Going offshore to escape the CFTC

Broker Discussion Forex Brokers
4182

Clint, what do you see as the advantages and disadvantages of the Click365-type of exchange?

Thanks for this great thread.

4183

Clint,

It’s going to be interesting. That’s the nicest thing I can think of to say. After 7 years of work / study, I’m finally beginning to recover my losses… I just hope the CFTC doesn’t close the door completely before I’ve at least had a chance to do that.

4184

I am too looking for a new broker due to FXCM. I have been looking at tradersway and so far I have one complaint. The swap rates are super high. I trade setups based off the weekly and monthly moves so these could really take a hold after a a few Wednesday triple swaps.

Tradersway swap rate for the EURJPY is Long -11.85 Short -14.45 “calculated from the live account feed not demo”
FX Choice swap rate for the EURJPY is Long -0.56 Short 0.33
Oanda swap rate for the EURJPY is Long 0.75 Short -1.55
Gain Capital swap rate for the EURJPY is Long -0.17 Short 0.01

So far for an offshore broker Fx Choice seems to be a clear winner in this regard. As they’re not taking large amounts of profit from their client via swap rates.

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4185

Trump is appointing Giancarlo as the new chair of the CTFC. Do you think this will make a difference?

Also, in a short interview after the NGFA national convention (video titled “Giancarlo speaks with NGFA” for those interested to view it), Giancarlo mentioned that “Dodd-Frank assigned to the CTFC responsibility to a large portion of the [swaps] market”. My understanding is forex part of the swaps market. Wouldn’t that mean that a repeal of Dodd-Frank could potentially make the CTFC more chill?

4186

I’m not an expert on the [B]Click365[/B] system. That’s the reason I suggested in my previous post that anyone interested in this topic [I]do the research on your own.[/I]

This site — FX Daily Futures contracts — is the only resource I’ve looked at in any detail. You might want to start there.

I will throw out a few of my impressions regarding the pro’s and con’s of the Click365 system:

[U][B]Pro’s[/B][/U]:

• [B]Segregated customer funds.[/B] This is something we’ve never had in the U.S. — and, under current U.S. law, never will have. Unless and until the U.S. congress amends the law, segregated accounts for U.S. forex traders are not possible. See Jason Rogers’ excellent EXPLANATION of the situation in the U.S.

• [B]Essentially, an STP-type of order-handling protocol,[/B] in which client trades go directly to the interbank. Click365 does not use the term STP, or compare its order-handling to STP order-handling — that’s my interpretation. But, Click365 makes it clear that client trades are matched directly to the best BID and/or ASK prices available from among the banks in their pool of liquidity providers. In Click365’s description, customers trade directly with “market-makers”, which of course is what their liquidity providers are — but, the terminology can be confusing to U.S. traders, who classify [I]retail forex brokers[/I] as market-makers, or STP brokers, or ECN brokers.

[U][B]Con’s[/B][/U]:

• [B]Terms and conditions dictated by the exchange,[/B] with zero competition between brokers wishing to attract customers with favorable terms and conditions. As I understand the arrangement, brokers in the Click365 system are reduced to the role of [I]introducing brokers,[/I] responsible for determining the suitability of individual clients, and responsible for forwarding their funds to the segregated accounts at the exchange. The following things are all dictated by the Click365 system (and/or the Japanese regulatory authority):

  • contract size (10,000 units for most pairs; 100,000 units for some pairs)
  • maximum allowable leverage (currently 25:1 for individual clients)
  • required margin (not linked to max. allowable leverage)
  • required initial deposit
  • currency pairs offered
  • etc.

• [B]Disadvantageous margin and leverage for individual clients.[/B] Note that individual clients have [I]much higher required margin, and much lower maximum allowable leverage,[/I] than institutional clients.

• [B]Limited number of liquidity providers.[/B] Click365 currently lists 6 liquidity providers (banks, referred to as market-makers). Compare this to anywhere from 12 to 20 liquidity providers for many offshore retail brokers.

Take all of the above [I]with a grain of salt.[/I] As I said, I’m not an expert in this Click365 system.

If you want more detailed info, you’re on your own.

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4187

My hope, as well.

If you’re trading with a U.S. broker, I think it will become clear over the next few months whether that broker/client relationship has a future.

I’m cautiously optimistic that the new administration in the White House, and the new leadership at the CFTC, will adopt a new stance toward off-exchange forex trading in general, and retail forex trading in particular.

In the event my optimism is misplaced, and things go south here in the U.S., an offshore account, as a back-up, could give you a bug-out option.

If you’re already trading with an offshore broker, my guess is that you will be safe for the foreseeable future. But, nobody can know for sure, and my guess could be totally wrong.

As Yogi Berra famously said, “It’s tough to make predictions. Especially about the future.”

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4188

Are you sure you’re comparing swap rates for equivalent position sizes?

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4189

I hope so, but it’s too early to tell.

I like the things I’ve heard him say, so far, but I’ve only heard general comments about his attitude toward markets and competition, and his approach to regulation. I haven’t heard him say anything specific about the currency market in general, or retail forex trading in particular. So, we’ll just have to watch and listen carefully.

I know you’re not yet able to post links, so I’ll do it for you — THIS is the video you referred to.

Actually, it’s the other way around: swaps are part of the forex market (broadly defined).

The forex market (broadly defined) comprises all of the worldwide foreign exchange market(s), including:

  • spot forex (that’s our little corner of the market)
  • outright forwards
  • foreign exchange swaps
  • currency swaps
  • options
  • other products

Spot forex (which includes both retail and institutional trading) is part of “the forex market”, and swaps are part of “the forex market”. But, spot forex is not part of the swaps market, or vice versa.

