Going offshore to escape the CFTC

Broker Discussion Forex Brokers
67

Regarding some of the brokers we have been investigating:

[B]Finotec[/B] — U.K. domiciled, FSA regulated

One of our members said that Finotec has a U.S. presence (which, if true, would make them subject to CFTC rules regarding U.S. clients). However, I can find no evidence of this. Finotec does not even have a telephone in the U.S. (Their offices, reachable by telephone, are in London, France and Cyprus). Accordingly, I am adding this broker to our list of “qualified offshore brokers who accept U.S. clients.”

Here’s something that needs investigation: Finotec’s website ( Finotec Product Range & Conditions ) shows forex trading hours as: Open 00:05, and Close 20:55 (evidently those are London times). Is this for real? A forex broker that closes for 3 hours and 10 minutes every day?

[B]
Dukascopy[/B] — Swiss domiciled, FINMA regulated, Swiss banking license 2010 (Dukascopy Bank SA)

One of our members questioned whether Dukascopy accepts U.S. clients. Others, who currently trade with Dukascopy, say that Dukascopy will continue to accept U.S. clients. I am adding Dukascopy to our list.

[B]C.I.M. Banque[/B] — Swiss

I am removing this broker from our list. On the account-opening page on their website, they clearly state: “U.S. Residents must come into our offices in Geneva or Lugano.” I don’t believe this will suit any U.S. members of the Babypips community who might be considering offshore brokers.

[B]CMS Forex[/B] — U.K./U.S.

I am removing this broker from our list. Their website clearly states that they are CFTC-regulated, and belong to NFA. I believe that the website Forex Broker Guide is wrong to list them as a U.K. broker, regulated by the FSA.

[B]One Financial[/B] — U.K. domiciled, FSA regulated

I have confirmed that this broker accepts U.S. clients, and has no exposure to the CFTC. I am adding them to our list.

More info to follow, as discrepancies are resolved.

Edit: Sunday 10/3

I am removing [B]Alpari-UK[/B] and [B]MF Global [/B] from our list, because they both have a U.S. presence. Alpari (UK) is affiliated with Alpari (US), which is CFTC regulated. And MF Global has U.S. commodity futures brokerage operations regulated by the CFTC.

68

So far so good. One withdrawal, pretty much easy, processed within 3 days. Customer service is really good, 24 hours on weekdays and the representatives sound really knowledgable and ahave been very helpful.

69

I received an interesting email from a Cyprus-based forex broker, inviting me to move my trading to their firm. Perhaps you have received the same email. I think this broker’s sales pitch is worth reading, so I’ve copied and pasted it here.

I’m not interested in advertising this broker, so I have replaced their name with empty brackets, like this [-----].

Dear Forex Trader,

We have watched in agony as the CFTC’s new margin requirement rule was passed. Anyone who is interested in keeping their right to act as an individual in a free market society likely has shivers running down their spine as a result. The rule will be implemented on October 18, 2010, whether we like it or not. Many people objected to the proposed new rule, which was initially presented in its 10% margin requirement guise, in order to lull people into the belief that the 2% margin requirement that actually passed is OK, and that this was a victory for the retail investor. This is not the case. This is not a victory for anyone except those who would usurp our freedom.

While using extremely high leverage is certainly not a good idea for most traders in most circumstances, it should not be within the realm of the CFTC’s power, or anyone else’s, to protect adult individuals from themselves. High leverage can be a very useful tool for investors who do not wish to keep all their capital in their trading account. Now, such investors will either have to keep more of their capital tied up with a broker, be happy with smaller returns, or move to an overseas broker.

The high leverage available at overseas brokerages is proving to be a honeypot for many retail investors around the world. There are a number of offshore brokerages, with no ties whatsoever to the CFTC or to the US, that right now are happy to have your business. Many of them are unregulated or loosely regulated bucket shops that see this as an opportunity to quickly make a buck from those fleeing over-regulation in the US.

