Going offshore to escape the CFTC

[HyperScalper]

@Mapex4X

Higher leverage multiples mean you can control more currencies
amounts (lot size) with a given amount of base account equity.

Most offshore brokers offer 10x the leverage of any remaining
U.S. broker; therefore only 1/10th the equity needs to be held
in the offshore account for the same buying power.

[EDIT] I feel I should clarify what I mean here. It’s a bit like they
say “don’t try this at home kids…” in the sense that you must
not over-leverage yourself, unless you have manual or automatic
methods which are proven to control your exposure.
There is a “trader’s paradox” or a tension here, in the sense
that if you are too “defensive” in your trading, then you will
lose when otherwise you should be able to win. On the other
hand, if you are too “offensive” in your risk allocation, then
you might suffer unacceptable drawdowns. My main solution
to this problem of over-commitment is to use multiple entries
scattered across a wide range in creating a position, and to
factor “price adversity” into your method from the very
beginning…

hyperscalper

[whywescalp]

@Mapex4X I think higher leverage lets you better manage your risk.

Lets take a mathematical example

Say you have two accounts each with 10K USD. Account 1 has 10X leverage and Account 2 has 100X leverage. Both the accounts have margin call at 70% and position closeout at 50%.
Now lets say you buy 1 standard lot of EUR/USD in both Account1 and Account2. Mathematically speaking, you have the exact same risk and risk capital in both the accounts.

After the above trade, In Account 1 your free margin will be 0% and in Account 2 your free margin will be 900%.
Now lets assume, EURUSD goes down by 300 pips. You are loosing 3000 USD on your trade both in Account 1 and Account 2.
In Account 1 you will get a margin call but in Account 2, your portfolio is intact and you can continue to hold your positions.
Now lets say EURUSD goes down furhter 200 pips. In that situation, you will be loosing $5000 in both Account 1 and Account 2. Your free margin in Account 1 will be -50% and in Account 2 will be 400%.
At this point, your Account 1 will hit a margin call and your positions will be closed out by your broker of Account 1. BUT in Account 2, there will be no change to your portfolio and your positions stay untouched.
So essentially you are going to have to fund your account or risk close out of positions pre-maturely in Account 1 while in Account 2, you not only can carry on with your positions but can also add more positions if you wish to double down or diversify.
Essentially, the more the leverage, the better it is for your portfolio “Assuming” that you will not abuse the leverage. By Abuse of leverage I mean, that technically, you can only open 1 standard lot in Account 1 but you can open 10 standard lots in Account 2. And in that case, if EURUSD goes down by 100 pips, your Account 2 will wipe out while Account 1 will stay in tact.
The issue is that regulators assume that the forex traders are dumb and will always open 10 standard lots instead of 1 if given the choice and hence should have the leverage down to 10X instead of 100X. This might be true for amatures or start-up traders, but is almost always wrong for educated / pro traders. And almost always inevitably end ou making it difficult for forex traders to make right bang for the buck. Plus, forex is an OTC market and regulators like exchanges more than OTC because there are more fees, more taxes and more control on what can be traded as opposed to OTC market.
In the end, if we can pay higher taxes and smoke as much cigarettes as we want, even though we know its bad for health then Why can we not make our own decision on our trading leverage ?

[ShatnerReborn]

Also, offshore brokers offer something US brokers won’t (can’t because not allowed by CFTC regulations) – “negative balance protection”. So you get the advantages of extreme leverage, with limited downside risk like an option.

Imagine having a large short position in CHF Futures going into the SNB crisis a couple of years ago. The CME would have called “Dog the Bounty Hunter” to collect the loss “down to your last cufflink” as they used to say. More than a few trading careers were ruined that day.

But if you had been trading offshore, account balance would have been zeroed, otherwise no big deal.

