Going offshore to escape the CFTC

You’re a week early with your elaborate proposal — [B]April Fools’ Day[/B] is next weekend.

Well, that’s interesting. Please us keep us informed about your experience with [B]HotForex,[/B] especially your experience withdrawing funds from your HotForex account.

It’s possible that HotForex has a “public” position (we do not solicit or accept U.S. residents), and a “private” position (U.S. residents are welcome, just keep quiet about it). If I were an offshore broker being bullied by the CFTC, that’s exactly how I would conduct my business.

Let’s watch this situation for a while. I would love to move HotForex back onto the list of “good guys” — offshore brokers who will do business with U.S. residents. But, before I do that, I want to hear more about this.

Again, please keep us updated.

Will do. Also, just wanted to say I really appreciate the work you guys are doing maintaining this post. Learned a lot from reading it. Individuals who believe the CFTC’s lawsuit rampage is all about protecting newbie traders from their gambling addiction just don’t get it. If they cared a wink about FOREX traders then why is the US about the only major country that still doesn’t afford investor protections to FOREX brokerage accounts like the Security and Futures brokerage accounts get? I know some traders have tried to move their accounts overseas for that very reason. And it’s pointless to mention the ridiculously generous 40/60 capital gains tax break for even high frequency commodity traders. Meanwhile the IRS can’t even bother to write a decent memo on HOW to tax FOREX, much less provide a tax break. Ha! No, the only ones benefiting from all of this are the US Futures Exchanges. Maybe if the exchanges would have paid a little more attention to retail trading needs back in the 90’s when they had a virtual monopoly on global derivatives they wouldn’t need the CFTC to protect their business now. The CFTC seems to have forgotten that competition is actually a good thing. Oh, I forgot, the CFTC did bless NADEX as America’s answer to retail derivatives trading. How pathetic…

Couldn’t have said it better myself!

And, welcome to this Forum, by the way.


I know my proposal seems a bit funny to consider it to be proposed and actually accepted. But legally, is there anyway to propose a different change to the CURRENT DODD-FRANK ACT?

I currently submitted the proposal to a FOREX Broker, and to a LEGAL Investment firm asking if they could review the procedure for free to see if it has any merit of being possible to submit rebutting the DODD-FRANK ACT.

But the way I see your comments, you make it seem as if they would not even be possible to consider the option of what I suggested.

I just know this personally,

My hotforex demo account starting at 100k with the 300:1 no FIFO and with Hedging ability within one month or maybe a little more is at 144k due to the leverage FIFO and Hedging abilities. I personally do not believe that with 50:1 FIFO and no Hedging I could even be capable of this achievement in the manner that I choose to be able to trade. (If you would like to see my demo account transactions for proof, walk me through to show since I’m not this computer literate for demos and mt4 fxbooks.)

(Since I inquired to them about the DODD FRANK ACT and initially was told it was fine, but after I mentioned to them about the United States stance, and a Legal representative from the firm I initially mentioned above. And the legal firm mentioned that it was a grey area saying that the CFTC might or might not go after the company, as well the CFTC might or might not go after the individual on a smaller note for doing transactions with them. Personally I believe you know my stance thinking the DODD-FRANK ACT as rediculous.)

Sadly though, due to not having that actual type of cash on hand, I end up typically over-leveraging and wiping my account out over and over again due to lack of discipline, and pertinent feelings that I need to rush-rush-rush knowing it will do me no good, and I could attain the actual amount to succeed within 9 months or so faster than if I was to just wait to not do anything at all and constantly rushing and blowing my own account up. I do in part fall under the gambling category of trading, but I know the proper mentality of succeeding as well when I allow it just happen.

Just consider this:

What is/was the number #1 complaint against people that trade the currency market for the first from any brokerage firm?

I’m going to assume that it would be the fact that X high percentage of people have losing transactions and not winning transactions. Therefore making people say, “REGULATE WITH MORE THIS MORE THAT MORE THIS MORE THAT!”

All these people making these statements with a brief 5-10 minute break-down of thoughts saying, “AH HA, I FIXED IT ALL YOU PEOPLE WHO LOST TONS OF MONEY DUE TO THE 200:1 OR 400:1 MARGIN LEVERAGE NOW HAVE 50:1 LEVERAGE SO YOU ARE UNABLE TO LOSE SO MUCH MONEY AS QUICKLY” But that’s like putting on a bandaid to what needs to Tourniquet(?) to stop the bleeding from a limb that has already been blown off completely.

