At this momentum of newly enacted regulations I think we might see some laws pass that make it illegal for US investors to use foreign FX brokers. It’s the beginning of the end. For anyone whos more than a hobby trader (I can’t say I’m passed that yet, I work full time) it might be time to give serious thought to expatriation. Otherwise start getting good with options. Options on commodities and stocks can offer similar leverage.
I “think” you’re right… but, I “hope” that you’re wrong. 
I am also a US citizen at FinFX and have some questions for Paul at Tallinex: MY concern is about your segregated accounts --how they are segregated and with what protection. I know another broker that advertised segregated accounts with Wells Fargo afew years ago, but they still controlled the accounts and simply transferred the funds back to their regular business account. Are the funds in separate accounts under the names of each individual or are they lumped together in one “segregated” account that the broker controls? If they are individual accounts under our names do we get anything showing that we control the accounts so Tallinex cannot transfer the funds out to their business accounts? What about this bank in Latvia? What happens to our funds if the bank goes south?
Hey, Dewey - I believe that this was answered already by our support team, but to reiterate, you can’t stop an unscrupulous company from doing something unscrupulous.
Tallinex operates segregation accounts in the exact same way as every other broker - including your current one.
In the same vein, the situation with our bank is no different to the situation with any other broker’s bank - including that of your current broker.
My following comment isn’t specifically for Tallinex, but it is meant for everyone here: What is the purpose of having a segregated account if it essentially means nothing? If a broker can easily transferred the funds from a segregated account back to their regular business account, then what is the point of having a segregated account in the first place??
I just don’t understand the purpose of a “segregated” account if the broker can easily access those funds whenever they want - including when they (the broker) are having serious financial issues, such as with a bankruptcy or whatever. If it is true the brokers can access the segregated accounts at any time, then essentially there is no such thing as a “segregated” account? Am I correct? Or am I just not understanding the entire “segregated” concept?
This conversation is complicated by two issues:
• First, different countries, with different laws, are being compared to one another, and
• Second, there is great confusion about the difference between “separate customer accounts”, and legally “segregated customer accounts”.
• On the first point, the broker referred to by [I]deweymcg,[/I] which “advertised segregated accounts with Wells Fargo” obviously was a U.S. broker. And the situtation with U.S. brokers vis-a-vis U.S. bankruptcy law and the legal definition of “segregated account” is dicey, to say the least, as the later portion of this post will illustrate.
Similarly, the broker referred to by [I]pipfreak,[/I] where he wrote “I just don’t understand the purpose of a “segregated” account if the broker can easily access those funds whenever they want…” is an apparent reference to FXCM here in the U.S.
As we will see in a moment, [B]there are no segregated forex customer accounts in the U.S.,[/B] regardless of what your U.S. broker tells you, and regardless of whether your broker deals, not only in forex, but also in futures (which [B]do[/B] provide segregated accounts).
Is it any wonder we hate the regime under which U.S. brokers struggle?
Is it any wonder we look for better trading conditions offshore?
• On the second point above, brokers can divide customer funds into separate accounts in banks all over the world — and this provides [B]no protection[/B] to their customers, [B]unless[/B] the laws of the countries involved keep those customer funds out of the hands of the brokers, and/or the brokers’ creditors in the case of bankruptcy proceedings.
The following quotes will explain this further. I have highlighted certain portions in red, for emphasis.
So, where does that leave us? It leaves us with a very big “due diligence” requirement, when we look offshore for a new broker. Where is that broker domiciled? What are the laws in that locale regarding truly, [B]legally[/B] segregated customer funds?
We know about the customer protections written into law in the U.K. and Canada. But, we are locked out of those markets. (And we probably wouldn’t want to trade in Canada, anyway. Canada may do a good job of protecting customer funds — but, in every other aspect, Canada is outpacing the U.S. as the world’s biggest nanny-state.)
So, what about Tallinex in St. Vincent and the Grenadines? We need to ask, not only Tallinex, but also their regulator. Oh, wait, they’re not regulated. See how tough due diligence can be?
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[B]AnnexFX (Estonia)[/B] now states clearly on their website that they are owned and operated by AssetsFx (Finland). They also state clearly on their FAQ page that [U]they do not accept U.S. clients[/U]. I will add AnnexFX to Group 2.