Did you know the German Financial Authority (BAFIN) requires retail FX brokers to offer zero balance protection. Yet another example of how US regulators exist to serve the Financial Institution cartel, not individual investors

[HyperScalper]

EXHAUSTION OF BUYING POWER NOT SUCH A GOOD IDEA

My subject says it all. IF you are even close to “flirting” with exhaustion
of your Buying/Holding Power, then you should just hang it up…

I’d just leave it at saying, in general, that you have 10x Buying Power
with these non-U.S. brokers; but let’s not push it, UNLESS you
happen to have a Trading Strategy (or Algorithm) which gives
you CONTROL over your Exposure… 'Nuff said ?? LOL

hyperscalper

[ShatnerReborn]

Yes, of course. Zero balance protection is an insurance policy, not a trading strategy!

[HyperScalper]

EVOLVE.MARKETS UPDATE

OK, it’s still possible to open MT4 accounts with Evolve
but they are limited to the BitCoin BTC funding currency.
Previously, I thought they were not issuing any new
MT4 account, but that is wrong.

On the MT5 side, accounts enjoy BTC (BIT) or LTC
choice of funding crypto-currency.

On the Coinexx.com side, I believe they offer only MT5
accounts. This is a challenge for me until I get the MT5
terminal types stabilized in my NJ4X runtime system…
But ultimately, we’ll all have to move to MT5, and I
expect to use Coinexx extensively, as well as Evolve.

BOTH appear very good, so I’m planning to mix accounts
between them…

hyperscalper

[SmallPaul]

The Commodity Futures Trading Commission filed a civil enforcement action in the U.S. District Court for the District of Utah against JAFX, Ltd. (JAFX), a/k/a JAFX, EOOD, of Sofia, Bulgaria and Kingstown, St. Vincent and the Grenadines.

Complaint CFTC Sues Forex Dealer for Registration and Disclosure Violations | U.S. COMMODITY FUTURES TRADING COMMISSION

[FinancialWorld]

Hey all,

I hadn’t posted in a while, but wanted to give you all an update on CCM (Capital City Markets). I began having trouble earlier this year withdrawing funds. Rather then the typical 2-4 days it should take I was waiting 1-2 months. They kept giving excuses that they were having trouble with their intermediary bank (the bank was requiring more documentation) and said they were trying to resolve the situation as quickly as possible.

I’ve made multiple withdrawals throughout this year with the same issue every time…but I ended up getting my money (after many emails). My last withdrawal was submitted last in May but wasn’t received until July. They actually split that into 2 wire transfer saying that they weren’t allowed to wire that much cash (was only $25k). Received one and after a few more weeks (and many emails) I received the last part of my withdrawal.

I know they were red listed by the CFTC last year (sorry, since I’m a noob they won’t allow me to post the link), so maybe the additional regulatory attention is causing these issues, but I hate when they leave me in the dark about why I can’t get my money out.

End result, I got all my money back. But I don’t trust them anymore and won’t be using them. I don’t like having to wait that long for my money, and it just seems to get sketchier and sketchier. The fact that they haven’t fixed the issue and haven’t been fully transparent about it just shakes my trust in them. **Side note, their spreads are really high most of the time.

Anyone else having similar issues with them? Should we remove them from our list? Would be interested to hear others’ experiences.

Cheers!
FW

[Clint]

The Commodity Futures Trading Commission filed a civil enforcement action in the U.S. District Court for the District of Utah against JAFX, Ltd. (JAFX), a/k/a JAFX, EOOD, of Sofia, Bulgaria and Kingstown, St. Vincent and the Grenadines.

JAFX has been included for many months in the Alphabetical List of Brokers in post #4 of this thread. And the listing has always said “no U.S. clients”, because that’s what the fine print at the bottom of each JAFX webpage indicates.

This is the text in fine print:

“All information on this website is not directed towards soliciting citizens or residents of the United States. Please check with your local jurisdiction if you are permitted to open an account with JAFX.”