This typicallly occurs why? Massive movements, and a lack of acceptance in needing to have x amount of cash available in the account for x time frame required before being able to go into profits.

If the CFTC(?) people in charge of the currency market regulations, repeal their mandated FIFO (FIRST IN FIRST OUT), Hedging (ability to buy and sell at the same time for the same currency in the same account) and Authorize the Leverage ability of 500:1 or 400:1, or 300:1 or 200:1 for a transaction account but enact the moving average stop-loss proposal to be enforced by the brokerages themselves then there’s only one problem that will happen.

The constant rat race that governments attempt to control for an uncontrolled inflation of money in their currency will be at the mercy of the people who trade, if the government is unable to enforce enough taxation against the people who trade for a living.

As well, there will be a future acknowledgment that the win-loss ratio of transactions will be possibly different as people learn with appropriate training from brokers, and currency market training institutes that it is possible to receive a higher ROI (Return of Investments) in a shorter time-frame indicating a new inflation of currency concern that will then increase the spread-cost differences and possible interest rates offered by each country as more traders go into the currency market to make a return on their investment over a longer time-period.

The only disadvantage to this proposal is an increased concern of inflation for a country’s monetary value and in and out ratio of products and services provided and offered.

If I am missing a bigger concept behind why my proprosal would be a hindrance and not an advantage to the government and not the traders please let me know, since it is the government who creates and enforces the laws and rules; but it is the traders who have to either appeal or accept the rules and laws put into place.


Regarding your “proposal”, you are aiming your attack at the wrong target.

Several times, you have mentioned (1) the FIFO rule, (2) the rule against hedging, and (3) the 50:1 leverage restriction — all of which you object to, and rightfully so. But, you blame these regulations on the Dodd-Frank Bill, which is not where they came from.

The entire Dodd-Frank Bill could be overturned, and those three regulations would still stand, because they are based on laws enacted prior to Dodd-Frank.

Here is a very brief history:

The CFTC was authorized by Congress in 1974 to regulate commodity futures.

At that time, there was a clear distinction between a spot transaction (meaning a cash transaction completed right now) and any of the various forms of futures transactions. The “rolling spot” transactions (with settlement 2 days out, and daily roll-forward) which we enter into in today’s retail spot forex market did not exist at that time.

During the Congressional debates leading up to the creation of the CFTC in 1974, the U.S. Treasury weighed in, recommending an exclusion for off-exchange forex trading by institutions, and the Treasury recommendation was written into the law. That provision, generally referred to as the “Treasury Amendment”, would become the source of debate and lawsuits for decades, over the extent to which the CFTC had authority over the forex market.

When retail spot forex became widely available to non-institutional players in the late 80’s and early 90’s, the “rolling spot” transaction was offered as a highly-leveraged, “futures look-alike” product which was outside CFTC jurisdiction. The CFTC attempted, for many years, to regulate retail “rolling spot” transactions, but those attempts were consistently challenged in the U.S. courts, by various players in the forex market.

New laws were layered onto the 1974 CFTC Authorization Act — specifically, The Futures Trading Practices Act of 1992, and The Commodity Futures Modernization Act of 2000. The 2000 Act, in particular, established that (1) the CFTC had jurisdiction over retail forex, and (2) only certain financial institutions could act as counterparties (i.e., broker/dealers) to retail forex customers.

The CFTC’s authority over retail “rolling spot” forex transactions was repeatedly challenged in the courts, on the grounds that “rolling spot” forex transactions were not futures contracts, and therefore the CFTC had no jurisdiction over them. In the most notable case, CFTC v. Zelener (2004), the Seventh Circuit Court ruled against the CFTC, and in favor of defendant Zelener, exempting “rolling spot” forex transactions from CFTC jurisdiction. “Rolling spot” forex contracts became known generally as “Zelener contracts”, and that term even appeared in CFTC documents. The court’s ruling in the Zelener case gave cover to the retail forex market in the U.S., for about 4 years.

In 2008, The Commodity Futures Trading Commission Reauthorization Act of 2008 (known as the CRA) (1) defined a new counterparty entity, the Retail Foreign Exchange Dealer (RFED), (2) gave the CFTC authority to regulate these RFED’s, and (3) gave the CFTC authority over “rolling spot” (Zelener) contracts offered by these RFED’s. In other words, the CRA gave the CFTC complete jurisdiction over small, retail players in the forex market — players whose only access to the market was through an RFED (i.e., a retail broker).

