US Forex Brokers

cftcUS Forex brokers are regulated by the National Futures Association (NFA.futures.org) and the Commodities and Futures Trading Commission (CFTC.gov). Forex brokerage business in the US have a good number of participants, but there are strict regulatory protocols and framework that must be followed.

The regulatory framework set out by these two bodies is quite comprehensive, making the US forex brokerage arena one of the most tightly regulated in the entire world. Add a very robust criminal justice system which comes down hard on financial infractions, and traders and investors alike can virtually go to sleep when they deposit money with a US forex broker to carry out their trading business.

Some US forex brokers who have tried to push the boundaries and tested the will of the regulators have found out the very hard way that it is very difficult to mess around with forex traders in the US and get away with it. Forex Capital Markets (FXCM) was fined about 14 million dollars for several infractions against their own clients. Some others like MF Global are in hot water over trading losses that bankrupted the firm and took down with it a lot of money belonging to their clients. This goes to show that US forex brokers must be on their toes so as not to run foul of the law.

Rules US Forex Brokers Must Follow

These rules border on the trading conditions set out for their traders and the kind of traders that US forex brokers can admit into their trading network. Some of these regulations are listed below.

Leverage Requirements

Sometime in 2010, the Commodity Futures Trading Commission released new trading rules regarding the use of leverage and margin by clients, setting out rules for CFTC regulated US Forex Brokers who had to change leverage requirements due to new rules a regulations coming into force, leading to a leverage requirement of 1:50 for individual forex traders and 1:20 for options traders.

OFAC Restrictions

In addition, the Office of Foreign Assets and Control (OFAC) has placed limitations on who US forex brokers can accept into their network. Nationals of countries on the OFAC blacklist are not permitted to open forex trading accounts with US forex brokers. Those from affected countries who already operated accounts with US forex brokers all had their accounts shut down as a result. US forex brokers therefore have to operate within pretty stringent guidelines and so they tend to restrict their business to a certain class of traders.

FATCA

The Foreign Accounts Tax Compliance Act is a US tax law which requires all financial services business with US clients to report to the IRS (the US tax agency) details of the holdings of their US clients for purposes of pulling them into the tax net. FATCA provides for worldwide taxation of all assets, businesses and holdings of US citizens in order to plug the budget deficit currently plaguing the US economy.

As a result, many US forex brokerages that decided to branch out to capture the foreign market have had to completely unbundle their operations, creating new companies to attend to the international market. For instance, a brokerage firm such as Alpari has a US operation (Alpari US), which operates very differently from Alpari UK. Alpari UK does not accept US clients and Alpari US does not accept the clients that Alpari UK accepts. This has been adopted by many US forex brokers so as not to run foul of FATCA requirements.

Regulated Forex Brokers in the USA:

US forex brokers who are able to fulfill these requirements are accorded good standing with the relevant regulatory agencies and some of these brokers are listed below:

a)    Alpari review US

b)    Zecco review

c)     FXCM review

d)    GAIN Capital Review / Forex.com review (Forex.com)

Alpari US

A little has been said about this company and the circumstances surrounding its operations. It is one of the brokers that has partnered with Autochartist, providing traders with the opportunity to use the MT4 plug-in of this company’s software on Alpari US’s MT4 Brokers platform. Assets offered include currencies, futures, energy assets (crude oil and natural gas) as well as spot metals (gold and silver).

Zecco

Principally known as a discount stock brokerage firm, Zecco began offering forex as one of its products a few years ago.

FXCM

Although it got into the news for all the wrong reasons in 2010, FXCM has since bounced back and put measures in place to comply with the terms and conditions of the penalties imposed on it by the CFTC. It operates a dealing desk division as well as an ECN brokerage service.

GAIN Capital / Forex.com

This is one of the best forex brokers in the world with a robust system of news and technical analysis tips provided on the News tab of its trading platforms. GAIN Capital are the owners of Forex.com, and recently took over the operations of FX Solutions LLC.

There are other US forex brokers that fit the bill. More information can be obtained on the CFTC website.

Leave a Reply