Commercial forex firms that offer only hedging services to corporate clients and money transfer services to retail clients currently comply with FINTRAC regulation but are not registered with the applicable securities commission or regulated by IIROC. It remains to be seen whether any changes are pending in response to the recent regulatory developments.
[B]CFTC/NFA Regulation – Update[/B]
For registered dealers in Canada who have found themselves competing in the online retail FX market with Forex Dealer Members (FDMs) regulated by the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA), it is important to have a basic understanding of the regulatory environment in which they operate.
The CFTC Reauthorization Act of 2008 has clarified the CFTC’s authority over forex transactions with retail customers. The CFTC delegates regulatory responsibilities to the NFA, which provides oversight for every firm and individual trading futures and forex with the public. According to the NFA, forex is defined as: “leveraged off-exchange or OTC foreign currency futures and options and any other agreement, contract, or transaction in foreign currency where one party is a customer. A customer is any party to a forex trade who is not an eligible contract participant (similar to accredited investor in Canada).”
[B]Recent Developments[/B]
Effective October 18th 2010 the CFTC has capped leverage at 50:1 for major currencies and 20:1 for the more exotic variety, with the NFA given some discretion to make adjustments within the CFTC minimum security deposit parameters.
FDMs are now required to charge customers the full 1%/4% margin deposit for major/exotic currencies, with no exemptions.
Minimum capital requirements for FDMs have increased from $250K to $20 million.
[B]Hedging has been disallowed in the same customer account.[/B]
Market making FDMs must maintain additional capital equal to 5% of customer liabilities when they exceed $10 million.
[B]Positions have to be closed based on FIFO.[/B]
Don’t forget about poor Alberta…they aren’t even allow to trade forex unless they have assets and income over and above already-quite-well off and don’t really need to trade in the first place :((
Yeah I mentioned the 1/4 million dollar limit but didn’t know for sure what Province it was, thanks for clarifying.
Really, really idiotic if you ask me, glad I don’t live there but after this I think all of Canada is really ruined overall, much worse conditions than the already stupid USA ones.
Are we just SOL then? I was trading at forex.com a couple of years ago and vaguely remember hearing something about new regulations and margin changes about the time I caught on to what market makers were and witnessed some of the tricks. Just now looking to get back into the game with a legit dealer.
Found a comment online somewhere about sunbirdfx being available to canadians. I started demo this week, and talked to a rep today on the phone. No one so far has mentioned any problems about being Canadian, but I haven’t tried to go live yet. Was just offered a promo. Can we just say, “äh, screw it. and trade with someone anyway?” Am I risking anything I deposit if that’s the case?
Stupid governments always getting too involved… :49:
Hi,
I don’t think we’re that bad off…unless you live in Alberta…lol. At first it was frustrating trying to find one, but then I found and opened a live account with MF Global and everything was fine …until they went bankrupt (something that didn’t seem likely, but it happens), and because they were registered with IIROC and BC Securities, I got all my money back. Now I’m shopping around for another broker and there are a couple of options available…ie Oanda, Friedberg Direct (FXCM), and FXDD but still not quite sure about them.
Here’s the list you can check Dealers We Regulate
FXDD and FXCM are CROOKS, do your DD about these. Oanda is a MM, which usually should be avoided like the plague, but they have a good rep overall and dont play TOO many games, be sure they are some, like widening the hell out of the spread during news.
See this is the whole trouble, people are not free to choose the best Brokers anymore, AND good luck trying to make money with 16:1 leverage, too. You won’t be trading full time I guarantee you that, unless you have 40K to stick into an account. (so instead of trading with 4K in account, now you have to risk 40K being in an account, gee thanks for the protection…)
Its great that they want to TRY protect people, buts its a shame they are NOT doing so effectively. Instead of cracking down on MM games, like Virtual Dealer Plugin, and many many more, they enforce baby-sitting rules on the TRADERS, which all it does is completely ruin their opportunity. Restrict the Brokers, not the Traders you A$$wipes
I completely agree with you Jayjonbeach. What’s with all these strict restrictions from US and Canada. If they want so much to protect the clients then make some hard rules for the brokers, not the traders. Basically they limit only the traders. In the end traders could “choose” from a very small number of brokers and basically these brokers can afford to offer the conditions that will only be in their best interest knowing that clients will not have any other choice. Overall is like they want to make trading in these countries only a hobby and not a full time profession…Very annoying indeed.