Beginning in late 2008 or early 2009, the CFTC began heavy-handed regulation of retail spot forex in the U.S. In a series of steps, the CFTC increased the capital requirements on RFED’s, outlawed FIFO and hedging, and proposed the infamous 10:1 leverage limit on retail forex. All of this was authorized by the CRA, and was implemented prior to the time, or during the time, that the Dodd-Frank Bill was being drafted, debated, and enacted. Dodd-Frank did not enable any of this regulation.

The revision of the leverage limit from 10:1, as initially proposed, to 50:1, as finally enacted, was a political move on the part of the CFTC. The Dodd-Frank Bill had nothing to do with this revision.

It is likely that we would be stuck with FIFO, prohibited hedging, and restricted leverage, even if Dodd-Frank had never been enacted.

The Dodd-Frank Bill is partly responsible for the CFTC’s prosecution of offshore retail forex brokers who have (or had) some “presence” in the U.S., and/or have (or had) U.S.-resident clients. The CFTC cites both the CRA and the Dodd-Frank legislation as their authority to pursue these foreign brokers.

But, in my opinion, the CFTC would be doing what they’re doing to offshore brokers with or without the help of the Dodd-Frank Bill.

Nevertheless, the Dodd-Frank Bill is a nasty piece of work, in many respects, and should be scrapped, in my opinion.

I can’t even guess what the odds might be that Dodd-Frank will be gutted, or repealed. But, it’s not the cause of the problems concerning you.

So if all what you’re saying is true,

What can we as United States Citizens do about it?

The only thing that immediately pops into my head is some form of HYIP (High Yielding Interest Profit) off-shoot that basically pools all the money people put into it and make it managed together from a specific individual, also probably also known as an account manager but for the forex market itself.

And by all the indications you referred to, I’d imagine this HYIP off-shoot would be illegal if I was to let’s say ask someone from another country manage it since I’m an american and they’re not an american.

Which goes against the free trade act composed upon the united nations concept, unless all the nations fold and accept the 50:1 margin leverage requirements and the hedging and FIFO.

If I was to want to open up currency account with an off-shores overseas broker would I be breaking any laws that would hinder, or prevent me from being able to trade with a series 3 or series 34 test for a retail forex brokerage?

This I see is very frustrating to me.

Thank you for your clarification Clint. Is there anything that we the little people can do to change the current situation legally, technically, or any other method?

Would there be any way we the traders could give case-point scenarios that can be provided for a court-document concept that would be legally acceptable as evidence as to why it should be accepted for a bigger leverage, allowing FIFO, and allowing Hedginge?

I figure this is probably more of a legal lawyer question due to the circumstances, but shoot, the current requirements are extremely upsetting to the me little guy.

No. There are no laws preventing you from having financial accounts (bank accounts, brokerage accounts, gold-deposit accounts, etc.) offshore.

You [B]are[/B] required to report your account, or accounts, to the IRS, on a form called FBAR, if the total value of all such accounts exceeds $10,000. And you [B]are[/B] required by U.S. tax law to pay tax on your worldwide income, no matter where it was earned, and this includes income earned in any of these offshore accounts.

The CFTC has no authority to take action against you for trading forex with an offshore broker, even if that offshore broker is the target of a CFTC action.

Spend some time reading this thread. Start with the first 3 posts in this thread. That’s where you’ll find the List we have been compiling, for the past 18 months, of offshore brokers who will do business with you.

You’ll find answers to a lot of your other questions in the pages of this thread, as well. I’m not going to repeat 18 months of research here.

CFTC will start coming after individual traders with the help of IRS next. CFTC must be reigned in before their head gets bigger and bigger. The point is CFTC never cared about retail traders. They just found a niche now supported by Congress that will allow them to be lawsuit happy. And US traders cannot open UK accounts! CFTC will make sure of that with endless lawsuits!

CORRECT me if I’m wrong, but the higher the leverage, the better my trading plan works as far as risk because my plan is to trade 1 lot (100,000) no matter what the exact account balance is (between $2,500-$5,000…maybe $7,500) until I hit my goal, (still working on defining it) then increase by 1 lot at that point…what this means is lets say I have $2,500 I want to have in my account to trade, and I want to trade 1 lot in and out for say 30 pips with 10 pip stop loss, using the very successful system out lined in Tmoneybags’ thread, 30 pips a day keeps the money at bay, at 1:200, my remaining usable margin after a trade is in would be $2,000 with the other 500 being the lot traded, RIGHT?..that means if it hits my 10 pip stoploss, i loose $100, which is 4% of total account and 10% of the 2000 usable margin, RIGHT? To me that’s between conservative to moderate in money management…Now, take 1:50 and I have to put $2,000 in my 1 lot trade, only leaving $500 of usable margin (I don’t even know if most brokers allow that low $amount) that is unacceptable for my risk management…Does anybody see how my plan makes higher leverage advantageous???