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• However, if you begin the Live Account opening process, this is the first page that comes up:

United States is already filled in. This makes it pretty clear that U.S. clients are welcome.

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I decided to test the account opening procedure, by filling in this page, as follows:

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No problem, apparently. When I clicked “Create Account”, I was taken seamlessly to the next page, which asked me to submit identity documents.

I did not proceed.

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It appears that JAFX has done a poor job of disguising the fact that they will, indeed, open accounts for U.S. clients.

The control-freaks at the CFTC will always go for the easy-pickings first. JAFX kinda asked to be noticed by the CFTC when they made “United States” the default selection on their account opening page.

Let this be a lesson to all our offshore broker friends.

[Clint]

I hadn’t posted in a while, but wanted to give you all an update on CCM (Capital City Markets). I began having trouble earlier this year withdrawing funds…

I’ve made multiple withdrawals throughout this year with the same issue every time…

End result, I got all my money back. But I don’t trust them anymore and won’t be using them.

Anyone else having similar issues with them? Should we remove them from our list? Would be interested to hear others’ experiences.

Hello FW. Thanks for the update.

I haven’t traded with CCM, and I’m not inclined to do so in the future. But, like you, I have wondered whether we should continue to host them in Group 1 of our List.

Anyone who has live trading experience with CCM is invited to weigh in on this question.

[SmallPaul]

my concern is that the CFTC will start going after all offshore brokers who accept U.S. citizen on there R.E.D. list

[whywescalp]

I haven’t traded with CCM, and I’m not inclined to do so in the future. But, like you, I have wondered whether we should continue to host them in Group 1 of our List.

Personally I think after all the issues that we hear about them it might not be right. There are always issues with brokers, but as long as those issues are not persistent and not related to withdrawals, its not a “red” signal for me. I think we might have to think about users who follow and believe in the brokers that you put up there in Group-1. I personally know of atleast a couple of traders who just opened an account with one of the listed brokers, just because they were on the Group 1 list. Obviouslt its a democratic vote that we follow on this thread, but my sense is that there might be more users who agree with what I’m saying in here.

[whywescalp]

my concern is that the CFTC will start going after all offshore brokers who accept U.S. citizen on there R.E.D. list

I personally belive crypto borkers are the ultimate solution (atleast as of current scenario). These brokers are not limited by banking system, that is controlled by CFTC and the likes… I’m betting evolve.markets and coinexx.com are sort of best positioned to take advantage of the current situation and have longivity when compared to some other offshore brokers, especially in how they are structured.

[4evermaat]

I wanted to update the group. I got all of my balance from Capital City Markets today. Took just under a month from start to finish, which isn’t acceptable, but I got the $$ which is of course the most important thing. My experience with execution, etc was good. Their spreads are too high, especially for an offshore broker, but it was all upfront. Now the question is, do I put my $$ into OANDA, or go back offshore? Thanks again to the contributors of this thread (especially Clint).

Really up to you. IG group is coming back to the USA, so there is some hope there. But the current selection of offshore brokers that openly accept USA clients leaves something to be desired. Too bad as there are some great options like Darwinex, Global Prime Au, LMAX, etc

We don’t address the needs of traders in other countries (except, occasionally, Canada) who are looking for brokers beyond their own national borders.

Now that ESMA has stepped up to challenge our own CFTC as the World Forex Police, it will probably become necessary for someone from Europe to open a thread similar to this one, in which to address the interests of European traders desiring to escape from ESMA.

Well, there is a big difference here. ESMA is not banning people from using non EU brokers. There are plenty of quality brokers in Australia and Switzerland that you could trade with. And you can go offshore to less stable jurisdictions and take your chances.

When Brexit is complete, UK will likely reverse some of ESMA rules, particularly on leverage.

