It’s good to see three new participants in this thread. Welcome — MarkinTn, SirKharles, and caffelatte.
And it’s good to see some renewed enthusiasm for finding and vetting new offshore brokers who are interested in doing business with us.
For the benefit of any newcomers who are discovering this thread for the first time, I think it would be a good idea to briefly describe our methodology. Let’s talk specifically about the kind of brokers we are looking for. And then let’s discuss how we go about finding and vetting them.
We are looking for offshore forex brokers who match the following profile:
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A broker who offers, to a worldwide retail clientele, an attractive menu of forex products, services, and trading platforms.
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A broker who not only tolerates — but, welcomes — U.S. clients. This broker realizes that business dealings with U.S persons (American citizens and non-citizen residents) attracts the attention and hostility of U.S. regulators; and this broker knows how to become insulated from hostile U.S. government interference. (See Note 1, below).
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A broker who operates a legally established business, domiciled in a jurisdiction which does not prohibit offering retail forex brokerage services to U.S. persons. (See Note 2, below).
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A broker who is well-capitalized, and firmly established in the forex brokerage business, who can be presumed to be in this business for the long haul.
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A broker whose reputation indicates honest, efficient dealings with clients in two critical functions: in the execution of client orders, and in the handling of client funds.
How we go about finding the brokers we are looking for
A broker who meets criterion #1 and criterion #2, above, qualifies to be included on our List. Finding such a broker is a task that any experienced trader can perform online, by searching the website of any offshore broker that comes to his/her attention. Brokers are discussed in many forums and in other online venues. Finding potential candidates to investigate is not difficult.
If you are interested in participating in this research, you should familiarize yourself with the details we have included in the listings for brokers in Group 1 — things such as: the type of broker (market-maker, ECN, etc.), whether the broker is regulated, the instruments offered by the broker (forex, stocks, metals, cryptos, etc.), and so forth. When you have found a candidate for our List, bring us some of this information, to support your recommendation. If most of the current participants on this thread agree with your appraisal, then your broker candidate will be added to our List.
A broker who meets all of the criteria (1 through 5) outlined above not only deserves to be on our List, but also deserves the Trusted Broker designation. That requires much more vetting than just getting onto the List, and this vetting always takes time, and requires input from multiple thread participants.
Criterion #3, above, is a tricky one. It’s generally easy to determine where an offshore broker is domiciled. But, determining the legal structure of that domicile location is more difficult. We have seen more than one situation in which a country seemed safe and welcoming for brokers dealing with U.S. clients, but subsequently started to restrict those dealings, when something in the country’s legal framework changed. As in the recent case of EagleFX, domiciled in Dominica, we suspect U.S. government pressure is behind these restrictions. But, we almost never learn the details. Brokers who are threatened or intimidated into severing their ties with the U.S. market are seldom forthcoming with explanations about what actually created the situation.
Criterion #4 requires some detective work in order to estimate broker capitalization, and this is often just not possible. Accordingly, the presumption of a broker’s permanent presence in the forex industry is a subjective judgement.
Criterion #5 depends on the actual live trading experience of members of this thread. This criterion is the one we use, more than any other, to decide the Trusted Broker designation.
Notes:
Note 1: Foreign brokers interested in onboarding U.S. clients face some formidable threats from U.S. regulators — and, in many cases, from regulators in their own countries, because those regulators have entered into agreements with the U.S. to act as proxies for U.S. regulators and to enforce U.S. regulations regarding U.S. persons.
The CFTC (especially when it was headed by Gary Gensler) has tried every trick in the book to erect a regulatory “fence” around the U.S., to prevent Americans from having any business relationships with offshore brokers. The CFTC’s threats and intimidation have driven most offshore brokers to abandon the U.S. market completely, and those brokers will tell us flatly that they do not accept U.S. clients. Unless and until that situation changes, those brokers are not candidates for our List.
The CFTC has specifically targeted offshore brokers known to be hosting U.S. clients, and many of those friendly brokers have been prosecuted, often on trumped-up charges. For example, the CFTC acquired the legal authority to prohibit foreign brokers from advertising to, or otherwise soliciting, U.S. persons (citizens and non-citizen residents). Then the CFTC took the position that foreign brokers who have websites that can be accessed in the U.S. are, in effect, soliciting U.S. persons.
The CFTC has received a lot of blow-back on the website issue. But, they continue to treat any foreign broker whose website can be accessed in the U.S. as a potential target.
This is the mine-field that offshore brokers must navigate, if they want to tap into the lucrative U.S. market.
A frequently used tactic for keeping the CFTC at bay is for an offshore broker to categorically deny, in writing on their website, that they accept U.S. clents. Whether they acually host U.S. clients then becomes a difficult matter for the CFTC to determine. This ruse has worked for some brokers in the past. However, the categorical denial that U.S. persons are hosted is a major turn-off to prospective U.S. clients looking for a friendly offshore broker with whom to trade. So, a softer sort of denial has evolved, as follows.
The CFTC’s legal authority is aimed at the solicitation of U.S. citizens, or any other persons within the borders of the U.S. So, savvy offshore brokers have adopted the tactic of categorically denying that they solicit U.S. persons, or that their websites are directed at a U.S. audience. Their actual policy toward prospectve U.S. clients is revealed only in personal conversations with customer service representatives. U.S. traders interested in opening accounts with these brokers, upon contacting them directly, generally get reliable information regarding the actual policy toward U.S. clients. And when the policy is to welcome U.S. clients, customer service representatives typically are very welcoming. These are the offshore brokers we want to find and vet.
Note 2: In most cases, legally domiciled does not mean physically located. It’s very common to find offshore forex brokers, with offices in financial centers like London, whose legal domicile is half-a-world away — in the middle east, in the Caribbean region, or in the Asia/Pacific region. This arrangement is analogous to a western mining company in the U.S. being incorporated in the state of Delaware.
Offshore domicile gives legal cover to these brokers, who — if they were domiciled in the U.K., for example — would be targeted and shut down by the cooperative efforts of British and American regulators. This sort of cooperation is set forth in nasty little agreements between governments, known as Memorada of Understanding. These are the agreements that turn certain foreign regulators into proxies for U.S. regulators.