The 4-page Offshore Broker List (above), compiled by members of this Forum over the past 13½ years, has been placed at the beginning of this thread, where it will remain.
What follows (below) was originally the first post in this thread, back in September 2010.
September 24, 2010
On the Broker Aid Station forum, a discussion got started about trading through foreign brokers who are outside the jurisdiction of the CFTC. That particular topic really doesn’t belong on that forum. So, I’m opening this thread, as a place where that topic can be continued.
I’ll start this thread with a rant about the CFTC (because I have some ranting to get off my chest). Then, in subsequent posts, we can talk about specific foreign brokers, and whether there are advantages to trading with them.
But, first things first. Here’s my rant:
We’ve been conned — by Gary Gensler, the head of the CFTC. On another thread, I called Gensler “a sneaky, little weasel”, and I stand by that description.
Gensler set up a straw-man — the 10:1 leverage limit — and we all bravely attacked and destroyed the straw-man, thinking it was the enemy. In 9,000 public comments to the CFTC, we battled against that 10:1 straw-man, and we tore it to shreds; and we said, “If you ram this 10:1 thing down our throats, we’ll take our business offshore.”
All the while, Gary Gensler and his crew were saying, “Gotcha — you’ll take 50:1, and you’ll thank us for it. And, by the way, like hell you’ll take your trading business offshore!”
The CFTC never intended to impose a 10:1 leverage limit on retail forex in the U.S. From the very beginning, their objective was 50:1; and they achieved their objective completely.
The phony 10:1 proposed limit was so extreme that we were relieved when the CFTC “relented”, when they “listened to the voice of the forex community”, when they set the leverage limit at 50:1, instead.
Gensler wrote the sheet-music, and we sang the song. Have we been had, or what?
Many reasonable folks, including several on this forum, have pointed out the hazards of using too much leverage, and have endorsed the new CFTC limit. Which misses the point entirely.
It is not the proper business of government to regulate the way we live our lives. It is not the proper business of government to tell us how many calories we may consume, or how much we may drink, or how much of our paychecks we may spend on lottery tickets, or HOW MUCH FOREX LEVERAGE WE MAY USE.
And it’s not the proper business of government to tell U.S. residents where they may do their banking, or where they may do their trading.
Finally, it’s not the proper business of government to tell U.S. forex brokers where they may set up foreign branches, or whom they may accept as customers in those foreign branches.
It is appropriate for the government to require brokers to furnish full and honest disclosure of the risks involved in forex trading, and to furnish full and honest disclosure of the terms and conditions of the trading accounts which they offer.
And it is appropriate for the government to prosecute fraud wherever and whenever it occurs in any of the financial markets.
Beyond that, the government has no legitimate role, and they should butt out.
The CFTC has U.S. forex brokers by the throat: By threatening their ability to do business in the U.S., the CFTC can interfere with the rights of those brokers to do business outside the U.S.
But, the CFTC has no authority over foreign brokers who operate entirely outside the U.S. (See the Note, below). And under current law, the CFTC has no authority over individual traders who trade through foreign brokers that are beyond the reach of U.S regulation.
The U.S. government claims the authority, through the IRS, to require U.S. residents to report foreign accounts which we hold — bank accounts, brokerage accounts, etc. But, they cannot (yet) prevent us from having those accounts.
The CFTC, and their sock-puppet the NFA, are behaving like the rest of the Nanny State: They are acting like our rulers, rather than our public servants. These people seem to believe they have the right and the power to do anything they want to do.
They’ve never had that right, and they never will have it.
They may have the power — but, not for long.
Note (Edit - 8/26/13) — The statement noted above, is not entirely correct.
Soon after we began this search for offshore forex brokers, we discovered that the CFTC (and other U.S. regulatory agencies) have their tentacles deep inside many foreign governments, through a series of nasty, little agreements known as Memoranda of Understanding. These agreements have effectively extended U.S. regulation to cover U.S. residents doing business in countries which have signed the agreements.
There still are countries where these agreements do not (yet) exist — and we are eager to find reliable brokers within those countries who will do business with us. And there are a few offshore brokers, in Memorandum countries, who have the courage to defy the over-reaching U.S. regulatory authorities, and welcome U.S. residents as clients — and we are eager to identify these brokers, and to consider client relationships with them.
September 24, 2010
Some things I learned this week about ACM and dbFX
Earlier this week, I called ACM in Switzerland, and dbFX in New York, and specifically asked whether they are subject to CFTC regulation in any way, and whether they accept U.S. residents as clients. Here’s what I was told:
ACM (Advanced Currency Markets, Geneva, Switzerland) is completely beyond the reach of the CFTC. They have canceled their plans to open a U.S. subsidiary (it was to be called ACM-US), and they now have no U.S. presence. ACM is regulated by FINMA in Switzerland; they have an application pending with the Swiss banking authorities to become a Swiss bank; and they welcome U.S. customers. Minimum deposit to open an account is $2,000.
Here is the ACM website — Online Forex Trading | Currency Trading | ACM
dbFX is the retail forex brokerage division of Deutsche Bank. As a bank, Deutsche Bank is domiciled and regulated in Germany. But, their forex operation, dbFX, is domiciled in the U.K., and regulated by the FSA. dbFX’s relationship to the CFTC is less clear-cut than ACM’s. Deutsche Bank (the German-domiciled bank) has a large presence in the U.S., and some of their operations (other than forex) are regulated by the CFTC. dbFX (the U.K.-domiciled forex broker) is awaiting legal opinions on whether they fall under the jurisdiction of the CFTC in any way. I have placed my name on a list of people to be notified when that determination is made, and I will pass that info on to you, when I get it.
Here is the dbFX website — Forex Trading | Online Currency Trading Rates | FX Research | dbFX