The Frank-Dodd Wall Street Reform and Consumer Protection Act was passed by Congress nearly a year ago, but the repercussions of this act will be felt more palpably in the coming days, when Forex brokers that are not regulated by the CFTC permanently close their doors to US Forex traders. A handful of brokers have already begun turning away US traders, and all others will be required to do so by July 15th, 2011.
The goal of the bill was to protect American investors, as a direct response to the financial maelstrom resulting from the recession that has been plaguing the country since the early part of the millennium. The part that pertains to the Forex industry stipulates that only brokers that are regulated by the NFA and CFTC can serve US traders. Traders who fail to close their accounts before July 15th will have their positions closed automatically. Some brokers, such as TadawulFX will be closed by July 8th, and other brokers may close their US accounts earlier at their discretion. Not surprisingly, traders who wish to withdraw their funds must request the withdrawal with the same method they used to deposit. We recommend that this request be made as soon as possible, as many brokers are already struggling to deal with the inundation of requests.
Brokers that are set to close their doors to US traders on July 15th include Dukascopy, ACMarkets and MIG. Other international Forex brokers including InstaForex (InstaTrade), FXOpen, and the now-defunct GIGFX, among others have been sued by the CFTC in Federal District Courts in New York, Chicago, Kansas City and the District of Columbia. Defendants are accused of operating without an American license and soliciting traders illegally. Most of the defendants are also accused of taking the other side of a trader's position without being registered.
Forex brokers regulated by the CFTC are required to adhere to a stringent list of guidelines that aren't imposed upon brokers in most other countries. Among the guidelines for CFTC regulated brokers:
- Maximum leverage of 50:1
- Rigorous record-keeping in accordance with specific reporting requirements
- Maintenance of net capital of $20 million plus 5 percent of the amount, if any, by which liabilities to retail Forex customers exceed $10 million
US traders who are currently trading with an international Forex brokerage are encouraged to find a new broker immediately.