Others have an eye to the future, and would rather build a long-lasting and mutually beneficial business relationship with those whose freedom is in danger due to over-regulation. One such company is [-----], a fully regulated (though not OVER-regulated) European brokerage. Regulated by the Cyprian Securities and Exchange Commission and under the jurisdiction of the Markets in Financial Instruments Directive, [-----] is in an ideal position to offer a new home to the exodus of traders that are leaving US brokerages for greener pastures overseas.

The rest of this email is contact-information for this particular broker.

Just a heads-up — I thought you might be interested in reading their sales pitch.

70

This thread was opened in order to enlist the due diligence of Babypips Forum members to evaluate potential offshore brokers.

In our broker evaluations, we are using only 2 criteria:

(1) is the broker totally free of CFTC regulation (or other CFTC mischief-making)?

(2) does the broker accept U.S. clients?

The list we are developing is a work-in-progress. This list is far from complete. Rather, it is simply a starting point.

Here’s the list as it currently stands.

[B]U.K. brokers[/B]

Finotec 

HY Markets 

One Financial

[B]Swiss brokers[/B]

ACM 

Dukascopy 

MIG Bank 

Tadawul FX

[B]German broker[/B]

Forex Web Trader

[B]Danish broker[/B]

Saxo Bank

[B]Australian brokers[/B]

GO Markets 

IG Markets

[B]New Zealand broker[/B]

WSD

Questions remain regarding the following brokers. (More research by Forum members is needed.)

ODL Markets (UK)

dbFX (German)

Axi Trader (Australian)

Latitude FX (New Zealand and Australian)

At this point, we need to do 3 things:

(1) double-check the 12 brokers which have made the list so far.

(2) resolve the questions surrounding ODL, dbFX, Axi Trader, and Latitude FX.

(3) expand our search to include more of the 300+ brokers we know are out there.

71

Clint,

some firms to add based soley on the fact that they are not cftc exposed and will accept us clients.

FBS
Forex-metal


vantagefx
forexfs

This is based strictly on the above criteria.

FXM also I think.

72

Update

I have sent an email inquiry to 13 of the 16 brokers listed in post #66 on this thread. My email asked each broker whether they meet the criteria we have set: (1) not regulated by the CFTC, and (2) will accept U.S. residents for new forex accounts.

The 3 brokers I did not email are:

[B]ACM[/B] (Swiss) - they have already confirmed that they belong on our list

[B]dbFX[/B] (UK) - they have previously replied, and their status is under internal legal review

[B]ODL Markets[/B] (UK) - this broker is a subsidiary of FXCM-UK, and will be compelled (by the CFTC’s strangle-hold on FXCM-US) to get rid of any U.S clients they may have.

In addition to the 13 brokers included above, I also sent emails to: [B]ActivTrades[/B] (UK), [B]Finexo[/B] (German) and [B]Varengold[/B] (German) — to double-check the info we have previously received.

And, finally, I included 2 new names in my emailing: [B]Forex FS[/B] (Aus) and [B]Halifax Online[/B] (Aus).

Replies to my emails are dribbling in slowly. I will report the results in a couple of days.

73

Hi all,

Another Australian forex dealer is ForexCT based in Melbourne.

74

ForexFS seesm very solid. There server is in dallas so the ping should be fast. They are true stp and so far the service has been very good. They are relatively new, but they appear to be a great option.

75

Sorry to report…I enjoyed a Micro Account with them, and this is the message they sent me this morning:

Dear Client,
You may be aware of recent changes in US regulations regarding off-exchange retail foreign currency transactions. In response to the Dodd-Frank bill, the US Commodity Futures Trading Commission (CFTC) adopted a new comprehensive regulatory scheme, which goes into effect on October 18, 2010. The rules apply to retail Forex transactions that are offered or entered into by entities that are solely registered with the CFTC under the Commodity Exchange Act (CEA).
GO Markets is regulated under Australian Law and does not have any offices or operations based in the United States. This means that GO Markets is subject to the comprehensive licensing laws in Australia and not the US. However the recent changes adopted by the CFTC seek to ensure that retail Forex transactions offered to US residents can only be offered by entities registered through the CFTC and therefore subject to US regulations and laws. You may be aware that part of these new rules is the requirement to set minimum security deposits for transactions. The new rules require a minimum 2% security deposit for major currencies (i.e. leverage 50:1) and 5% (i.e. leverage 20:1) for all other currencies. This may place a restriction on your current trading activities.
Despite the fact that GO Markets is regulated under Australian law the regulatory regime of the CFTC seeks to impose its rules across all jurisdictions when it relates to Forex services being offered to US residents. The CFTC has a Memorandum of Understanding concerning consultation and cooperation in the administration and enforcement of futures laws and additionally the CFTC and ASIC are also party to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and Exchange of Information. GO Markets has satisfied clients from all over the world who are attracted by quality products and services that we offer. We value your business and the trust you have placed in us to provide a quality trading solution.
Unfortunately due to the restrictions placed by US laws GO Markets will be unable to accept any new trades from US residents after the 18th October 2010 unless you are eligible to meet one of the categories below:
You are an individual or company with total assets in excess of $10,000,000
You are a corporation, partnership, proprietorship, organization, trust, or other entity that has total assets exceeding $10,000,000; that has total assets exceeding $1,000,000 and enter into an agreement, contract, or transaction in connection with the conduct of the entity’s business or to manage the risk associated with an asset or liability owned or incurred or reasonably likely to be owned or incurred by the entity in the conduct of the entity’s business.
We apologise for the inconvenience of this as the changes in US regulations are beyond our control. Please be advised that we will continually re-evaluate opportunities to offer services to US residents depending on changes to US laws etc. We may be in a position to advise you that we are able to accept US based residents in the future. You may also consider seeking your own legal advice as to how the regulations affect you or any company you operate through. Of course this is not a decision we wanted to make and we would have liked to continue to offer our services to US clients, but it is out of our hands due to the relationship between the CFTC and ASIC and is only brought about by the restrictive regulations recently put in place.
If you have any questions please do not hesitate to contact us and we will be only too willing to help.
Regards,
GO Markets Pty Ltd

76

ApacheDan, thanks for the update.

As we feared, the CFTC has been busy making “deals” around the world.

And the Forex Dealers Coalition is now obviously in bed with the CFTC.

77

I’m very disappointed with the lack of response I’ve gotten from the emails I sent to 18 offshore forex brokers.

Actually, “disappointed” doesn’t really cover it. The results were pathetic. Of 18 brokers contacted, only 3 bothered to reply —

[B]Forex FS[/B] (Australia) replied that they meet our criteria (for offshore brokers)

[B]Tadawul FX[/B] (Cyprus/Switzerland) replied that they meet our criteria

[B]MIG Bank[/B] (Switzerland) replied that their legal status is being reviewed, and they will give us an answer later

Here is the text of the emails that I sent out:

Gentlemen:

I participate in a forex traders’ forum here in the U.S. Recently, there has been a lot of interest on our forum in the topic of offshore forex brokers, and some of our members have begun compiling a list of offshore brokers who meet two criteria:

(1) brokers who are NOT regulated by the U.S. CFTC, and cannot be compelled by the CFTC to comply with any U.S. rules or regulations

(2) brokers who will accept new U.S. clients for spot forex trading

If [ broker name ] meets these criteria, please reply to this email, so that we may include you in our list of recommended offshore brokers. Thank you.

Very truly yours,
(signature and email address)

I will send follow-up emails to the 15 brokers who have not responded, as well as several other brokers who have been suggested in recent posts on this thread.

I’ll send those emails out Sunday evening (New York time) — which will be Monday morning in all offshore locations.

In my follow-up email, I will change the wording to simply ask whether each broker accepts new U.S. clients and wants to be included on our list of recommended offshore brokers.

I recently learned that Tadawul FX is not actually domiciled in Switzerland. They are domiciled in Cyprus, with European offices (and European regulation) in Switzerland.

Accordingly, I’m showing their name as Tadawul FX (Cyprus/Switzerland) from now on.

More later.

