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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
Allianz Global Investors US LLC (AGI US) has been charged on Tuesday by the United States Securities and Exchange Commission with a
US’s Securities and Exchange Commission is increasing its personnel of its crypto enforcement team with an additional 20 new faces. SEC announced
The US Securities and Exchange Commission (SEC) has updated its list of flagged website with 58 new entries. Out of these, there
On Monday the US Securities and Exchange Commission (SEC) revealed that it has broken into a multinational multi-million dollar penny stock scheme
The US’s CFTC conducted a civil enforcement act against one Kay Yang and her two proprietary companies. Yang, AK Equity Group LLC
The US Securities and Exchange Commission (SEC) reported this Tuesday that it has cracked opened a $124 million securities fraud. The two
The US-based SEC has charged one Craig Sproule, from Australia, and his two companies – Crowd Machine and Metavine – for conducting
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Lat Friday United States’ SEC issued an official warning against an impersonating website that was communicating with investors and users alike. These
The highly effective whistleblower program operated by the Commodity Futures Trading Commission (CFTC) has hit a new record. It recently granted its
The United State’s financial regulator – the CFTC – has red-listed 14 trading platforms in a global effort to intensify its local
Coinbase’s newly announced Lend program is at a risk of being the main culprits of a potential lawsuit. After a 6 month
United States’ SEC recently started an investigation against a start-up that operates the biggest decentralized crypto exchange in the world- Uniswap. The
The US Securities and Exchange Commission (SEC) was reported to have filed charges against a very profitable Ponzi scheme. More specifically, SEC
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15 years of imprisonment await a Swede that recently pleaded guilty to being the head of a massive Thailand-based investment scam that