I am a newbie looking to open my first account. Before I do that I have been learning about all the different features available between the available brokers. One such feature is if the broker keeps traders funds in a segregated account. This seems like the way to go right? Who wants to lose their money if their broker goes bankrupt right?
Also as a newbie (and a US trader) I figured it would be safe to select a broker that is regulated. So I was planning on selecting a broker that is regulated by the NFA & CFTC. (Down the road I may get fancy by getting a broker outside of the US that offers more leverage than 50:1, but that’s later as I’m still learning).
Throughout my search for broker info. I found the site 100forexbrokers.com to be very informative (same with babypips too :)) On the 100forexbrokers site there is an article explaining what segregated accounts are all about. In that article (link below) it states “Currently US law doesn’t allow holding Forex funds in segregated accounts. Oversees brokers, however, are able to offer this option.”
[I can’t provide the link since I haven’t posted 5 or more times here. To see the article go to the website and look for the link on Segregated Accounts in the left margin]
So I was wondering if it’s true that I won’t be able to find a US broker that offers segregated accounts. Or perhaps the information in the article is outdated??? I don’t know, it just seems to me that segregated accounts are a good thing for the customer and I would think that if the purpose of the NFA & CFTC is to protect the customer then why would US law not permit funds to be segregated?
Any thoughts/info. and/or advice on this topic would be greatly appreciated.
I agree that segregating customer funds (separating customer money from the broker’s own money) is long overdue in the U.S., and I’ve been ranting about this for several years. And at least one major U.S. forex broker agrees with me on this. See here, here, and here.
Unfortunately, I was way off in my 2009 prediction that we’d have segregated accounts within 2 years.
Back in 2009, I was a big supporter of the CFTC, and what they were doing to clean up the retail forex market in the U.S. When the CFTC raised the capital requirements on retail brokers, it quickly drove all the bucket shops out of the U.S., and forced the weakest of the remaining (legitimate) brokers to scramble for major capital infusions, or to merge with other small brokers, or to simply go out of business. (Over a period of about 18 months, the capital requirement was raised from $250K to $20 million.) And that “thinning of the herd” was a good thing. I was hopeful that stepped-up CFTC regulation of the forex industry was going to safeguard and benefit all of the small retail forex traders in this country.
Then, the CFTC’s real agenda began to reveal itself. The CFTC doesn’t really want to [I]strengthen[/I] retail off-exchange forex trading. In fact, they hate the “off-exchange” part. The CFTC would prefer to drive this business out of existence, by driving it onto a [I]commodity-futures-style[/I] exchange — with a clearing-house, and margins, [I]a la[/I] the Chicago Mercantile Exchange.
If, and when, they succeed in doing that, forex trading in the U.S. will most likely include segregated customer accounts. But, [I]exchange-traded forex[/I] will probably be something that you can’t afford to participate in.