Going offshore to escape the CFTC

SmallPaul, did you grow up speaking a language other than English?

@grandpipmaster

As this subject has my interest I decided to have a look around at some stuff.

Very interesting (once again) that the CFTC does not protect client funds nor compensate clients. And I will be honest: I for one was under the impression that this was but one of their functions.

I checked on my broker (UK) for the fun of it. In the UK: it is the FSCS that will compensate clients if the firm is registered with them and it is a requirement that such firm is authorized by and regulated with the FCA. In other words: it is not the FCA (CFTC equivalent I assume) that undertakes to compensate clients. It is unclear to me, however, and at this stage, as to whether it is a requirement of the FCA for an authorized and regulated broker by the FCA to be registered with the FSCS but I am attempting to obtain clarity on this from my broker (who is, fortunately for me anyway, both authorized and regulated by the FCA and registered with the FSCS).

I suppose my point really is: in the US is there not another regulatory body or organization responsible for client fund compensation that a broker could/should be registered with e.g. the FDIC???

All of the above definitely something for (new) traders to investigate i.e. before making the assumption that the regulatory authority/body itself will protect and compensate (easy mistake/assumption to make though).

Regards,

Dale.

Right well straight from the horse’s (broker’s) mouth:

In the UK: it is a mandatory requirement to be FSCS protected as a regulated brokerage. Coverage has recently been raised to £85 000 (from £50 000).

US and CFTC??? No idea. Am still very interested to find out though.

Regards,

Dale.

your barking up the tree, pull yourself together

i would use coinbase pro over coinbase the fees are cheaper so who has the lower fees when buying crypto gemini or coinbase pro?

So gemini or coinbase pro. I just dont want to pay high withdrawal fees. Also for coinexx, would I do the account currency as BTC or USD?

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Ive looked at Gemini seems to be slightly better.

https://gemini.com/api-fee-schedule/#api-fee-schedule

maybe i didn’t look hard but for my trading volume coinabase pro look cheaper, with me im using them for my withdrawals from my brokers then selling my bitcoin for USD and using ACH transfer to my bank

EDIT: for example i did a bitcoin withdrawal from ldqfx it was in my coinbase pro account in 40min, i sold them did a ach transfer to my bank it was in my bank account 6hrs later. that whole process took less then a day, im still shock how quick ldqfx procees withdrawals

Oh wow, did you check out the links I previously posted. Coinbase pro was still the better choice? Also how are you liking lqdfx? How long have you been with them? I have been looking at both them and coinexx. Thats a super fast turn around for deposits.

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i started with lqdfx this year i have account with every trusted broker on our list some are funded and some not, i love lqdfx because of thier quick withdrawals any thing longer then their normal will raise a red flag they might not have the better spreads but they pay my profits, coinexx also pay out i woould tell any trader to spread your money out with diffrent trusted brokers on our list just incase sht hit the fan, im drunk im out

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Hello Dale,

Regarding the protection of customer funds on deposit with U.S. retail forex brokers, there are two separate, but related, issues.

First, U.S. customer funds cannot be segregated (in the legal sense) from the corporate funds of the broker, because of some quirk or other in the bankruptcy laws of the U.S. This means that an insolvent U.S. broker can lose its customers’ funds along with its own funds.

I’m not a lawyer, so I can’t explain why the U.S. bankruptcy law is what it is. The little I know about it, I learned from Jason Rogers, the FXCM representative on this forum (and other forums). Here is one of Jason’s posts — CFTC - “Customer Funds in Segregation”

Second, in the case of lost customer funds, there is no U.S. government agency charged with restoring those losses.

All of this stands in sharp contrast to the situation in the U.K., for example, where customer funds are legally segregated from broker funds, making it unlikely that those customer funds will be lost, in whole or in part, even in the case of a broker bankruptcy. And further, in any case of broker bankruptcy or fraud in which customer funds are lost, U.K. government insurance stands ready to make good, up to a fairly sizable maximum amount.

In my opinion, a new trader in the U.S. should initially consider only a U.S.-based forex broker, leaving the consideration of an offshore broker for a time later in his career when he is better qualified to evaluate the special challenges of trading offshore. This means that a new trader in the U.S. has pitifully few choices starting out.

Currently, there are only three U.S. brokers available to a beginner with limited funds: Forex•com, Oanda, and IG Markets US. All three are required by CFTC regulations to offer no more than 50:1 leverage, to prohibit hedging, and to conform to the FIFO rule. And all three essentially commingle corporate and customer funds, with no provision for insurance in the case of loss.

U.S. traders can find better trading conditions offshore, which explains the interest in this thread.

But, U.S. traders can also find rip-offs and scams offshore, which makes extreme due diligence one of the essential survival skills for offshore traders. That’s why I recommend that newbies not make their first forex broker an offshore broker.

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Hi Clint.

Thank you for this.