[B]AssetsFX (Finland),[/B] the parent of AnnexFX (Estonia), has been in Group 1 of our List for some time. According to their website (as of today), [U]they continue to accept U.S. clients[/U]. (The list of countries which they exclude can be seen HERE).
Edit:
Also note that the maximum leverage offered by AssetsFX has been corrected to read 200:1.
Hello Clint,
As far as the number of negatively affected accounts is concerned, well, luckily it is not such a big figure, in total there were 50 accounts. Nonetheless, we had to cover clients’ losses in amount of USD 44k. This is a relatively small figure.
In answer to your question on whether or not we were able to make any profits on that day, we can openly say that although our trading volume was through the roof, our commissions didn’t offset our clients’ losses which we were forced to cover.
You also wanted to know if we were going to possibly change our trading conditions. The events of the ,Black Thursday“ exposed the weaknesses of the existing safeguard mechanisms and practical inability of brokers to do anything about this situations, which leads us to believe that we can expect some drastic changes in the entire industry. Meanwhile we can observe isolated instances where LPs increase initial margin and widen spreads.
We are not going to change our conditions for as long as our LPs don’t change theirs…
Many of you could observe the absence of liquidity for almost 20 minutes, which translated into inability to close or otherwise modify open positions. The market has been in the state of confusion ever since SNB published their decision and it is too early to make any forecasts as to what other changes we can expect.
The fact that technologies initially developed for institutional clients have been used on a retail market without being adapted and leverage increase have all contributed to the situation we have on our hands right now. Many brokers say that they were able to overcome this disaster thanks to their sophisticated risk management tools and internal control systems but we say it was pure unadulterated luck. The simple truth is that ECN brokers simply don’t have any kind of protection from that kind of risk and from being literally forced to cover their clients’ losses.
Many large brokers were affected because they had massive CHF exposure and no matter how big your liquidity reserves are, they won’t be enough when the value of a currency changes by 30% within a relatively short period of time. Let’s be honest, clients won’t be able and won’t be willing to cover their losses, which would eventually hurt brokers a lot. This is exactly what happened to Alpari UK.
This is precisely the reason why highly unpopular leverage decreases have their merits and ultimately have one particular goal, that is being stability, especially when a broker lacks other tools to cover the losses.
Regards,
Alex
Thanks for your detailed reply to my questions, Alex.
You’ve been more open and forthcoming than most of the brokers out there, regarding the SNB crisis and its direct impact on the industry, in general, and on your firm, in particular. And we applaud you for clearly telling us your position.
I’ve made some small changes to the data we show for FX Choice in our Offshore Broker List, to make our listing match your website. You can check the way we have FX Choice listed on THIS PAGE.
I hope FX Choice will continue to welcome U.S. clients. The FAQ page on your website uses [I]very[/I] cautious wording regarding U.S. clients.
And I hope you will stay in touch with us here on the Babypips site.
Thanks again for your post.
You offshore, unregulated forex brokers, which are now the hope of many to most forex traders, I have the solution to your worries about any future “Black Thursday.” Simply tell prospective and existing trading customers that in the event of another cataclysmic central bank or other announcement, if their open position within seconds increases in value by let’s say 400 pips or more, or decreases in value 400 or more pips with the EUR/USD for example, then 400 pips profits will be the [B][I]MAXIMUM[/I][/B] profits the trader will receive. For losing trades, the maximum loss will only be the total value of the account. Always warn your traders to set protective stops on all trades.
I know that this harsh advice will probably be ignored, but if implemented it should go a long, long way towards protecting both traders and brokers and preventing unnecessary lowering of currency pair leverages. Most traders would be thrilled to have their open positions increased with a profit of 400 pips if another super, super rare “Black Thursday” ever happens again (to be paid from the broker’s profits and from the accounts of the losing traders), and losing traders should be content to not have to reimburse the broker with money that is not already in their account. Losing traders should remember that they have been warned repeatedly to trade only with money that they can afford to lose. Losing traders also should have already withdrawn some of their previous profits and put them in something safer like dividend yielding stocks or apartment buildings or just cash so that they can start over again in the world of forex if necessary.
Brokers, think about it.
Thankfully, I wasn’t trading that day and I do use stops, always.