78

…this is a partner with Dukascopy, and found this on their website:

Quote:
Originally Posted by sub00
I got this message from the Australian broker.

From October 18th we will no longer be able to accept new applications from the US due to the recent SEC & CFTC rulings

Any talks in FXopen relating to this USA insanity ruling?

Since we don’t have an office in the US, nor are we an affiliate of a US based broker, we are not bound by CFTC rulings. Rest assured we will be able to accept US clients for the foreseeable future unless a legal impediment appears.

FXFrench.com Forex en français!
*FXFrench is the dual language (french/english) partner of FXOpen for the European Market

79

My recent correspondence with dukascopy was very clear that they will continue accepting US customers, but I’m definitely nervous.

80

If you like Go Markets, you may want to try Vantage FX (also in Australia). Even though Vantage FX is a Corporate Authorised Representative of GO Markets Pty Ltd (at least, they were a while ago), they are accepting US Residents until October 18 and will let us stay after that. I don’t know much about them - I’m still researching them, but here’s the E-mail they sent me last week…

Welcome to Vantage FX and thank you for downloading our demo MetaTrader 4 Trading Platform. I also called today and left a brief phone message.

Due to the recent bill passed for US clients in relation to forex trading, I have been informed that Vantage FX will continue to accept applications for new trading accounts from US customers before the 18th Oct 2010, which leaves us less than 2 weeks to open an account for you.

From the 18th Oct 2010 onwards, we will no longer accept any new applications from US customers. However, we will continue to service any US clients who join before the deadline for as long as they wish.

If you wish to open an account, the process is as follows:

Submit an application online.

You also need to provide ID notarised by an authorised individual attesting that the copies of the original documents are true copies (i.e. exact copies of the originals). I have attached an example of a certified document.

All prospective clients are to provide at least one item from Section A and one item from Section B below.

* Section A:     Certified Copy of Passport or Drivers Licence or Government ID Card
* Section B:     Certified Proof of Residence  - Utility Bill or Phone Bill or Bank Statement no older than 12  months that shows your name and residential address

NOTE: The Notary or person certifying the documents will need to state in writing that they certify the true copy of the original document.

Both documents need to be certified/notarised. Public Notaries can notarise documents and this is the most popular for International clients…

81

Hi all,

Another Australian fx dealer has come to mind.
For some reason I couldn’t think of it before, just remembered it!
It is Got Money their address is Got Money Forex

82

I’m new to Forex and frankly I’m a little confused about it all…
Does anyone have any experience with this broker?

exness.com

83

[B]I just wanted to say Thanks for the great thread and the effort that you are putting in to contacting all the brokers. it’s nice to have all this info in one place![/B]

84

I’m surprised that no one has mentioned IBFX Australia or are they not accepting US residents or limiting them them to 50:1? Been trading since mid September with them on a 200:1 Account. They are licensed with the ASIC (Australian Securities and Investments Commission) so everything looks fine.

www.IBFX.com.au

85

russian bucketshop with very low spreads.

prob could care less about the cftc or nfa, but i’d be wary. IMHO

86

I received an E-Mail from my broker yesterday telling me they would be closing my account as of the 18th due to CTFC rules. My broker is GO Markets in Australia. If I could attach the E-Mail I would, but I don’t see any way. At any rate, to paraphrase what they have said: Although we are controlled by ASIC here in Australia there is a ‘memorandum of understanding’ between ASIC and the CFTC that prohibits us from servicing US citizens any longer. (I’m so P*sed I can hardly type!). They go on to say there are certain exceptions. If I’m residing in the US, but not a citizen, then I’m OK. If I have $10,000,000 or more in my account, then I’m OK! There are others, but I can’t remember them offhand. I didn’t qualify for any of them.
I left IamFX in March to avoid this BS. A broker I was happy with, which by the way, I think went out of business the other day, or perhaps is moving to Panama, I’m not sure. I am sure it’s related to this CFTC crap. You know, as do I, Forex is hard enough without the Fing government ‘helping’.
If this seems incoherent, please pardon me. The election is soon, and we have to get these imbeciles fired!
Really frosted,