New CFTC regulations (effective October 2010) over the off-exchange retail forex marketplace reversed this trend.
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The Commodity Futures Trading Commission has published its highly anticipated final rules for trading off-exchange retail forex.
That means U.S. retail forex traders can trade on non-registered foreign bank forex platforms until July 16, 2011.
Retail forex brokers are not direct participants in the Interbank foreign exchange market.
There are plenty of people asking these important questions, as thousands of Americans have offshore retail forex trading accounts.
It seems these new rules will put a stop to Americans trading retail forex offshore to evade CFTC rules.
We think this same extraterritorial concept may apply to retail forex trading too.
We think the CFTC may interpret the legislative text to mean the CFTC has extraterritorial control over retail forex too.
If the CFTC has extraterritorial powers on retail forex, then foreign-based brokers will probably not do business with non-qualified American participants.
It includes a nice history of regulation (or lack thereof) of off-exchange retail forex, the new registration categories and how it works.
The CFTC regulates retail forex, whereas the SEC has authority over swaps.
The retail forex industry should be run better with the new rules.
With Dodd-Frank, retail forex trading will become illegal for non-participants (traders) unless the CFTC finishes its new forex regulations in short order (Dodd-Frank Bill Section 742(c)).
For more details on the 360-day foreign bank deadline, see a blog update from the InvestmentLawGroup.com: Major Development: Foreign Banks Still Eligible Counterparties for Retail Forex Traders.
So if this forex broker says its U.S. retail forex traders using offshore platforms from its affiliates have more time to close accounts, that may not be true in my view.
We answer a key question about whether a U.S. retail forex trader can trade on a non-RFED registered foreign platform after the Oct. 18 registration due date (90 days after Dodd-Frank Fin Reg enactment).
As discussed on prior blogs, the recently enacted Dodd-Frank Fin Reg bill forced the hand of the CFTC to act by Oct. 19 because it would otherwise bar non-eligible contract participants from off-exchange retail forex trading.
According to the forex dealer executive I spoke with, the NFA plans to issue a notice to members perhaps today or in a few days to clarify DF and the new CFTC retail forex trading rules, mostly for implementation issues.
Gaining an extra 270 days to trade on a non-registered foreign bank platform can help many retail forex traders who are not otherwise ready to begin trading under the new CFTC rules, which include 50:1 margin on majors, 20:1 margin on minors, the hedging rule and no FDIC, SPIC or segregation protection.
Most online forex traders have accounts with retail off-exchange forex brokers, most of whom only offer trading in the forex spot market.
Rather, they are customers of Interbank forex dealers, and they make a derivative market for retail spot traders.
With retail investors looking for a one-stop-shop for all their financial transactions, and with forex trading becoming increasingly popular, Schwab cannot afford to be left out.
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