Hi S, I don’t mean this sarcastically, but seriously, if one is trading less then 10M USD Notional, it is more of a hobby than profession. Getting outsized returns on a small size account is a fantasy, Some folks will tell you that it is possible to make 80k usd a year on a 100k usd account. This will never happen or has ever happened. I challenge anyone here to put up a certified and audited statement, that shows for three years they have attained this or better, in fact, how bout 50k per year on a 100 k account.
Que the people who say that, yes I have done it and I have no need to prove it to anyone, so there, nanny nanny noo noo. Hehehehe, oh big roller, we have challenged your integrity, and that is the best you can come up with?
Now the leverage question is interesting, in reality the U.S. is fine with this, 50/1 on the majors allows you to start to learn how to trade with $500 bucks, taking 1000 units, you have $.10 a pip, this allows a new trader the ability to be able to experience real trading for a couple of years, until they are ready to invest more, or attract capital to trade. I think Canada wants FOREX for the average person to go away, the thinking being, free healthcare, free housing, free food, what more do you want.
Oanda, excellent Desktop, Web, and mobile app. In fact I have just moved an account to them this week because of the quality of their mobile app. I wish I could address the issue of the widening of the spread and if that has affected anyone buying/holding/swing as far as stops are concerned, but I have not been able to get a reliable real live delio, only innuendo from the “bubbleheaded bleach blond”. But overall, they seem to be solid, so lets see how this account goes.
While it may seem as if all the restrictions are placed on traders, this would be a misconception. For example, the CFTC and NFA set the requirements brokers must meet in order to offer forex trading to US residents. Though not an exhaustive list, this membership application will give you an idea of some of those requirements: Compliance Requirements for Retail Foreign Exchange Dealer (RFED) Applicants | NFA
Actually, the reason only four firms are currently approved as forex dealer members as of the latest data from the CFTC is precisely because the standards to be a US-regulated broker are so rigorous both for financial transparency and for accountability regarding the price where each customer transaction is executed. Unregulated brokers don’t have to meet any of these standards.
On the contrary, consider this excerpt from the CFTC website:
The final rules include financial requirements designed to ensure the financial integrity of firms engaging in retail forex transactions and robust customer protections. For example, FCMs and RFEDs [futures commission merchants and retail foreign exchange dealers] are required to maintain net capital of $20 million plus 5 percent of the amount, if any, by which liabilities to retail forex customers exceed $10 million. Leverage in retail forex customer accounts will be subject to a security deposit requirement to be set by the National Futures Association within limits provided by the Commission. All retail forex counterparties and intermediaries are required to distribute forex-specific risk disclosure statements to customers and comply with comprehensive recordkeeping and reporting requirements.
With exception of Alberta, retail forex trading is available in most provinces of Canada. It’s also worth noting that funds deposited with Canadian-regulated brokers are insured for up to $1 million per client by the Canadian Investor Protection Fund.
Hi Forex.com and thank you for the detailed answer. I agree that it’s not easy for most brokers to fit in the strict rules of the regulators as well. I just could not understand why the governments are trying so hard and put such limits. Of course high security is necessary but when it affects both traders’ and brokers’ access to each other at this level, the result is not that satisfying. Overall the traders do not have a variety of choices and feel a bit pressed. For now, in Europe the situation is different, hopefully it will not become that rigorous as in US and Canada.
Please do you know about Day Trade The World in Canada ? They ask me to pay 500$ for pro training hadware and after the training the will fund my account with money for me to trade and share the percentage.
Sebastiano, it is very good question which I have also asked. I dont understand quite well why would one country impose such a strict rules on Forex trading, when for the last 50 years everything was allowed. Something is deeply wrong in this picture