Also, ESMA ban is technically only 90 days long.
And while the new leverage rules do not affect professional traders. Although I do not recommend re-classifying as a professional trader. It is a scammer’s dream, as it allows brokers to legally walk away with client funds without any recourse. As this trader noted:

You understand and agree that the consequence of the transfer of ownership of any such monies means that it shall no longer be regarded or treated as “Client Money” in relation to the segregation of those monies and that we may deal with such money in our own right. Furthermore, in the case of insolvency, you rank as a general creditor in relation to such money.

You do have the right to request re-categorisation as a retail client. Whilst we will consider such a request, we cannot guarantee we would agree to it.

As a professional client, you will not receive the benefit of certain protections that are available for retail clients under FCA’s rules. You may however be eligible to benefit from lower overnight financing charges and interest on encumbered funds on your account. We enclose a summary of the main differences between professional clients and retail clients herein for your information

Why reclassify when you can go to a proper jurisdiction and get real protections? Defeats the entire purpose of being onshore if:

• your funds are not segregated
• no recourse whatsoever if the broker acts stupid
• no priority status in case of insolvency

[whywescalp]

Why reclassify when you can go to a proper jurisdiction and get real protections?

can you please elaborate more. What is your suggestion ?. I understand that its perhaps one of the most foolish thing to do to get classified as a professional trader but options do we really have to keep our required leverage and trading conditions intact ? other than going offshore or going to a second level jurisdiction (which is not better than offshore brokers)

[mlawson71]

Be careful with JAFX, CFTC has filed a civil action against them, accusing them of soliciting and accepting US customers in violation of the Commodity Exchange Act and agency rules.

More specifically, the CFTC’s complaint was filed on July 27, 2018 in the U.S. District Court for the District of Utah. It alleges that JAFX has been the counterparty to leveraged, retail forex transactions for customers located in the United States from September 2016 to present. The CFTC also alleges that the broker misrepresented its profit probability and risk of loss to customers.

[Clint]

Be careful with JAFX, CFTC has filed a civil action against them …

Yup. This has been discussed already in posts #5030 and #5032, above

[HyperScalper]

DIVERSIFIED OFFSHORE TRADING

OK, just to say where I’m focussed, we just went into production
using TurnkeyForex.com, FinProTrading.com, Evolve.Markets,
Coinexx.com and Tradersway.com as active accounts managed
by a BOT in a couple of pools, “small” and “medium” so that
similar accounts can operate on similar risk profiles…

A Master/Slaves arrangements allows for Slaves to instantly
copy the Master’s positions, while scaling them down in size
appropriately to the Slave account size, etc…

This is all “pure Forex” over the 28 Pairs, so I won’t be commenting
on any other trading instruments…

I’d hate to lose any of these brokers, and preferably we can
begin to accumulate more candidates… KEEP LOOKING
for new quality brokers, please !!

hyperscalper

[FinancialWorld]

Would you mind clarifying what your point was again?

You mention withdrawal issues as being something concerning, and that’s what’s been happening with CCM. I’ve been with them since they were Tallinex (those of us whose accounts were transferred to CCM as Tallinex could no longer accept US clients…I think because of CFTC crackdowns). Anyway, I’ve been a loyal customer for many years and really haven’t had many issues. But I’ve made 4-5 withdrawals since January and it’s been a complete nightmare every time. Yes I got my money, but something isn’t right over there and they aren’t being open about it. We don’t have to remove them (maybe just downgrade them), I’m just letting everyone know I don’t trust CCM anymore and have withdrawn all my money from them.

– FW

[rrram2]

I still have a live account there, that was transferred from Tallinex, CFTC recently sued Tallinex and fined them 10 million. SO lets see how the CFTC plans on collecting that. They may have some ties in NY somehow.

As for CCM I never was able to get money in there, I got the CC approved, and sent them all those pictures of the front and back of the CC with the face of the card holder, and after that CC was approved for deposit, they stopped taking credit cards, so I have never funded that account.

if you got the money thats whats most important~! AND for sure slow withdrawls suck, but better late than never!