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The US forex market is probably the most heavily regulated one. US Forex brokers must be regulated by the National Futures Association (NFA) or the Commodity Futures Trading Commission (CFTC), and must meet strict requirements designed to protect local investors. Needless to say, the CFTC and NFA are quite strict in enforcing their regulations and guidelines. If a regulated company fails co comply with any of the legal requirements, the fines are pretty heavy.
First of all, they are subject to one of the highest capital requirements for financial services providers worldwide. US brokerages must maintain a net capital of at least $20 million to make sure that they are well-capitalized to protect investors from unfavorable events. By comparison, the minimum net capital requirement for Australian brokers is AUD 1 00 000, and for those in UK and Cyprus – EUR 730 000. The US market, however, does not tolerate small players.
Second, forex brokers in the USA are allowed to provide leverage up to 1:50 for majors and up to 1:20 for minor currencies. A number of financial regulators have introduced similar leverage caps due to the high risk of significant loss when using high leverage ratios, including those in Japan, Turkey and, most recently, the European financial authority, ESMA. However, many traders are tempted by the opportunity of quick profit on a small deposit, which higher leverage offers, and search for brokers that provide leverage up to 1:100 or more. On the other hand, the leverage restriction also results in lower trading volumes, and, respectively, smaller profit for the brokerages.
Another restriction US brokers are subjected to is the so called FIFO (first in, first out) rule. Simply put, this rule prevents traders from going long and short on the same pair at the same time. Where there are several open trades on the same pair and of the same size, a trader is required to close the oldest trades first. This also means that hedging is not allowed.
Similarly to the situation in other jurisdictions, US brokers have to meet certain reporting requirements. In addition to CFTC’s recordkeeping and reporting guidelines, they are required to provide their customers with access to certain transaction execution data (under the NFA’s rules on disclosure of transaction data).
Actually, most of the above-mentioned restrictions for forex brokers in the US were introduced by the Dodd–Frank Act in 2010. What’s more, this law practically prohibited foreign forex brokers from accepting US clients. According to the Dodd–Frank, forex brokers that are allowed to deal with US forex traders must be registered with NFA (and regulated by CFTC). US regulators keep threatening any broker that accepts US clients without US regulation and have spread their tentacles inside many foreign governments through a series of Memoranda of Understanding agreements. Thus, NFA & CFTC have effectively extended US regulation to cover US residents in countries that are parties to these agreements.
Considering the heavily regulated environment in the US, no wonder there are only a few forex brokers left legally operating there. Above is a list of those brokerages.
US Forex news
The lack investor protection hinders the approval of Bitcoin exchange-traded funds (ETFs) said on Tuesday the Securities and Exchange Commission (SEC) chairman
A US federal court ordered a New York company to pay $2.5 million in fines and restitution for running a Ponzi scheme
IG, one of the biggest brokers in the forex industry has acquired a US regulatory approval – a step that will allow
US authorities, including FBI, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) moved against 1pool Ltd., owner
The US financial watchdog the Commodity Futures Trading Commission filed charges against eight forex and binary options brokers, that illegally targeted US
The Securities and Exchange Commission (SEC) in the US has charged with fraud two men from the state of Michigan for running
The US Securities and Exchange Commission (SEC) has rejected nine applications to start the first-ever bitcoin-based exchange-traded funds or ETFs. The decision,
The U.S. Commodity Futures Trading Commission (CFTC) has filed a civil action against forex broker JAFX, accusing it of soliciting and accepting US customers
The latest monthly metrics reports of US forex brokers Forex Capital Markets, or FXCM, and Gain Capital, the operator of Forex.com, indicated
The total retail client deposits of the US forex brokers posted a 10.7% drop in April and fell below the $500 million
Oanda, the third-largest forex broker in the US is continuing upward trend and is overtaking the second-largest – Gain Capital – in
Gain Capital (NYSE:GCAP), the second-largest US forex broker has remained a steady second after FXCM, shows data on February client deposits published
Forex Capital Markets, the US forex broker also known as FXCM (NYSE:FXCM) has retained its leading position in terms of size of
US-based automated forex brokerage Interactive Brokers Group said on Monday it posted a total clients daily average revenue trades (DARTs) of 658,000
US-based automates forex and stocks brokerage Interactive Brokers Group posted a total clients daily average revenue trades (DARTs) of 767,000 in February
Banc de Binary, a Cyprus-regulated binary options broker agreed to pay $11 million in settlements to the US regulator Commodity Futures Trading