However, you might want to remind yourself that stop losses are only as “good” as the traders who are willing to take the other side of a trade at that price (where one has their stop set). In the case of the SNB announcement, there weren’t enough traders willing to take the opposite side of those trades. Thus, the “lack of liquidity” and a big part of the reason for such an unprecedented move.
On your chf charts, go out to a weekly view and you will see where big money players had their orders parked. That is where enough liquidity finally came in to take the opposite side of the stop losses and thus, the price stopped at that location (weekly support / resistance).
NEW BROKER FOR NEXT UPDATE OF LIST.
We trade Dukascopy, but were getting some grief. My partner identified
Atom8 (http://www.atom8.com) as a viable alternative, if we needed to
switch. This could be a great way to get JForex access, and they are based in London.
They are a 100% compatible Dukascopy JForex provider; I checked it out in
depth. As with all “white label” partners for Dukascopy, they have direct
connection to the SWFX ECN. Best retail trading venue in the world for
pure Forex.
BUT Atom8 makes no mention of Dukascopy (normally a big selling point),
hence the idea of a “pure white label” partner.
They call their JForex variant “Atom8 Trader”.
I do not know of their financial stability but they are regulated, I believe.
Unfortunately, they do not accept U.S. clients to my knowledge.
Good Trading !
HyperScalper
You are correct.
Sorry, Compounder, but your suggestion is totally off the mark because you clearly don’t understand how a real brokerage operates.
With genuine ECN/STP brokers such as Tallinex, the chain of participants is:
Client - Tallinex - Liquidity provider - Banks
When you, as a client, try to open a position, Tallinex relays the request to its liquidity provider who identifies the best price available from one of its market-making banks, accepts the position and the fill price is passed back up the chain to be displayed in your trading terminal.
Just as you must deposit funds with Tallinex, Tallinex must deposit with its liquidity provider and the liquidity provider must deposit with the various banks.
But, since trading is typically executed with the benefit of leverage, poor trading decisions by clients can easily result in accounts becoming negative due to over-trading.
When that happens, the banks (who basically never lose out) deduct the loss from the liquidity provider, who deducts it from the broker’s deposited funds, and the broker reports a negative balance on the client account.
Therefore, your proposal would simply limit the profit/loss of clients whilst leaving their broker exposed to unlimited losses (or perhaps profits), and is effectively what brought down so many brokers this month…
Clients trading irresponsibly using leverage resulted in huge losses which banks immediately recovered from liquidity providers. The LPs, in turn, emptied the coverage accounts owned by brokers, which left the brokers with no cash to continue trading activities and negative balances on their clients’ accounts.
Due to the fact that 99% of retail traders have minimal cash assets and are only able to trade by using credit from their broker (leverage), coupled with the ease with which people in the US and EU countries can ignore debts (or just declare bankruptcy), the possibility of recovering those losses are negligible. Even if it were possible, the negative publicity that would result from “xxxx broker took my house away” accusations pushed brokers to just forgive the balances. Legally and morally, however, those clients were responsible for repaying those negative balances.
In summary, the only brokers who would benefit from your proposal are the ones who trade against their clients - they have no liquidity providers to deal with (so were totally unaffected by the SNB move) and would simply be cutting short profits and forgiving non-existent debts.
Consider the SNB move in terms of a a broker with two clients - each with a $1,000 account, one long 1.0 lot and the other short 1.0 lot - both orders with 100 pip TP and 100 pip SL:
- with a real ECN/STP broker
- Short client account balance: $2,000 (100 pips profit - instant exit due to glut of buyers)
- Long client account balance: $-12,000 (-1200 pips loss due to lack of sellers)
- Broker position with liquidity provider: $-11,000
- Chance of long client repaying the debt: 0%
- Loss suffered by broker: $-11,000
- with a non-ECN broker
- Short client account balance: $2,000 (100 pips profit - instant exit due to no counter-party)
- Long client account balance: $0 … -12,000 (up to 1200 pips loss at broker’s discretion)
- Broker position with liquidity provider: N/A - no liquidity provider involved
- Chance of long client repaying any debt: 0%
- Loss suffered by broker: NO LOSS - broker gained $1,000 deposit lost by the long client and used that to offset the $1,000 gained by the short client
… and any negative balance held by the long client can be written off because the broker has no 3rd-party obligation for that amount.
