NFA Regulated Forex Brokers

NFA Regulated Forex Brokers

nfa forexThe National Futures Association (NFA) is a US-based self-regulatory organization which was a product of the same law that setup the official regulatory agency in the US, the U.S. Commodity Futures Trading Commission (CFTC). The law enabling the formation of the CFTC also provided for the formation of a self-regulatory agency for operators in the US commodities and futures markets, and this gave rise to the formation of the NFA in 1982.

 

Best NFA Regulated Forex Brokers 2017:

A comparison table of NFA regulated forex brokers has been provided for your perusal. You can choose from any of our list of approved NFA regulated brokers and trade with peace of mind.

Broker Bonus Min Deposit Min Deposit US Traders Review Open Account
IBFX $2,000 USA Allowed ReviewVisit Broker
FXCM (Forex Capital Markets) NA $50 USA Allowed ReviewVisit Broker
Interactive Brokers No Bonus Available. $10,000 USA Allowed ReviewVisit Broker
Forex.com Receive a Free Trading eBook and $50k Demo Account! $2,500 USA Allowed ReviewVisit Broker
MBTrading No bonus available $400 USA Allowed ReviewVisit Broker

What are the NFA’s Main Functions?

NFA’s main functions are those of fraud and abuse prevention, dispute resolution and mediation, as well as the drafting of regulatory frameworks for its dealing members. Being an organization which works within the United States, the NFA’s duties and functions do not extend beyond the US jurisdiction.

The NFA has the power to discipline any errant members, but this does not go beyond imposition of fines. Stiffer penalties can only be implemented by the Commodities and Futures Trading Commission (CFTC), on the recommendation of the NFA’s Hearing Panel and ratification by the NFA Appeals Committee. The NFA and the CFTC work in close collaboration to ensure that the trading market place is sanitized and kept free of abuse, thus ensuring that the market space in the US forex market is one of the closely regulated and overseen jurisdictions.

 

Guidelines for NFA Regulated Brokers

What does it take to become an NFA regulated forex broker? For one, NFA regulated brokers have to cope and comply with some of the most stringent set of rules that the market regulator has to offer. These rules sometimes impinge on the trading space of market participants, but these are all to protect everyone from some of the issues that are commonplace in other jurisdictions.

a)    NFA-regulated brokers must meet a minimum capital requirement of at least $20 million. This is necessary so that customers’ positions are guaranteed, and withdrawal requests can be settled promptly. We have had cases where brokers who operate in some other areas are unable to meet the withdrawals of customers, leading to an erosion of market confidence. Thanks to measures such as this, NFA regulated brokers do not present such problems.

b)    The FIFO Rule: The FIFO (first in, first out) rule is a policy which states that when traders have multiple trades open on one currency pair, the traders MUST liquidate the oldest of the open trades on that currency pair first.  This rule applies to all NFA regulated brokers so by extension, any broker within the USA is obliged to obey the FIFO rule.

c)     Hedging of forex trades is not permitted in the USA and therefore all NFA regulated brokers are mandated to prevent the use of hedging strategies on their platforms. If a trader is able to pull this off, it is very likely that any profits made will not be applied to the account.

d)    Another major requirement of NFA regulated brokers is the restrictions that have been placed on leverage. This rule was actually instituted by the CFTC, but because of the close collaboration between the government regulator (CFTC) and the industry self-regulator (NFA), all NFA regulated brokers are bound by this rule. This rule mandates all  NFA regulated brokers to place a ceiling on the leverage offered to retail traders, setting it at a ceiling of a maximum of 1:50 for forex trading. European brokers and brokers in other areas allow traders to use leverage of up to 1:2000. This is no longer possible with NFA regulated brokers. Indeed, exotic currencies such as the Nordic pairs (pairs involving the USD and Euro with the Swedish, Danish and Norwegian crowns) attract a maximum leverage of 1:25. By extension, this has radically increased the capital requirements that retail traders need to start trading with NFA regulated brokers.

e)    The use of stop and limit orders have by extension also been stopped on all NFA regulated broker platforms. These have been replaced to a large extent by OCO (Order-Cancels-Order) style of execution for trades with pending order entry types.

 

Assessing the Standing of an NFA Regulated Broker

The NFA allows members of the investing public to check to see if a broker that claims to be an NFA regulated broker is actually in good standing with the regulator. This is done on the NFA website. Here traders can check on an NFA regulated broker’s standing using the Firm Name, Pool Name or NFA ID Number. All NFA regulated brokers are required to state their ID numbers on their respective websites, making it easier to assess their standing with the NFA.

Below, we shall use an example of Oanda, which is an NFA regulated broker. We have decided to conduct a search of good standing using the firm’s name:

nfa forex form

The results of the search are shown below, which shows that Oanda is in very good standing with the NFA and is thus an NFA regulated broker which is considered safe for the investing public to trade with.

nfa brokers

 

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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