US-based traders looking for a US Forex broker should always make sure that their broker is a member of the National Futures Association (NFA). This is a legal requirement for US Forex brokers and helps to provide an additional layer of security against potential fraud.
I have intensively researched the tight field of US NFA regulated brokers offering Forex trading to identify the best NFA Forex brokers listed below.
- FXTM, Best all-around broker with high floating leverage and fast execution.
- eToro, Best broker for social traders and crypto traders : 74% of retail CFD accounts lose money.
- Plus500, multi-asset and CFD broker.
Best NFA Forex Brokers Comparison
| | | |
Regulators | CMA, CySEC, FCA, FSC Mauritius, FSCA | ASIC, CySEC, FCA, FSA | ASIC, CySEC, FCA, FMA, FSCA, MAS |
Year Established | 2011 | 2007 | 2008 |
Execution Type(s) | ECN/STP, Market Maker | Market Maker | Market Maker |
Minimum Deposit | |||
Average Trading Cost EUR/USD | 0.1 pips | 1.0 pips | 1.3 pips |
Average Trading Cost GBP/USD | 0.2 pips | 2.2 pips | 1.7 pips |
Average Trading Cost Gold | $0.18 | $0.45 | $0.34 |
Trading Platform(s) | MetaTrader 4, MetaTrader 5, Proprietary platform | Proprietary platform | Proprietary platform, Web-based |
Islamic Account | |||
Negative Balance Protection | |||
| Visit Website | Get Started Visit Website74% of retail CFD accounts lose money | Get Started Visit Website82% of retail CFD accounts lose money |
FXTM
In Summary Best all-around broker with high floating leverage and fast executionWe have made FXTM one of our top-rated brokers because in addition to its lengthy track record, it enjoys a very high level of regulation and reputation, and it offers a highly competitive fee structure which tends to keep down the cost of trading.
Pros & Cons
- Excellent commission-based Forex pricing environment and transparency
- Upgraded MT4/MT5 trading platforms plus proprietary mobile trading app
- Quality market research and educational content for beginner traders
- A highly regulated broker with a tier-1 license
- No cryptocurrencies and limited choice of commodities
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
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
Does the CFTC Maintain a Forex Brokers list?
The CFTC, founded in 1974, is a trusted US regulator with oversight of the US derivatives markets. They include futures trading, swaps, and select options contracts. All US-based derivative brokers must register with the CFTC. While there is no CFTC Forex brokers list, the CFTC maintains a RED (Registration Deficient) list. It gives an overview of foreign entities operating without CFTC registration but offering products and services the CFTC believes require one.
Traders should avoid Forex brokers on the CFTC RED list. It increases the risks of fraud or scams. Inclusion on the RED list does not mean the entity violated any provision of the Commodity Exchange Act. The CFTC notes Forex as a sector with increased fraud complaints, together with cryptocurrencies, commodities, metals, and binary options.
Before opening a trading account with a broker, it is best to double-check if the broker operates with all the necessary registrations and licenses. The CFTC RED list offers one tool to avoid potentially fraudulent trading environments, but the CFTC also has a link to the NFA BASIC database. It lists the registration of market participants, their financial information, and the disciplinary or regulatory history.
How the NFA Regulates Brokers
The National Futures Association is not a government regulatory body but a self-regulatory organization (SRO) for derivatives in the US. Despite not being a regulator, membership is mandatory for many market participants and required for all market participants dealing in swaps. Therefore, all US-based Forex brokers should list membership with the NFA on their website. NFA brokers pay membership and assessment fees, which is how the NFA funds operations. It counts more than 4,000 member firms and 55,000 associates, with its headquarters in Chicago, the US hub for commodities and futures trading, with a representative office in New York.
NFA members must adhere to well-communicated standards, and the NFA ensures that US futures markets and the retail Forex market also operate under uniform standards. The aim is ensuring the safety, security, and transparency of the derivatives marketplace across the US for all market participants, from retail to professional.
NFA Forex Regulations
The most important NFA rules impacting Forex traders using NFA brokers are:
- Maximum leverage of 50:1 on Forex, lowered to 30:1 for some less liquid currency pairs (exotics).
- FIFO (first in, first out) rule – if traders have multiple positions open in the same Forex currency pair or cross, the positions can only be closed in the same order as which they were opened.
- Hedging is prohibited.
- Regulated brokers must hold a minimum of $20 million to ensure customer protection.
NFA regulated Forex brokers, in theory, ensure fair market practices to all clients, but that does not guarantee the absence of fraud. It does reduce the likeliness of it, but the biggest ones in history occurred under the watch of the NFA, together with the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). Despite such occasional shortcomings, US-based traders should always trade with one of the NFA-regulated Forex brokers, as there is significantly more upside in doing so than not.
Pros and Cons of NFA Regulated Brokers
The main advantages of using an NFA regulated broker are:
- Access to a regulatory channel to resolve disputes with your broker without needing to resort to litigation.
- Knowing your broker is highly regulated and well-capitalized, and properly segregating client accounts.
- Knowing that your broker has a reputation to protect.
- They may provide US tax-friendly accounting.
The main disadvantages of using an NFA regulated broker are:
- Cap on Forex leverage at 50:1, although this should be more than enough leverage for anyone’s needs.
- FIFO rule, but this can be avoided by slightly varying the position sizes.
- Lack of access to CFDs and certain other assets, although CFD are not efficient vehicles for US persons anyway.
NFA Broker Check
Traders can locate the existence of NFA membership on the bottom of the homepage of a broker and then conduct an NFA broker check. The NFA allows visitors to check the status of all members via its search tool BASIC. Entering the name of a firm or individual in question will return any available information from the NFA database. It also includes regulatory action from the NFA and CFTC with complete details. The NFA also provides the monthly updates Futures Commission Merchant (FCM) financial data reports, offering information about the required net capital and the adjusted net capital of member firms. The “File a Complaint” button allows traders to report malpractice or fraudulent activity to the NFA, which it then must investigate.
Retail Forex traders in the US have a limited choice of brokers, and it is illegal under US law for non-NFA regulated brokers outside the US (where the trading environment is more competitive) to open accounts for US persons. Note that it is not illegal to be the person opening the account in this case.
Trading with NFA Forex brokers will limit the risk of fraud and notably increase the security of their deposits. Therefore, all US traders should conduct an NFA broker check using BASIC before opening a trading account.
Final Thoughts
US persons – especially US residents – wishing to trade Forex, face a choice between using an NFA regulated broker, or using an offshore broker outside the US which is not regulated. It is not illegal to use an offshore broker, but very few Forex brokers outside the US will now accept a US person as a client for fear of getting into trouble with US authorities, so traders wishing to go offshore are likely to find they have limited choice and may find problematic issues even with brokers where they are able to open an account. For these reasons, and as US regulations are not as restrictive as they are often claimed to be, it will usually make sense for a US Forex trader to open an account with an NFA regulated broker.
You might also be interested in reviewing the below top brokers:
