The Commodity Futures Trading Commission (CFTC) regulates all Forex brokers which are legally allowed to market their services in the U.S., along with the National Futures Association (NFA). Most Forex traders in the U.S. choose to open their accounts with CFTC-regulated Forex brokers. I have created a shortlist for you of the best CFTC-regulated Forex brokers. Read on to view my shortlist and to learn how the CFTC can protect you plus the pros and cons of opening an account with a CFTC-regulated broker compared to an offshore broker.
- eToro, Best broker for social traders and crypto traders : 74% of retail CFD accounts lose money.
- Forex.com, Excellent trading conditions + NFA regulation.
- Plus500, multi-asset and CFD broker.
Best CFTC Brokers Comparison
| | | |
Regulators | ASIC, CySEC, FCA, FSA | ASIC, CFTC, CIMA, FCA, FSA, IIROC, NFA | ASIC, CySEC, FCA, FMA, FSCA, MAS |
Year Established | 2007 | 2001 | 2008 |
Execution Type(s) | Market Maker | Market Maker | Market Maker |
Minimum Deposit | |||
Average Trading Cost EUR/USD | 1.0 pips | 1.1 pips | 1.3 pips |
Average Trading Cost GBP/USD | 2.2 pips | 1.3 pips | 1.7 pips |
Average Trading Cost Gold | $0.45 | $0.63 | $0.34 |
Trading Platform(s) | Proprietary platform | MetaTrader 4, MetaTrader 5, Proprietary platform, Trading View | Proprietary platform, Web-based |
Islamic Account | |||
Negative Balance Protection | |||
Get Started Visit Website74% of retail CFD accounts lose money | Visit Website | Get Started Visit Website82% of retail CFD accounts lose money |
eToro
In Summary Best broker for social traders and crypto traders : 74% of retail CFD accounts lose moneyeToro was founded in the early days of the online retail Forex era, in 2007 – this broker occupies a unique space as the king of social and copy trading. eToro has a long track record and unique reputation to protect, although this image is more focused on its copy trading model than on any other individual feature, except maybe its special relationship with cryptocurrencies. eToro is regulated in Cyprus, the U.K., Australia, and the United States although its U.S. offering is firmly differentiated from its offering to the rest of the world. eToro is a leading cryptocurrencies CFD broker. Following its 2019 acquisition of Danish blockchain company Firmo and Belgian crypto portfolio tracker application Delta, it released its cryptocurrency wallet for mobile devices.CFD crypto is not available for users in the US and under FCA regulation.
Pros & Cons
- Active investment community ideal for social trading
- Dedicated tools for social trading
- Broad cryptocurrency selection
- Expanding educational offering for beginner traders
- Internal withdrawal fees
Forex.com
In Summary Excellent trading conditions + NFA regulationFounded in 2001, Forex.com is a global name owned by StoneX Group, a publicly traded company on the NASDAQ. It is a CFTC Forex broker and is owned by a company facing strong regulatory requirements due to its public listing.
Forex.com executes over 99% of customer trades in less than 1 second, and their average execution speed is 0.05 seconds. They successfully fill 99.99% of client orders.Forex.com provides regular analysis with trade ideas and webinars on key events such as non-farm payroll.
Direct Market Access is available at Forex.com. This can be a great option if you want to access raw spreads from their liquidity providers and do not want a dealing-desk or market maker type of account.
Pros & Cons
- Lower minimum deposit
- Islamic account available
- Good reputation
- Choice of account types
- Withdrawal fee
Plus500
In Summary multi-asset and CFD brokerPlus500 is a global Forex broker founded in 2008. It maintains an excellent regulatory environment provided by the FCA in the UK, the CySEC in Cyprus, the ASIC in Australia, the FMA in New Zealand, the FSCA in South Africa, the FSA in Seychelles, and the MAS in Singapore. Plus500 offers traders a choice of more than 2,800 assets to trade, including nearly 900 options contracts, in a commission-free trading environment. This extremely wide range of choice can make Plus500 an appropriate choice for traders looking to pursue wide diversification of assets. Plus500 is licensed to offer CFDs through ASIC (AFSL #417727), and through the FMA (FSP #486026), for licensed CFDs in New Zealand. Plus500 trading services are also available in South Africa (Authorised Financial Services Provider #47546).
Pros & Cons
- Broad asset selection in equities and options
- Free and unlimited demo account
- Advanced free-of-charge analytical trading tools
- Global and regulated fintech platform
- Sub-standard trading platform without support for automated or social trading
What is the CFTC?
The Commodity Futures Trading Commission (CFTC) is a US government agency created in 1974 that regulates the US derivatives markets, including futures, Forex, and certain kinds of options. Since the CFTC’s founding, the US government has expanded its mandate to keep up with developments such as the popularity of retail Forex trading and cryptocurrency assets.
Any Forex or Futures broker actively offering services to U.S.-based traders must be registered with CFTC and regulated under its standards.
The CFTC’s mission is to foster open, competitive, and financially sound markets and protect market users and the public from fraud, manipulation, abusive practices, and systemic risk related to derivatives subject to the Commodity Exchange Act (CEA).
Without the CFTC’s oversight, market participants could be subject to fraud by unscrupulous firms or individuals and, in turn, lose faith in our capital markets, with severe consequences for investors, consumers and society.
The CFTC delegates much of its oversight operations to the National Futures Association (NFA), a self-regulatory organization. For example, the CFRC requires retail foreign exchange dealers (RFEDs) to become members of the NFA.
Both the CFTC and NFA are highly active agencies that set industry standards, and they investigate and prosecute violations of the CFTC regulations and the Commodity Exchange Act (CEA), which establishes the statutory framework under which the CFTC operates.
Key takeaways:
- The CFTC is a US government regulatory agency.
- All Forex & derivatives brokers actively offering services to U.S.-based traders must be registered with the CFTC.
- The CFTC delegates much of its oversight operations to the NFA.
How Do You Check if a Broker is CFTC Regulated?
There are several ways to find out a broker’s regulatory status, but the easiest way is through the NFA online verification system called “BASIC” where the status can be verified using their NFA ID, firm name, or other identifying criteria. If a broker is regulated by the NFA, it is also regulated by the CFTC. Ensure you enter the correct information because many Forex broker firms are known by different names (for example, a website name may be different from the legal corporate name).
The CFTC also maintains a “RED list” containing names of foreign entities that appear to be acting in a capacity that requires registration with the CFTC but are NOT registered with the CFTC.
What Guidelines do CFTC Regulated Brokers Have to Follow?
CFTC guidelines for brokers are amongst the most stringent in the world. Here are some of the more noteworthy regulations:
Minimum capitalization. Brokers must maintain a $20 million security deposit—significantly higher than any other global regulator. As a result, only larger and well-capitalized brokers choose to be CFTC regulated, and smaller companies focus on other parts of the world.
Anti-money laundering. Brokers must have policies and internal controls to help prevent money laundering and a designated individual to monitor Anti-money laundering compliance.
Security. Brokers must protect the reliability and confidentiality of customer orders and account information.
Difference between a CFTC Regulated and a CFTC Licensed Broker
There is a difference between regulated and licensed brokers, but they still follow the same rules so you can effectively treat them as the same.
A regulated broker holds a CFTC registration number to operate within the United States. On the other hand, a CFTC licensed broker only needs written permission to offer services in the US, for example, when the broker is governed by a foreign regulator with which the CFTC holds a treaty.
Advantages/Benefits of the CFTC
CFTC and NFA regulations and guidelines set minimum standards for U.S.-active Forex brokers to help minimize the risk of fraud and give traders a transparent and fair marketplace. Some of the key measures and mandates they use to achieve this are:
Segregated accounts. Separating client funds is possibly the most crucial requirement for the safety of client funds by CFTC Forex brokers. The CFTC requires that brokers keep customer funds in accounts separate from the firm’s money. Whether or not you choose a CFTC Forex broker, I highly recommend always using a broker that segregates your deposits from its operations.
Trade integrity. Brokers must have procedures designed to ensure the integrity of trades placed on their trading platforms. In particular:
- Pricing. Trading platforms must be designed to provide pricing that is reasonably related to current market prices and conditions. Customer market or limit orders must be executed at or near the price at which other customers’ orders during the same time have been executed.
- Slippage. Trading platforms should be designed to ensure that any slippage is based on real market conditions.
- Rollovers. Trading platforms should be designed to ensure that automatic rollovers comply with the terms disclosed in the customer agreement.
Market risk disclaimer. All brokers registered with the CFTC must display a disclaimer about trading risks, particularly stating that performance is not guaranteed.
Enforcement. Regulations without enforcement mean very little. The CFTC has dedicated enforcement staff as part of their Division of Enforcement (DOE). Taking 2020 as an example, the DOE filed 113 enforcement actions, the highest number in the CFTC’s history. That same year, the CFTC ordered over $1.3bn in monetary relief.
Whistleblower program. The CFTC is one of the few financial regulators that directly accepts complaints about suspicious activity from the public. The Division of Enforcement houses the CFTC’s whistleblower program, which provides monetary incentives, confidentiality and retaliation protections to individuals who come forward to report possible misconduct. The CFTC even pays a percentage of money sanctioned to whistleblowers whose information leads to successful enforcement. On one occasion in 2021, the CFTC paid a whistleblower almost $200 million.
Key takeaways:
- The CFTC requires brokers to segregate customer accounts from their operations, a critical foundation for the safety of funds.
- The CFTC requires that brokers provide their clients with trade integrity with fair pricing, slippage, and rollovers.
- The CFTC enforcement program leads to successful prosecutions and recovery of assets every year.
Disadvantages/ Prohibitions of the CFTC
U.S. persons using CFTC-regulated Forex brokers have several significant restrictions to consider that they would not face at non-CFTC regulated brokers based outside the U.S. The most important restrictions are:
Leverage. This restriction is probably the most significant for U.S.-based traders. Since 2010, the CFTC has set the maximum leverage for retail Forex traders at 50:1 for major Forex pairs (EURUSD, GBPUSD, USDJPY, USDCAD, USDCHF, AUDUSD, NZDUSD, USDSEK, USDNOK, and USDDKK), and 20:1 for minor Forex pairs.
No Hedging. The CFTC does not permit hedging on Forex accounts, i.e., holding two opposing positions in the same currency pair.
First in First Out (FIFO). This rule requires that traders liquidate their positions in the order in which they were opened in a currency pair. For example, if you opened two positions in EUR/USD, you must close the first one before closing the second one.
Key takeaways:
- Using a CFTC broker means maximum leverage of 50:1 on major Forex pairs and 20:1 on minor Forex pairs. You can’t hedge trades, and FIFO rules apply.
How Does the CFTC Intervene in Cases of Financial Abuse?
The CFTC monitors US futures and options markets via its CFTC Market Surveillance Program in partnership with exchanges. Should the CFTC or an exchange detect suspicious activity, the first step is verbal contact seeking to clarify the situation. Although the CFTC grants an exchange the right to resolve the issue without CFTC intervention, the CFTC has emergency powers to force action but has only ever used this power against an exchange four times. These powers have been used to impose new or reducing existing position limits, position liquidations, delivery period extensions, or market closures.
The CFTC may also impose fines on market participants, impose lawsuits, or revoke licenses, forcing cessation of operation. The most prominent institutional examples include PFG Best and MF Global. A detailed list of all such historic actions is available on the CFTC website under the Enforcement Actions section.
The Bottom Line
- CFTC oversight of brokers. Any Forex or Futures broker offering services to U.S.-based traders must be registered with the CFTC and regulated under its standards.
- US-based traders. CFTC regulations are not designed to regulate traders, meaning if you correctly report offshore accounts to the IRS, you can use offshore brokers which are not regulated by the CFTC. If you are a US-based Forex or Futures trader, you should consider using a CFTC regulated broker as it offers major protections.
- The CFTC’s role. The CFTC and NFA are active in setting industry standards and preventing fraud. CFTC regulated brokers are well-capitalized, have strong safeguards to protect your deposits, and provide a fair environment for trading.
- Restrictions. U.S.-based traders face leverage restrictions, no hedging and FIFO rules.
- Checking regulatory status. It’s easy to check the regulatory status of a broker that claims to be regulated in the US through the NFA’s “BASIC” portal. While registration and a clean disciplinary record won’t protect you from fraud, most scams involve unregistered entities.
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