It's an issue that's been discussed before: how the protection of U.S. consumers with punitive fines for brokers and more stringent regulation infringes on Forex-related business activity. Those usurious fines and the increasingly tighter rules by the National Futures Association (NFA) resulted in a number of U.S.-based brokers like Advanced Markets and Forex Club making the decision to downgrade their operating license to Futures Commission Merchants or FCMs. The downgrade from the previously held RFED license that permitted retail trade meant Forex brokers were allowed only to accept only institutional investors.
The regulatory agency has now taken the downgrade a step further by proposing to the Commodity Futures Trading Commission (CFTC) what is sure in most cases to be an overtly onerous capital reserve requirement of $20 million. That would be an increase from $1 million, amounting to what is essentially a 1,000% increase in capital, to back what theoretically might be only be a single Forex transaction for a retail customer. The NFA further points out in their letter that some FCM's may be involved in inappropriate business dealings, though some critics say the implication to link the FCMs with their institutional clients' nefarious activity is a smokescreen and merely a way for them to "?legitimize" the request.
Critics believe that the NFA's aim is to force the expulsion of Forex brokers out of the U.S., effectively shutting down their entire operations. Many believe that the implementation and enforcement of this particular proposal will be the last straw and could result in the withdrawal of the (very) few remaining U.S.-based Forex brokers who will either pack up and leave to go elsewhere or else give up the business altogether. Either way, critics see that as a win-win for the NFA but it's clearly a lose-lose for the Forex industry, in general, and Forex brokers and U.S.retail customers, in particular.