The domestic legislation of overseas brokers does not prohibit them from servicing foreign customers, and US customers fall under this category among all others who are not from broker’s country of domicile. I therefore do not see how such an action can be regarded as illegal on the broker’s part. Moreover, the CFTC regulations do not prohibit US customers from using overseas brokers, but require the overseas brokers to register with the CFTC to service US customers instead.
That is correct, which is why a foreign broker not registered as an FCM or RFED would be in violation of CFTC regulations if they accept US customers. By dealing with US residents and not being registered, they are risking opening themselves to litigation.
And how can the US CFTC authority extend to brokers domiciled in other countries? What is legal and what is not for those brokers is determined by the respective domestic legislation of their country of domicile and not by the US legislation.
Assuming there are no agreements between the two countries to the contrary.
For one, are there any agreements between the US and the UK on the US legislation being prevalent over the UK one for the UK-based financial institutions?
After all, there are many more countries in the world than those two. Brokers in the traditional offshore jurisdictions (Cyprus, Mauritius, Seychelles, Dominica etc) might benefit hugely from accepting the former customers of the US brokers and their overseas divisions. To put it short, what is illegal for a broker in the US, can be very well legal in Cyprus. And as for the customers, the CFTC regulations make no mention of any restrictions in their regard.
It isn’t necessary to go that far down the [I]forex food-chain[/I].
Forex brokers in Germany and Switzerland, who do not have a subsidiary/division/branch domiciled in the U.S., are beyond the jurisdiction of the CFTC, and appear to welcome U.S. customers.
I am currently investigating ACM (domiciled and regulated in Switzerland), and dbFX (domiciled and regulated in the U.K.), as possible alternatives to coming back “under the thumb” of the CFTC.
Do they offer MetaTrader4 and low spreads typical for retail Forex brokers?
Clint if you find more information about FX brokers in other countries please let us know. I did not see any information sent to me about having my UK accounts sent back to the US. I have been working with new clients telling them to open UK accounts I several that have gotten emails about this.
It’s amazing how government gets in the way of regular folks claiming protection.
Hey Jason,
Could you post the new margin requirements for micro accounts when October 18th rolls around? I have always recommended folks that I work with to open a micro account to manage risk better.
Sure. The below table is for standard 10k accounts, but micro margins will be 10% of what’s listed.
For example, $20 for USD/JPY, $24 for CHF/JPY, $30 for EUR/USD, etc.
Let me know if you have any other questions.
-Jason
FXCM currently allows a customer to open a micro account with $25. If I am understanding your above table with a $25 balance I could not open a 1 micro lot position of EUR/USD. Is FXCM going to raise the minimum account requirements for US customers. An alternative to raising the minimum account balance would be nano or flexible position sizes. Can you comment.
We have sort of hijacked this thread with a discussion that doesn’t belong here.
This thread should be for discussing things directly related to FXCM.
A discussion of foreign brokers is appropriate on the Babypips Forum, but not on this thread.
Accordingly, I suggest we move this topic to — 301 Moved Permanently
That is a good point, and the minimum for micro accounts for FXCM US (LLC) will most likely be going up to $50 due to higher margin requirements. I should have confirmation next month and the website is in the process of being updated.
-Jason
Here’s some more important information about the rules going into place on October 18th [B]concerning FIFO[/B]:
For FXCM LLC (US), the platform’s [U]default setting[/U] will remain FIFO compliant. This means if you close orders through the summary window or by using the Buy/Sell buttons at the top of the platform, it will close positions according to FIFO.
However, individual trades may be offset in an order other than FIFO if you provide specific authorization. This means if you use the Open Positions window to close trades, you can authorize a specific ticket to close even if it is not in FIFO order.
This will take effect by October 18th for traders with FXCM LLC (US).
[B]REMINDER on Important Dates[/B]
[U][B]October 8, 2010 (This Weekend)[/B][/U]: If you currently have an account with FXCM US, please remember that leverage is being reduced this weekend. Leverage for the major currency pairs will be reduced from 100:1 to 50:1 leverage, meaning the used margin for your open positions will increase. Please check any open positions to make sure you are not in danger of a margin call. If your account is overleveraged, please consider reducing your position or depositing additional funds if you need additional usable margin.
[B][U]October 15, 2010 (Next Weekend):[/U][/B] If you are a US resident with FXCM UK, your account will be repatriated back to FXCM US next weekend. That is when the leverage in your account will be reduced to 50:1 for major currency pairs.
Please let me know if you have any questions.
-Jason
Back in September of 2010 we discussed the new regulations coming about as a result of the Dodd-Frank Bill and its impact on unregulated brokers. Yesterday, the CFTC issued a press release about actions being taken against unregulated brokers. CFTC Sues 14 Foreign Currency Firms In Nationwide Sweep
Now more than ever, it is important to make sure you are trading with a regulated broker to ensure there is financial standards and oversight, transparency in business practices, and a framework for dispute resolution. Forex Trading Regulation | FXCM
I’d be very curious to see if the CFTC actually manages to put down at least one foreign-based firm (such as InstaForex or InvestTechFX) for non-compliance with the CFTC regulations. Please, keep us posted on the matter, Jason.
What about running multiple EA’s on EurUsd for example. Will the EA’s all be able to take trades in different directions and open and close their own trades irrespective of FIFO and Hedging rules? Or will I be forced to go to an offshore broker to do this now?
The NFA rules are not about the trades. They are about the accounting. The FIFO/no-hedging stuff is about using “net” accounting which shows your position net of any offsets (longs matched up with shorts and vice versa). It in no way alters your bottom line profitability. If you run a set of EAs that make 100 pips in a day under “hedge” accounting they will make the same 100 pips under the non-hedge accounting because it’s where you buy and sell that matters, not the manner of accounting.
Some NFA brokers are not allowing hedge trades and are enforcing FIFO rules. So when you click to make the trade in MT4 it says “Trade Not Allowed” or similar. I just wanted to verify that FXCM handles the rules on the back end with accounting and does not force the rules on the trader. As a test, I took a .01 buy on my FXCM MT4 platform and then a .02 sell on same pair. Then I closed the .02 trade first, and then the .01 trade. So it appears with FXCM it is handled on the back end.
Still, I would like to hear Jason Roger’s official statement on this.