They can apply for a workers visa many American traders have moved to UK so they can escape the CFTC leverage requirements.

Also setting up residence in Canada outside of British Columbia is a way to bypass the new rules, some are fortunate with dual citizenship


I’m going to slice-and-dice your post, in order to answer it point by point.

In the example you’ve given ($2,500 account, trading 1 standard lot) your ACTUAL LEVERAGE USED is 40:1, which is ridiculously high leverage [B]for most trading strategies.[/B]

However, with extremely tight stops, which your strategy employs, 40:1 leverage is [B]not[/B] unreasonable, provided you don’t have MARGIN problems due to the MAXIMUM ALLOWABLE LEVERAGE provided by your broker.

As you correctly point out in your example, 50:1 maximum allowable leverage (which means 2% REQUIRED MARGIN on each trade) has the potential to screw up your strategy. I addressed this exception to the general rule on leverage, in this post.

Correct. $500 margin used (which is ½% of 1 standard lot), and $2,000 usable margin (i.e., funds not tied up in margin, and therefore available for other uses).

4% of your account balance is correct, [B]but it’s 5% of the $2,000 usable margin.[/B]

Yes, as I discussed at the beginning of this post.

Your broker will have no problem with $2,000 committed to margin, and only $500 left to cover losses.

Assuming that each time you take a loss it is a 10-pip loss, then you could trade your strategy as long as your losses occurred one-at-a-time. But, a string of losses of sufficient length would scuttle your strategy. Here’s a homework assignment for you: Calculate the maximum number of consecutive 10-pip losses you could stand, before you got a MARGIN CALL from your broker.

That question was answered at the beginning of this post.

I’m pretty sure only if you have a job commitment. Few years ago I looked into moving to the UK and did some research, not because of the CFTC leverage requirements, but for a mid life change. I found that it can be done but it’s not all that easy. Best way is to go over, fall in love and get married.

UK has a lot of Government sponsored social laws and programs they don’t want to share with everyone & anyone that just shows up. But if you know of a way to do it that I missed please let me know. :42:

THANKS mr. clint!..I think that answers my question, since it was the answer I thought was correct, your homework assignment is basically my point (and yours, redundantly, again! LOL!) I want to have as much possible failures (hit stoploss) as I can…-i.e, with 1:200, and my $2,500 account, trading one standard lot, I could theoretically have (with a broker that allowed trades down to the last penny of leftover margin) 20 losses in a row, still trading 1 lot each time (I wouldn’t really do that, duh, just for example sake) vs. 5 losses in a row with 1:50…how about 1:1000? 24 losses in a row…I would have to fund my account with $2000 more to have same amount of “room” with 1:50, still trading 1 std lot

And that’s [B]one[/B] of the reasons we want to “go offshore to escape the CFTC”.

INDEED!..Here we have a “rule” actually forcing us real guys to be more risky, then let me say my 2 cents about another REASON: hedging…hedging, correctly used, reduces risk! It’s like the CFTC (IMHO, George Soros) wants to turn forex into a slot machine for us! My application of hedging is used to help with my strategy, since I use tight stops, I can get stopped out kinda easily, so I can just put an opposite, equal sized trade just negative my entry with small TP, same as the opposite trade’s SL with it’s own very tight (1-2-pip) stop loss…if I can find a good broker…I’m really thinking about FINFX…has anybody heard anything or tried trader’s way?

The CFTC wants your profit targets to be lower that is one reason for the 50 to 1 leverage so that you cannot make too much money in a short period of time.

With 200 to 1 leverage your money will not grow as fast but your risk is decreased as well since it is a double edged sword that can work for you or against you.

A hefty “thank you” Clint for opening and maintaining this topic, and appreciation to everyone who contributed informative posts.

Recently I became yet another victim of the new Caste System forcing U.S.-resident traders into near ‘untouchable’ status. Used this thread to get my bearings on possibles, and communicated with a number of the Group 1 outfits. Opened demos and live accounts, closed accounts, am currently testing yet another spot. Thought I’d offer the following to fill in some of the blanks for traders still seeking offshore FX dealing.

