Help, Is this normal for a broker?

I am new to Forex and I have been doing lots of training. I am in the process of deciding which broker to use (have limited funds). Have come accross Forex club (Forexclub.com)where they give $100 to get started. They are NFA registered in NY. What got me slightly worried is a paragraph in one of their disclaimer forms as follows:

"THE TRANSACTIONS YOU ARE ENTERING INTO WITH FOREX CLUB ARE NOT TRADED ON AN EXCHANGE. THEREFORE, UNDER THE U.S. BANKRUPTCY CODE, YOUR FUNDS MAY NOT RECEIVE THE SAME PROTECTIONS AS FUNDS USED TO MARGIN OR GUARANTEE EXCHANGE-TRADED FUTURES AND OPTIONS CONTRACTS, WHICH RECEIVE A PRIORITY IN BANKRUPTCY. SINCE THAT SAME PRIORITY HAS NOT BEEN GIVEN TO FUNDS USED FOR OFF-EXCHANGE FOREX TRADING, IF FOREX CLUB BECOMES INSOLVENT AND YOU HAVE A CLAIM FOR AMOUNTS DEPOSITED OR PROFITS EARNED ON TRANSACTIONS WITH FOREX CLUB, YOUR CLAIM MAY NOT RECEIVE A PRIORITY. WITHOUT A PRIORITY, YOU ARE A GENERAL CREDITOR AND YOUR CLAIM WILL BE PAID, ALONG WITH THE CLAIMS OF OTHER GENERAL CREDITORS, FROM ANY MONIES STILL AVAILABLE AFTER PRIORITY CLAIMS ARE PAID. EVEN CUSTOMER FUNDS THAT FOREX CLUB KEEPS SEPARATE FROM ITS OWN OPERATING FUNDS MAY NOT BE SAFE FROM THE CLAIMS OF OTHER GENERAL AND PRIORITY CREDITORS.

Please comment, is this normal practice? Am slightly confused, it appears that funds are not actually going on the Market. If this is normal everything else seems ok.

Thanks
Edd

I would have thought not, unless its a spreadbetting company or something along those lines.

Thanks, I take it most platforms are directly in the market.

I don’t know if all forex brokers have the same language in their account documentation regarding creditor priority and all that, but the bit about not trading on an exchange is 100% correct. There is no forex exchange, so that applies to all forex brokers.