I hope the above helps people to understand the mechanics of Forex trading and how brokers are involved in the equation.
Unfortunately, they do not accept U.S. clients to my knowledge.
Did they give out a reason for it by any chance? 
Yes, of course, a high proportion (nearly all, but not all) of foreign brokerages, due to U.S. FATCA regulations are opting not to serve U.S. residents. In a nutshell, the U.S. is forcing all other nations to be the “nannies” and work for the I.R.S. or to be subject to heavy penalties. This forces participating foreign brokerages to increase their administrative costs to service reporting requirements for U.S. residents.
This is very well known everywhere in Forex. Many of the “good brokerages” are strictly off limits to U.S. residents, which is the very subject of this very long thread … In the sticky top posts of this thread you’ll see an up to date listing of options for U.S. persons, very kindly maintained by Clint, I believe.
HyperScalper
I had not received any detailed instructions as of Thursday 19:00GMT. Chat transcript attached.
Seems we won’t have to port MT4 templates. A big time saver.
Chat session with [B]Tallinex Support - TS[/B] - [B]Customer Service[/B]
[I]Regarding FinFx account transfer[/I]
[I][B]Tallinex Support - TS has joined the chat.[/B][/I]
[I][B][B]Tallinex Support - TS (11:18:45) :[/B][B] Yes, please?[/B]
[B][B]Dave (11:19:11) :[/B][B] Are there any details to know about my transfer from FinFx? How do I log in at Tallinex? Do I need to download Tallinex MT4?[/B]
[B][B]Tallinex Support - TS (11:21:04) :[/B][B] Details: During weekend you receive updated login number, updated password and updated MT4 server field[/B]
[B][B]Tallinex Support - TS (11:21:27) :[/B][B] With these you can login to your existing FinFX MT4 and continue to trade with your existing charting setup.[/B]
[B][B]Tallinex Support - TS (11:21:49) :[/B][B] You do not need to download Tallinex MT4.[/B]
[B][B]Dave (11:22:08) :[/B][B] OK. How do I process withdrawals in the future?[/B]
[B][B]Tallinex Support - TS (11:24:40) :[/B][B] It is easy. You also receive Tallinex Back Office credentials. In there you can place a request for withdrawal.[/B]
[B][B]Dave (11:25:34) :[/B][B] And I will receive both credentials this weekend? I will be able to trade Asia session on 1 Feb?[/B]
[B][B]Tallinex Support - TS (11:25:56) :[/B][B] Yes, correct.[/B]
[B][B]Dave (11:26:03) :[/B][B] Thank you very much.[/B]
[B][B]Tallinex Support - TS (11:26:51) :[/B][B] You are welcome, Dave.[/B]
[B][B]Tallinex Support - TS (11:27:00) :[/B][B] If you have questions we will gladly assist.[/B]
[B][B]Tallinex Support - TS (11:27:15) :[/B][B] Thank you for choosing Tallinex![/B]
[/B][/B][/B][/B][/B][/B][/B][/B][/B][/B][/B][/B][/B][/I]
Thank you for this list!
Technically, I don’t believe this could be done unless the broker was bucketing your orders. I also don’t want a cap on my upside. If I had been wise enough to be long CHF… AND they capped my win at 400 pips I’d be very unhappy.
When EUR/CHF melted down, stops weren’t filled because there weren’t enough bids to offset them. Everyone was long at 1.20. Underneath, nothing but air. The real money was parked down near parity back in 2011. I started seeing stops filled at 1.0135
I’m sure many brokers are devising plans for some safety net. I’m sure regulators are coming up with more onerous policies as well. The problem is that the broker’s LP’s are the ones holding their (our) money, so I don’t know how they could implement your suggestion?
Seems everyone would be happy to bankrupt their broker and let them take the hit when it wasn’t their fault. I was talking to an offshore broker just the other day and he told me they can’t take credit cards anymore, because traders were charging back their losses. The risk managers at the credit card companies have had enough. No more Forex. Another tool for the retail trader removed. The walls keep closing in on us, and the CHF debacle is just serving to speed up the process.
Hey everyone I am new to the forum. I have a question and hope someone can help me with. I am a US citizen and resident and I am looking for a broker that will allow me to trade forex vanilla options. If anyone could help me out that would be great. Love the forum and this thread is great.