I am looking to put in more money into my trading account to give me some additional capital to work with. I already have an account with a broker and no problems at all to date. However, I am concerned about the horror stories like MF Global, Refco, and the like. Upon examining the CFTC list of brokers, I was surprised to find a column called “customer funds in segregation”, and nearly all of the forex brokers have $0! I recall reading somewhere either in the forums here or on ForexFactory about how US retail forex brokers are in fact not required to keep their customers’ funds segregated. FXCM is the largest broker in terms of customer assets (for retail forex) and they keep $0 customer funds segregated. I was very surprised, however, to see that Gain Capital DOES segregate their customers’ funds! I do recall Gain Capital coming under CFTC scrutiny and probably getting fined several times during the 2000s. Oanda also keeps $0 funds segregated, and I recall seeing a post that the guys who started Oanda were the same ones who were owners of Refco?? Anyway, as a result of this new information I will seriously consider Interactive Brokers, maybe Gain Capital too if this information about them segregating their customers’ funds is for real (not that I doubt the CFTC table but rather, if I am reading it correctly). Other traders’ comments/experiences/suggestions welcome…
Hi San99,
There seems to be a misunderstanding about the “Customers’ Assets in Seg” column in the CFTC’s financial data for brokers.
None of the money you see in this column for any broker is set aside for forex accounts. That’s why you will see a value of $0 in this column for most forex brokers. The fact is that forex accounts are not given segregated status by US law. That means for any broker with money in the “Customers’ Assets in Seg” column, these funds are set aside for futures and other non-forex accounts, and are therefore not available to forex account holders during bankruptcy proceedings.
[B]What does this mean for forex traders?[/B]
Since US law does not give segregated status to forex accounts, holders of these accounts don’t have secured creditor status in bankruptcy proceedings.
Traders living outside the US, may opt to trade with a broker regulated in the UK where forex accounts do have segregated status and funds are protected for up to £50,000 by the Financial Services Compensation Scheme. Another option is to trade with a broker regulated in Canada where forex accounts also have segregated status and funds are protected for up to $1 million by the Canadian Investor Protection Fund.
However, for traders in the US, the choice is not so straightforward. US law only allows CFTC-regulated brokers to offer forex trading services to US residents. That means US traders can’t take advantage of the fund segregation and protection available from brokers regulated in the UK and Canada. It makes it all the more important for traders in the US to choose brokers with strong financials.
All traders need to ask their brokers the following questions regarding their financial stability.
[B][ol]
[li]What are your revenues?
[/li][li]How profitable is your firm?
[/li][li]Do you have a top-tier third party accounting firm auditing your financials?
[/li][/ol][/B]
Welcome to BabyPips! 
It would be so easy for FXCM to remedy this situation, by simply [B]voluntarily[/B] segregating their customers’ funds — while they push the regulators to require that [B]all[/B] brokers do the same.
Here’s one of my many previous posts on this subject — 301 Moved Permanently
One of the reasons that I hate the CFTC — instead of doing something [B]logical, obvious and necessary[/B] like requiring segregation of forex customer funds, they screw around with things like (1) restricting leverage, (2) prohibiting hedging, (3) imposing FIFO, and (4) prohibiting U.S. residents from trading offshore, either with foreign brokers or with foreign branches of U.S. brokers.
It’s time to dismantle the Nanny-State.
Hi Clint,
We already do this :57:
As a company policy, FXCM keeps client funds separate from our own operational accounts. However, no US-regulated broker is legally allowed to use the term “segregated”, because that term carries a very specific meaning under US law that gives an account holder secured creditor status in bankruptcy proceedings. That designation does not apply to forex accounts in the US under current regulations.
That’s why, if you’re a US trader, knowing the financial details of your forex broker is all the more important. :22: