CFTC Forex Rules In Effect October 18, 2010


"The CFTC is the government regulator that has authority over Forex Trades. This industry desperately needs some regulations. The problem is that they mix improvements with crazy stuff."

Seems like the guys at CFTC either went to the same school as my country's ex-finance minister or they must be related somehow...But mine went one step better by making forex trading outright illegal! : )

m r p

m r p Thanks for your input and just know that I certainly hope you are right with regards to how far the black hand of the CFTC can reach global financial markets. I rarely do this but to sum up my stance on this issue, i's going to express some personal beliefs with regards to the bigger picture happening here.

To put it plainly, this is one example of a much bigger trend in the push for widening the gap between the middle class and the upper class in America, the richest nation on the planet. So what happens here can certainly be expected to also at least get encouraged to happen in any other country that is on "good terms" with us.

Never before has the gap between the middle class and the upper-class been so wide, and this is by design. Captitolism is a failed dream, and we are a reflection of that fact.

And to relate it back to forex, let me ask readers a question. How many other self-taught professions can offer you the same potential and freedom that forex can offer? How close do you think forex is to actually reaching the masses of people that could potentially take benefit from this market's existence? The answer scare the CFTC and NFA so much, that you get what we have here.

Truthfully...I believe you. If I'm honest, I'll admit to a nagging, underlying anxiety that this will all go away someday. Or at least evolve (de-volve?) to a point where I'll no longer be able to participate.

It may very well be governments that ruin it for us. Every time I read about someone trying to rally the nations together to develop a fixed system for currency values I have a tiny little heart attack. When I read about the proposed 10:1 leverage I went from terrified ("I'll be retirement age before I have the kind of cash I'll need to make this worthwhile anymore...") to angry (" many suckers had to get scammed or traded out of their life savings to get currency leverage to show up on the Federal government's radar? During wartime???").

Corporations could do it, too (mirroring your sentiment on capitalism). Toyota, for example, stands to lose millions this year due to the yen being a juggernaut right now. We'll watch for broad, sweeping, across-the-board strokes that won't be limited to the US when enough corporations decide they've had enough (and figure out how to make their move).

My biggest fear, though, it the antagonist you don't see coming. When I was a kid, there was a network of realtors in my town (as in any town). They hired my dad to do a simple, long-term job for them. My dad - a resourceful guy (much like your average trader) - developed a system over a period of several years that became so streamlined and effective that, by the time I was thirteen, my dad was pulling in more money than, as it turned out, 95% of the local realtors out there.

You can imagine how this story ends. The rates were competitive (slightly lower than what these folks had paid for this service for the years prior to my dad showing up), there were zero complaints, the operation was transparent and nothing even marginally unethical going on. So when the axe dropped, all the board could say to my dad was: "We just can't have you making more money than us."

So, in response to your closing question (in my long-winded way)...I worry over typical US over-regulation stemming from too many folks losing their homes & shirts in this market, yes. But that's nothing compared to how terrified I am of what could happen if the wrong group gets it into their head(s) that we're more successful than we ought to be.

I guess you & I can take comfort in the fact that, for the most part, forex traders are not a high-profile bunch...

I'll check back here periodically just to see what's up and/or share anything interesting I might pick up out there. Take good care -



Screw the us brokers

I just went through this and ya, the US government doesn´t care really about the little ones. Same here over Europe but they are not that far but I would never put my hand into fire they won´t discuss this either.
So I decided to find a way around this because they force me to. I found some experts about offshore business and ya, they are great. You can get your own business without any hussle. I´ve recieved an free .pdf for this so perhaps you´re interested too before it´s getting worse (because yet there is no light at the end of the tunnel).
Just give me a private mail and you get the .pdf.....

Dirk, please send a copy of the pdf. you mentioned to my email: Thanks very much


One of my friends decided to clarify the matter with the new CFTC regulations and sent them a couple of questions. Below are his questions and the CFTC answers to them. I think you will find this info very informative.


Your email has been forwarded to me for response. In answer to your first question, in the year 2000, Congress amended Section 2(c)(2)(B) of the Commodity Exchange Act (7 USC 2(c)(2)(B)), setting out who is allowed to serve as a counterparty to a retail off-exchange forex transaction; these are often referred to as the “enumerated” or “eligible” counterparties. Among the eligible counterparties were affiliates of CFTC-registered FCMs and financial institutions (which includes foreign banks). It was through these two categories that off-shore entities were allowed to serve as counterparties.

However, two things have changed. First, in 2008, the Congress passed the Farm Bill, which directed the CFTC to register counterparties as either FCMs or Retail Foreign Exchange Dealers (RFEDs). The recently published final rules, which take effect on October 18, 2010, reflect this statutory mandate, so as of October 18th, foreign affiliates of US FCMs will no longer be able to offer to serve as counterparties to US retail customers unless they become registered with the CFTC as FCMs or RFEDs.

Second, although foreign banks are currently able to offer to serve as counterparties, the recently pass Wall Street Reform and Consumer Protection Act has once more amended Section 2(c)(2)(B) eliminating the provision permitting foreign banks to serve as counterparties. This change will be effective in July of 2011.

I realize this is a long answer, but the upshot is, if your “foreign broker” is an unregistered affiliate of an FCM, as of October 18th, it will either have to be registered as an RFED or FCM, or transfer accounts to someone who is. If your “foreign broker” was a foreign bank, it can continue to serve as a forex counterparty to US retail customers until July of next year. Security deposit/leverage rules will apply to all registered entities doing business with US retail customers.

I hope this proves helpful.


William Penner

Deputy Director, Compliance and Registration

Division of Clearing and Intermediary Oversight

Commodity Futures Trading Commission

(202) 418-5407

From: questions
Sent: Tuesday, September 07, 2010 4:36 PM
To: DCIO Internet
Subject: FW: Questions on the new Forex regulations

Sent: Monday, September 06, 2010 12:13 PM
To: questions
Subject: Questions on the new Forex regulations


I have several questions pertaining to the most recent Forex regulations implemented by the CFTC which become effective on October 18, 2010. In particular, I would like to know the following:

1. Will foreign-based Forex brokerages be allowed under the US law to continue servicing US customers after October 18, 2010? If so, for how long?

2. Will the new leverage requirements apply to those Forex brokers servicing US customers after the aforementioned date?

I look forward to your prompt response.

Thank you in advance.

Kind regards,


Draconian CFTC Forex Rules

So, in a few words, if you are a US citizen wanting to trade FX, you're screwed.

What can we do to fight back? I notice we have Barney Frank and Chris Dodd to thank (and other Democrats). I strongly encourage all Forex traders who are US citizens to VOTE IN NOVEMBER and to VOTE OUT EVERYONE WHO SUPPORTED THE LEGISLATION which lead to this lousy short-sighted new CFTC regulation. I would like to see a list of those who supported it. I am sure it is made up almost entirely of democrats, but any repubs found supporting it should also be looking for a new line of work come November.

Unfortunately, this will likely cause long-lasting damage, because even if Congress changes from Dem to Repub hands, there may not be enough votes to repeal or revise the piece of crap legislation. Not only that, but I have serious concerns that retail FX trading will be that high on the list of things to be fixed.


My friend also spoke with a representative of IBFX Australia. Below is a transcript of their conversation containing some valuable info in it:

Client Services 50: This is Brandon how may I Help you?
Customer: Hi, Brandon. I got a question to you: will IBFX Australia continue servicing US customers after October 18, 2010 in light of the latest CFTC regulations?
Client Services 50: No we will not be having US clients doing business in Australia
Client Services 50: Due to the regulations in question
Customer: so all IBFX customers from the US will have to stick to the 1:50 leverage accounts, correct?
Client Services 50: That is my understanding of this, yes
Customer: Thank you for your assistance, Brandon. I really appreciate it.
Client Services 50: I wish I did have better news for you
Customer: Do you think IBFX will be able to do anything about it?
Client Services 50: I doubt it Jake, honestly we tried but we are obligated to follow these rules to the letter
Customer: what about servicing foreign companies owned by US residents? For example, if I set up a company in Canada and apply for a trading account with IBFX Australia on its name, will you open it?
Client Services 50: That is a great question
Customer: if you are not sure, just forward it to your legal department for a comment. I would appreciate their response at my email
Client Services 50: I actually have the rules here they are just hard to find
Client Services 50: To my knowledge there is only way very specific way to do that
Customer: what is it?
Client Services 50: That is what i am trying to find as quick as I can
Client Services 50: The rules have changed about 4 times in a week
Customer: Did the CFTC release four official follow-ups to their initial statement?
Customer: I have no problem hanging on, take your time
Client Services 50: 8. An entity that is formed in a country other than the USA with directors/owners/authorized persons who are residents of the USA - Yes
Customer: great. makes me wonder what the purpose of these new regulations then is. pretty much any American can easily set up and maintain a company in Canada or elsewhere as long as he/she pays their taxes.
Client Services 50: Agreed
Customer: Would you mind if I share these news with my fellow traders? That is the path they might choose to follow.
Client Services 50: Yes you can, I dont see why not
Customer: Thank you for all your help. Have a nice day!
Client Services 50: You're welcome. If you have any questions or concerns feel free to contact us anytime. We are here for you 24 hours a day, Sunday afternoon through Friday afternoon.


Errr. . . . that "until July of next year" part from the CFTC is a bit scary. Any chance of writing back and finding out what they are talking about?


Errr. . . . that "until July of next year" part from the CFTC is a bit scary. Any chance of writing back and finding out what they are talking about?
It's clear in fact. Only those overseas brokerages that have the status of a bank (e.g. Deutsche Bank) may continue servicing the US customers without getting registered with the CFTC first and complying with its regulations, but only until July next year.