Before I get into details: If you’re an American who speaks no foreign languages, the English proficiency of the staff becomes important; it has to be at least high enough so you can make out what they are trying to say and vice-versa. Sometimes it just takes a little patience and you’re good to go, but with other places you may find the language skills aren’t there (surprising since English is taught around the world as a ‘universal business language’). There are also a few who will feign not to understand, in order to discourage you from applying. These things happen. Just a FYI, mostly for very new traders.

Next post will be some fill-in details on Group 1.

• [B]Uni-FX[/B] (UK)

Their site looked thrown together, with rudimentary English, beginning with the headline  "Why Uni-FX GT Is So Trustfull?"  They go on to claim:  "Credit Financial Co Ltd is a UK and wales Registered Company Reg No: 7233221 and Fully owned by Unifex Financial Group Ltd. We offer UnifexPro New Trading Platform as a special trading facilities to expand our business to new Regions."  

Max leverage advertised was 1:400.   To open an account I was redirected to a site called MPFN-FX, their Partner or Representative ostensibly in NZ -- again a website with garbled English which additionally had run over their 'weather' and 'widget' budgets.  I skipped it and just as well, because...

23 March, found they’d disappeared, or at least could no longer maintain their site: “This account has been suspended.”

• [B]Universal FX [/B](Switzerland) --- white-label partner of ACM/SwissQuote

COMMENTS:  Their website and my browser seemed to have odd disagreements.  Sent three identical emails asking two questions (U.S.? Leverage?) over a period of two weeks; no reply.

• [B]Renesource Capital[/B] (Latvia)

COMMENTS:  1:100 is max leverage.  I'm keeping their PDF account docs because they are masterpieces.

• [B]Varchev Financial[/B] (Bulgaria/UK) --- regulated in both countries    

COMMENTS:      use varchevbrokers.com for the English site - you'll still see the odd Russian character here and there, but it's not difficult to figure out what's going on if you examine the context.

We ran into a difficulty due to Varchev's mail servers being on the entire SBC and ATT/Yahoo blacklist -- for which I gave them resources to assist them in correcting the problem, but their IT so far did not follow up.  Live Chat is good, but when a broker can't organize email access we generally do not open live accounts.
Platform is MT4, also an ECN-ish setup is available.
-> Spreads on EU cling around 3 full pips, on GJ 5-6. 
Max 50 lots per ticket, after that you need to request and wait.  
Margin is taken both ways in a hedge.
They also offer spot trading with commodities, indices, cfds on European and American stocks, DJIA, DAX, NASDAQ etc. 
They have several physical offices, unlike others I'll get to in a moment. 
Their "leverage varies with position," so if you want to trade size you'll soon be looking at 1:100 again. 

I really like these guys, by the way; enjoy the ‘let’s make a deal’ mentality over terms etc., and it’s conceivable I’ll trade with them if we U.S. traders find our Caste Status trending further downward on leverage worldwide.

More in next post.

Hey “sm your1100whatever”…
This is the one and only reply you’ll ever get from me.
Today Bill Ayers said he woke up every morning trying to completely end capitalism by the end of that day. You must do the same thing! You’re nothing but a Media Matters puppet show for George Soros. George Soros said in his last book (I actually read it between vomits) he “thinks” capitalism has gone “too far.” and free markets should end blah blah blah … While he makes double profit on gold, telling everyone else to run away from gold…He is a LIAR! And you are too, sm*****! The only reason Soros hasn’t crashed the dollar is because all us new traders are actually learning how to trade and enough of us are taking back the free market, that his plans are being foiled! While he and warren buffet tell us profits and free markets are no good, they are using free markets and making big profits themselves. Why shut out all the freedom for everyone else? You didn’t even read or get my message you replied to. “making profits too fast” if you trade 1 lot for 30 pips, it is still $300 profit, I don’t care if your leverage is 10,000:1! Or 1:1. So throw away the crack pipe, and get outta here! You’re so obvious! Lie lie lie! You obviously don’t work, what’s your monthly welfare check, $2,400? Or does Soros pay you? If Soros wasn’t a liar and if he didn’t have bad intentions, like crashing all the world’s currencies, so he can help start open borders , i,e., one world government, then his profit accomplishments would be admirable, but alas! So sad, and sad for you, sm1100… You bum, get a job. The rest of us hard-working innovators will be millionaires by earning it!

P.S., George Soros is behind the whole current administration, not just the ctfc, but that was definitely a victory for him these last 3 years…hit, but not down, we still have some options left!