The most critical legislation of interest to U.S. traders is the CFTC Reauthorization Act of 2005; it specifically addresses retail FOREX. The primary thrust of the Reauthorization Act and legislation currently pending is to require retail brokers to meet minimum capital requirements. The new minimum is $20,000,000—up from $5,000,000 just three years ago and no minimum 10 years back. A number of mergers have already taken place. The NFA is also enacting a Know Thy Customer rule for FCMs. This will require them to undertake a more proactive due diligence of prospective clients and their suitability for currency trading. One effect of this will probably be to eliminate account-funding options by PayPal and other electronic transfers except for bank wires.
Traders may wish to periodically check FOREX broker-dealer financials here: www.cftc.gov.
Retail FOREX seems to be following a path parallel to retail futures in the 1970s and 1980s. As predicted in the second edition, Introducing Brokers (IBs) are now required to register and meet minimal capital requirements. I expect mergers between the majors within the next several years as competition, smaller profit margins, and lower growth rates loom.
Similar slow-but-sure regulation of retail FOREX is occurring in other countries. Brokers not domiciled in the United States also should register with the NFA if they desire to prospect and accept accounts from U.S. citizens.
The Financial Markets Association (FMA) has suggested international foreign exchange regulatory standards. FMA’s model code currently has regulatory standing in Australia, Austria, Canada, Cyprus, Hong Kong, Malaysia, Malta, Mauritius, the Philippines, Slovenia, and Switzerland.
Countries with specific agencies regulating FOREX: United Kingdom— Financial Services Authority (FSA); Australia—Australian Securities and Investment Commission (ASIC); Switzerland—requires registration as a Financial Intermediary under Swiss Federal Law; Canada—Investment Canada, Federal Competition Bureau.
Regulation Past of the retail FOREX industry could be considered mild and somewhat tentative. But in early 2008 the NFA and the CFTC began to put some teeth into their regulatory oversight with major new compliance rules.
Traders may wish to periodically check FOREX broker-dealer financials here: www.cftc.gov.
Retail FOREX seems to be following a path parallel to retail futures in the 1970s and 1980s. As predicted in the second edition, Introducing Brokers (IBs) are now required to register and meet minimal capital requirements. I expect mergers between the majors within the next several years as competition, smaller profit margins, and lower growth rates loom.
Similar slow-but-sure regulation of retail FOREX is occurring in other countries. Brokers not domiciled in the United States also should register with the NFA if they desire to prospect and accept accounts from U.S. citizens.
The Financial Markets Association (FMA) has suggested international foreign exchange regulatory standards. FMA’s model code currently has regulatory standing in Australia, Austria, Canada, Cyprus, Hong Kong, Malaysia, Malta, Mauritius, the Philippines, Slovenia, and Switzerland.
Countries with specific agencies regulating FOREX: United Kingdom— Financial Services Authority (FSA); Australia—Australian Securities and Investment Commission (ASIC); Switzerland—requires registration as a Financial Intermediary under Swiss Federal Law; Canada—Investment Canada, Federal Competition Bureau.
Regulation Past of the retail FOREX industry could be considered mild and somewhat tentative. But in early 2008 the NFA and the CFTC began to put some teeth into their regulatory oversight with major new compliance rules.
