We have received many questions revolving around the new CFTC Regulations, so we thought we should address it here. For those of you who have not yet heard about the new CFTC regulations, the CFTC finalized a set of rules on August 31, 2010 which significantly impact the forex industry.
The rules which have been finalized become effective October 18, 2010. These rules amongst others include all US clients to work strictly with US regulated counterparties. For the most part, all accounts that were moved to the UK/Australia/Malta etc. in the last few years due to the passage of earlier CFTC regulations will be coming back to the States.
When accounts are back in the US, and for those whose accounts that never left the US, the most significant new regulation is the new margin requirements. Margin requirements lower leverage to 50:1 on the majors and 20:1 on other pairs. The NFA has been designated to monitor this regulation, so the exact shakeout of the regulation is still very much uncertain. However, for the most part, those US clients that were used to 200:1 or even 400:1 leverage is done and over with. Furthermore, there is still confusion on accounts maintaining outside the US with firms who are registered counterparties.
There has been and still is much speculation on the enforcement of such a regulation. We have spoken with many clients who feel this is infringement of a natural right to do what he/she pleases with their money. Again, this is still highly unclear how this will pan out. As we approach the October 18, 2010 date the regulation and enforcement will become much clearer as to how to deal with accounts. In the meantime we are suggesting that US citizens avoid the confusion moving forward and open accounts with US based firms
Also, those clients who are working with an Introducing Broker that is not registered with the NFA, will no longer be permitted to do so as a US client. Again we would like to remind you that Forex Broker selection is a NFA registered IB.
Those clients outside the US are free to open accounts with firms that are not US regulated counterparties, assuming domestic regulations do not prevent from doing so.
We have purposely left this blog vague, in the spirit of the new CFTC regulation. We wanted to make those of you who were unaware of the regulation now aware. We will address this topic in the coming weeks as we approach the October 18, 2010 effective date. Until then, please call or email with any questions.
Forex Broker Selection Team