CFTC issues final forex exchange market rule

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The U.S. Commodity Futures Trading Commission (CFTC) issued a final rule for the retail foreign exchange market, which included slightly relaxing an earlier proposal that would slash leverage available to investors participating in these transactions.

The final rules implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Food, Conservation, and Energy Act of 2008, which, together, provide the CFTC with broad authority to register and regulate entities wishing to serve as counterparties to, or to intermediate, retail foreign exchange (forex) transactions.  

The final rule put in place requirements for retail foreign exchange products, including registration, disclosure statements, record keeping, financial reporting and minimum capital standards.  

The final regulations will be effective as of October 18, 2010.  The regulations were adopted essentially as written with the exception of two major issues:

  • Leverage – while the proposed rules called for a maximum leverage of 10:1, the final rules allow the National Future Association (NFA) to determine the margin requirements for the currencies within a defined set of CFTC parameters.  Currently the parameters include 50:1 leverage for major currencies and 20:1 leverage for all other currencies.
  • Forex Introducing Brokers – the proposed rules called for all forex introducing brokers to be guaranteed by a single future commissions merchant (FCM) or retain foreign exchange dealer (RFED).  The final rules allow a forex introducing broker to be either guaranteed or independent, consistent with other regulated futures introducing broker (IB).    FCMs and RFEDs are required to maintain net capital of $20 million plus 5 percent of the amount, if any, by which liabilities to retail forex customers exceed $10 million.

Major currency dealers oppose these changes.    Dealers argue that it will actually have a negative net affect on retail currency traders.   Instead of protecting the consumer, the CFTC’s actions will drive small volume retail traders to overseas dealers where leverage can be as high as 700:1!    There are also unregulated dealers overseas who will take advantage of retail traders seeking 100:1 leverage.   

More importantly, final regulation will kill retail trading in the United State.   Dealers argue that forex is a $1 billion industry that provides millions of solid jobs in the United States.     The final regulation will drive small retail customers offshore.   The result will be less fraud protection for the retail trader, a loss of millions of jobs in the United States, and no significant gain in consumer protection as a result.


Anna Timone (195 Posts)


  1. I saw this coming. That’s why I moved my accounts off shore 4 mos ago and I’m not coming back after this. I believe this is a nod to the Goldmans and Citibanks who saw a massive loss of investor traffic to FX over the last decade and they wanted to stop the flow.

    Well, smart investors left months ago and more will continue to leave for the Non-US brokers.

    Thoughts any 1??? Is this a good thing what the CFTC has done?

  2. Qawi Kabanu says:

    Any good referals of off shore dealers?

  3. How difficult is creating an account oversea’s where leverage is more lax? How are taxes on profits gauged (double counted??)? James – basically, I’m looking for the net-net change from having a U.S. based account vs. overseas. Thanks! :)

  4. Jamie Coleman says:

    Umm, Citi has its own brokerage for retail and Goldman has invested wads of cash in several retail ventures…I don’t think there is any conspiracy. Just consumer protection, however ill conceived, in my view. Washington feels it has to protect the proles like us from ourselves…

  5. This government has had too much time on their hands for the past 40 years.

  6. excellent!! i might have to check that out. I just signed up for my demo account on FXDD to test ‘er out. :)

  7. My understanding is that non-US brokers can’t go out of their way to solicit you. But if you find them :) .

    Some brokers will not be able to take US citizens but others are glad to open accounts. If you’re not sure about ANY broker, look them up, demo them and speak to their customer support BEFORE opening and account and trading.

    Sorry to the FXDD boys here but as much as I like Barry, this move didn’t sit well with me. I’m sorry they over compensated for the corrupt brokers. Again, I don’t think it was to proctect the trader, rather a nod to the investment banks in an attempt to staunch the flow out of them to FX brokers.

    Well, guys…you missed one Na na-na-na nahhhh naahhhhh!!!!

  8. By the way, I can vouch for FXDD Malta. Fast funding and withdrawls. Customer support is great!!!!

  9. is the Malta homepage

  10. I think the brokers saying they give job to 1 million worker….emmmmm…. maybe a bit over valued… the rest, well they’ll drag the traders away, no doubt. In mauritius, Cyprus, Malta, UK , Switzerland, etc etc , they are right now having champagne party, thanksfully to those politicians that are making so much money from their lobbies that they possibly do not even know what forex is…

  11. James,

    How long does it take to withdraw funds from the FXDD Malta account? I applied for one which was approved (not funded yet) when the word came out about more changes for US traders. I haven’t heard if anything will change, but if they do I will definitely take my business offshore. Perhaps I can get that account credited to FL.

  12. Excellent recommendation there James. Our main sponsor FXDD have been very good to us here at ForexLive.

  13. Normally I got my withdrawls in 2 business days.
    Paypal funding may happen the same day if you catch them early.

    No fees either way. That’s what the spreads are for. ;)

  14. James,

    Thanks James. I’m using PayPal now, and it works well. I see the changes take place in October. Bastards. Well, off I go to FXDD Malta.

  15. BTW, FXDD Malta:
    1. 200:1 Leverage
    2. Full hedging allowed , no FIFO rules
    3. Scalping allowed along with all EA’s.
    4. MetaTrader Extreme gives fractional pip pricing which may benefit certain EA’s.

    One of the best brokers out there.

  16. James,

    Thanks for the info. I wasn’t keen to move, but I’ll get on it. I’ve been very happy with FXDD in general. The Malta branch was a very smart thing to do.

  17. Alot of these guys take alertpay to, and it’s cheap as well. Those bank wire fees can add up.

  18. True, I moved from FXDD US to Malta, basically just tell them you wish to move to their Malta branch and they’ll take care of the rest.

  19. The CFTC might be following Japan, which also capped leverage to 50:1.

  20. Once these clowns in Washington get through destroying another industry, I won’t be back. I’ll vote with my capital and quit trading forex once it starts to fall apart. Nope, I will not trade stocks or futures either. I’ll let the liquidity providers provide liquidity all day to themselves. FX will soon be as popular in the USA as stocks are now – retail volume has dried up. This will mean higher spreads, and as more quit, spreads get higher, causing more to quit, and on and on. In the meantime, I’ll go find something else to do with my capital.

    I’ll be back once newly elected leaders unravel the mess that has been created. That will take years unfortunately. Good thing I have another business to focus on in the meantime.

  21. @Yohay Geez!!!

    Just educate ppl on how to trade properly!!! Maybe like before a new live account is traded for newbies with less than 1 year of experience, they have to trade demo for 2 months. Done punish everyone!!! Govt just overcompensate far too much.

  22. @Alex, yeah i noticed that too. Plus the sudden exchange of people pumping FXDD, the sponsor.

    • Jamie Coleman says:

      It’s called commerce, friends. If you want to discuss brokers, there are literally thousands of sites out there for you. Just not this one…

  23. @Alex, Hey, this is a business. I have accounts of different brokers, FXDD is one of them. I’m going to respect the site by not saying my other brokers by name. Want to know more about other brokers??? Google is your friend!

  24. I wasn’t intentionally advertising other brokers and was not including any kind of link or promotional material in the post. I personally had not thought of that until my post got deleted (twice now) I was just merrily trying to assist traders in presenting other choices for them.

  25. WSJ reports that BIS survey shows large banks no longer dominate $4Trillion a day FX market. Hedge Funds, Mutual funds and Insurance companies gaining the upper hand. Retail traders not mentioned in the article.


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