Swaps (being a type of foreign exchange derivative) come under the Dodd-Frank law, but spot forex does not. However, spot forex was placed under CFTC regulation by laws which pre-date Dodd-Frank. So, in my opinion, even a total repeal of Dodd-Frank would not get spot forex out from under the thumb of the CFTC.

If the new regime in the White House, and the new regime at the CFTC, take a more moderate approach to regulation generally, then maybe the CFTC will lighten up in its oppression of spot forex, and especially retail spot forex.

•

Here is a presentation which Christopher Giancarlo gave to an audience at the American Enterprise Institute last September. The presentation was long, and got off to a slow start. But, if you stick with it, I think you will get some insight into the thinking of the new CFTC chairman.

Welcome to this forum, by the way!

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4190

All swaps I made sure we’re quoted at 1lot or 100,000 units

4191

Very interesting, thanks for sharing! His views definitely look more on the moderate side. Statements like “we should be trying to understand the business and adapt our rules, not the other way around” are reassuring. I’m also hoping that FIFO and No Hedging won’t survive the scrutiny of the “we need to change our strategies to cope with the digital age and algorithmic trading” part that he repeated 100 times.

4192

I’m part of the FXCM fallout, as I was for GFT as well a few years back.

Being a US based trader, it’s my understanding that we now have Oanda, Gain, TD Ameritrade, Interactive Brokers, and the 12 off-shore brokers listed as “Trusted Brokers” from post #7?

Edited because my above statement was wrong. Corrected below. Thanks Clint!

Being a US based trader, it’s my understanding that we now have Oanda, Gain, TD Ameritrade, Interactive Brokers, and the 2 off-shore brokers ([B]Trader’s Way[/B] & [B]FX Choice[/B]) listed as “Trusted Brokers” from post #1?

Sort of sounds like FX Choice is the favorite?

Thanks!

4193

Currently, there are only [I][B]two[/B][/I] Trusted Brokers (not 12) in our Offshore Broker List.

Post #1 is the primary list.

The 12 offshore brokers listed there basically have 2 things in common:

B[/B] they all accept U.S. clients, and

B[/B] they all look reasonably sound and reliable, and therefore appear to be worth further
examination and careful vetting by interested traders.

The links in post #7 connect to comments, both pro and con, regarding the 12 listed brokers.

Two of the 12 listed brokers have been singled out for special notice as Trusted Brokers:

[B]Trader’s Way[/B] in Dominica, and [B]FX Choice[/B] in Belize.

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4194

Interesting article about IFSC (Belize) increasing capital requirements for FOREX brokers:

Exclusive: Belize IFSC Begins Enforcement of New Capital Requirements | Finance Magnates

I trade with [B]FX Choice[/B]. Never experienced problems with them, though I was a bit surprised a couple of months ago when they eliminated many of their derivatives offerings, citing lack of trading activity. Based on this, maybe they also needed to cut some expenses to shore up capital.

4195

I saw that article, Shatner. Thanks for posting the link.

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4196

Trader’s Way accepts US citizens. Someone has an account with them.

4197

HI

Can anyone also confirm it, so we can go to the bottom of this. Mr FxChoice rep. never responded to the above. If you do not trade around the news, i guess this is not applying to you.
I took my money and ran. I have just opened account with Tradersway and my EA works great.
Fxchoice cheats around the news. They might not be ECN STP broker.

4198

I only have demo account but yes I have seen it happen.

4199

Thanks for confirming that.

I actually traded few times during the freezes. Myfxchoice holds your order for few seconds and then they fill it. Its ridicules, this is the broker that we designated to be a trusted broker.

THIS IS NOT STP ECN BROKER.

Please watch this video, this is not an advertisement.

It seems to me, this is what they do.

This does not happen with Tallinex or Tradersway.

Anybody else can confirm it.

Thanks.

4200

Well, to me, it’s just the broker trying to be a bit more efficient / profitable, and there is
some logic to it. When MT4 sizes of 0.01 are permitted, it’s clear that the large
liquidity providers simply don’t deal in anything less than 1.00 or higher lot sizes.

Therefore, there appears to be a a need for an “aggregator” which assists in
accumulating larger sizes which will be executable at the inter-bank liquidity
level. At some stage, clearly this has to happen.

I discussed a 700 millisecond Order turn around time with one of the brokers on
our list. This was explained to me, and they could bypass this aggregation
function. That immediately resulted in execution times down in the sub-200 millisecond range.

We are locating VPS’s in Amsterdam, and this greatly decreases the latency to
many brokers’ backends as well… About 1 millisecond ping time.

But let’s not expect too much from a retail low cost platform such as MT4. If you
trade in the Big Leagues, and depending upon your Strategy, there are significant
differences among brokers.

Further details, I can’t really discuss due to confidentiality… But I’ve said before that
if execution speed and consistency are important for your trading plan, that you can
request the broker provide you with better connectivity…

After all, very few traders are Primarily dependent on execution latency and consistency.
We ain’t doing “arbitrage” on a low cost MT4 retail platform, right ??? Evaluate your
trading approach, and be honest how much of your plan depends upon "sheer speed"
anyway (within reason) ?? JUST A THOUGHT.

If you don’t ask, you won’t get ??..

hyperscalper

4201

You are talking about 700ms, I am saying 7-10sec or longer freezes. When you pull a 1 min chart,
you can see gaps.
The last US UNEMPLOYMENT NUMBER, Fxchoice froze for over 10 sec or longer.
I wish I recorded a video. I have never seen it that bad.

With TradersWay we get around 10ms ping, end everything works great.