Was hoping you were going to eventually get around here i.e. was getting worried that this thread was going to go sideways after my post.

Well I am surprised I will tell you. Even in the EU it’s possible to have client funds restored (all things being equal and requirements being met of course).

But I do agree: if I was in the US there is no question that I’d trade with a CFTC registered and regulated broker in spite of this (although in fairness probably only because my broker wouldn’t have me if I lived in the US!!! LOL!!!) (as far as I know anyway). But that’s just me of course i.e. leverage no longer an issue (matter of fact because of the ESMA rules of last year I’m on 5:1 on most instruments) (not FOREX obviously).

Anyways. Thanks again. A lot clearer now. As i said: I used to see this thread and wonder why anybody would actually want to escape the CFTC. Not that I agree with the sentiment: but at least I understand.

Thanks Clint.

And thanks, again, for so diligently maintaining this thread over the years.

Regards,

Dale.

I might also add that some of the offshore brokers offer CFD’s on various commodities, indices, stocks, etc. Even tho these are available elsewhere in the US, the cost of entry can be extremely high vs offshore offerings.

So for offshore brokers, are customers’ funds segregated?
From your discussion, I only know US CFTC brokers do not segregate customers’ funds, but nobody say if offshore brokers segregate customers’ funds.

Some say they do, but even if they do not, my entire point is your money is not at any LESS RISK with CFTC broker. Therefore, if money is not protected with any of our options as US traders, it only makes sense to trade offshore. Simply due to the fact you only need to put 10-15% of funds up for margin to EXECUTE SAME EXACT TRADE vs. CFTC broker. Keep the rest in your FDIC insured bank account and only move it when needed for more margin. The irony of this: folks think money is more at risk offshore, IT IS THE COMPLETE OPPOSITE

In the UK it’s not an option i.e. if the broker is registered and regulated then client funds must be segregated. As far as I know this applies to the EU as well.

But the onus is on you to check the broker’s blurb about this which is on their website and then go search for them on the website of their regulator. It’s not unknown for a broker to have been registered and regulated and for whatever reason such registration is no longer valid and therefore regulation is no longer in force or that certain exemptions have been granted which, conveniently, may not appear on the broker’s website.

Well, that’s nice for traders who have access to brokers in the U.K. or the EU.

However, U.K. and EU brokers are not an option for U.S. residents, thanks to agreements between the U.S. CFTC and the U.K. and EU regulators. These agreements are called Memoranda of Understanding, and they basically require U.K. and EU regulators to enforce CFTC regulations against U.S. residents who attempt to open accounts in the U.K. or EU.

And the U.K. and EU are not the only jurisdictions controlled in this way by the U.S. CFTC.

As U.S. residents, we are denied access to brokers in the U.K., the EU, Switzerland, Australia, New Zealand, and Canada, among others. When this thread began in 2010, we considered all of those jurisdictions to be part of the “offshore” that we wanted to explore. But, the CFTC quickly closed off every one of those regions, through their bloody Memoranda of Collusion, er, I mean Understanding.

Consequently, we have looked for trading opportunities in countries not yet under the thumb of the U.S. Nanny State – countries in eastern Europe and the Middle East, as well as island nations in the Caribbean, the western Pacific, and the Indian Ocean.

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Hi Clint.

This part is coming back to me now from when it started those years ago. I seem to remember taking the stance at the time that it wasn’t a big deal. But at the time I was involved with Bulgaria. In just reading your post and seeing how it has all evolved over the years is it not ironic how it throws US traders to the wolves and leaves them at the mercy of unscrupulous and unethical brokers and with unfair practices which APPARENTLY was what the legislation was intended to protect US traders from in the first place. And knowing what I know of those responsible for the legislation I would find it a stretch to believe that they did not see this as an unintended consequence of such legislation. I am surprised to say the least.

Suffice to say my question of late has been answered. Thank you.

Regards,

Dale.

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U.S. FOREX LEADER COMPARISON

I am in no way throwing in the towel and am
continuing to ramping
up production with my favorite offshore brokers, but… I have to
consider what would I need to do, if I were forced to use
a U.S. broker so just posting this comparison article
which is likely to be quite unbiased for your consideration:

If I had to move onshore, then I would need to reshape code to
respect FIFO and of course lose 10x leverage for the
smaller accounts, etc… Both offer MT4…
More of a "gedanken experiment"
than anything else for me, at this time…

[EDIT] Focus exclusively on what IG’s MT4 offers…
Overall, it looks workable; but is extremely disappointing
with restrictions on MT4 Limit placements, FIFO, Fixed Spreads
with poor pricing (commissions in spread), etc.
But it’s a starting point for me to see
what I could do to accommodate such a trading environment.
Really makes you appreciate what Coinexx and others are
currently offering !! :slight_smile:

hyperscalper

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I found a couple more brokers you guys can check out

https://www.n1cm.com/

https://xtreamforex.com/index.html

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