one. This one is from Forbes.com's blog. Looks like the pleas of traders and retail brokers to NOT make maximum leverage all the way to 10:1!
about 1 year ago
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For a foreign broker with a US presence, they could be subject to US regulation. For example, the IRA I have with Gain Capital could be an issue, and they may force me to return it to US jurisdiction. I have been investigating other options since I simply won't use a US broker or be bound by 50:1 leverage. The "nuclear option" would be to withdraw the Roth IRA account and eat the penalty, putting the money where I want in accord with the second paragraph. Another option would be to place the money directly with a bank which isn't subject to the CFTC. Deutsche Bank, for example, is not governed by the CFTC and offers 100:1 leverage. I've already been in contact with them, and they aren't sure how they will approach US customers. I'll contact them again in a while. Of course, I also need the "thumbs up" from Equity Trust, and I'll approach them if DB is interested in the business. I'd prefer to avoid going nuclear over this, as a Roth IRA is a very nice tax-free income vehicle in my old age. But I'll go nuclear before suffering with a US based broker, FIFO, no-hedging, and 50:1.
I have spoken with at least one foreign broker without a US presence, who does not feel subject to CFTC regulation, and will gladly continue serving US clients. Such a broker will continue to have my taxable account business, and will also get my retirement monies if I go nuclear.
The US government may try to force compliance from foreign brokers, but how can they do this without a US presence ? Diplomatic channels?! Maybe we'll declare war against Mauritius over this...
about 1 year ago
And I think you'll see customers going there in droves. I prefer to have my broker regulated by *somebody*. And you'll be hard-pressed to find a regulated broker less favorable to retail forex customers than any in the US. My Gain Capital account in the UK carries 50K GBP insurance through the FSA. The funds in my GoMarkets account are held in trust in a segregated account at the National Bank of Australia. And of course both are protected from creditor attachment in the USA. You don't get protections like those at *any* regulated or unregulated broker in the US. The CFTC & NFA do not regulate for the benefit of the customer but for the broker. Make no mistake about it.
about 1 year ago
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I just spoke with my US (non-NFA, non-CFTC) broker. They are located in the USA. Their strategy is to create an off shore presence, move all of the willing US customers to the off shore, then close any connections to the US....
about 1 year ago
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