THE NEW NFA & CFTC FOREX TRADING REGULATIONS (There May Be a Way Around It!)

[Ludvik Cizinsky]

Dear bros, you may want to know that there may be a way to get around the new unpopular NFA and CFTC forex regulations! But there is good news and bad news!

First the good news:
I have been subscribing to a very reputable, reliable and profitable signal service which is based in Europe. In their recent introduction of a new automated signal service, they are very highly recommending "The CollectiveFX" as our broker. What caught my attention is the fact that, technically speaking, they are not considered a "broker" but a "collective" which, by the way of definition, exempts them from the new NFA forex guidelines!!! So, who are they, really? They are a group of traders based in Florida who created a brokerage for themselves to get the best institutional pricing and spreading and have control over their quotes. Their clients get exactly the same treatment!

Now the bad news:
Currently, the TCF doesn't accept new clients (members of the signal service are exempt)! But you could put your name on a waiting list and when they have an open spot you can get in. But since the new forex regulations are so hard to swallow, I expect that there will be more such forex trading "collectives" mushrooming in the future to bypass the unpopular rules.

 

[ernest8fingers]

I doubt it. NFA is private crap Org. The CFTC and SEC are the ones that will make the rules. I believe NFA is optional? Not sure of the other 2 though. I doubt ANY USA based company will be able to side step these new rules as the USA wants FOREX dead. IMO

 

[Pharaoh]

There are a few ways to sidestep NFA registration. A few are legal, a few are gray areas, but most are very bad.

The new CFTC registration will be mandatory unless the brokerage is already under some other mandatory government regulator. There won't be any exceptions. Once those rules go into place, any broker that says "This brokerage is USA based, but doesn't need to be registered with anyone." will pretty much be saying "This brokerage is operating outside the law." Would you place your life savings in a US bank that wasn't registered or regulated?

If the rules on leverage go into effect, the ONLY way around it will be to move your funds to an offshore brokerage, at least until they find a way to make that illegal.

 

[Forexwatchman]

If the rules on leverage go into effect, the ONLY way around it will be to move your funds to an offshore brokerage, at least until they find a way to make that illegal.

Come on Pharaoh, don't even pretend like that might happen! i can't just pack up and move in the near future, and sure as hell don't want to work for someone else.

 

[Pharaoh]

ForexWatchMan,
I don't even want to believe this, but the sad truth is that this could finish the "Let's kill US retail forex" that the NFA started last year. With 10:1, a 10k account can't open a single full lot of xxxUSD, since the spread alone would trigger a margin call.

We've already seen brokerages moving clients to their overseas affiliates to escape hedging and other crazed rulings. Some US brokers found ways to skirt those rules and keep accounts here. If this one becomes law, there won't be any exceptions.

You don't have to leave the country, but if this becomes law, your forex accounts will have to move overseas or live within intolerably tight restrictions.

BTW - Any of my fellow US FPA soldiers have offshore bank accounts with over $10k total in them? If so, Uncle Sam wants to know about those. BTW - At least some offshore forex accounts are considered to be "investment accounts" that are reportable under this rule. I'm not sure if it applies to all brokerages or not, but I'll be asking my new accountant for some more info on this. Combine this little rule with the US Exit Tax, and blocking movement of cash offshore wouldn't be the hardest thing to do during a "fiscal emergency".

I try very hard not to believe in giant government conspiracies to strip away all the rights that Americans fought so hard for, but it gets harder and harder to come up with better explanations for some of the rules that have been showing up lately.

 

[Forexwatchman]

Well I decided it's inevitable, the whole bit about being open to comment is BS. I'm going to actively pursue movin all my funds offshore. Even though the brokers have formed an alliance (how incredible!!!) because they realize the end is near is not enough to stop what's coming. And European brokers will be next, they have a vested interest in staying close to the US political powers that be.

Here's a thought. What effect will all the outflow of USD have on the market? I guess we will see very soon. Goodbye FXDD, it was fun while it lasted.

 

[cowmadagan]

Two things.
Some retail brokers aren't 'investment accounts', they're 'trading accounts' because the holders of 'your' cash doesn't invest it; they only invest your open positions, or more accurately hedge. Who knows if that matters though.
The other question, what effect will all the outflow of USD have on the market? Since we're two percent of the forex exchanges...We won't be heard there either.

 

[Awais Rasheed]

It is better to rely on the regulated brokers rather going for the one that are not regulated, because if you are cheated you can atleast raise your voice somewhere.

 

[5of7]

Well actually, TheCollectiveFX is actually wrapping up their "STP ONLY LICENSE". So all is fine at the collective.

It's not really a trick, it's kinda the only way to get what we want. Me personally, I like the way I trade, I've been doing it a long time, old-habits and all that, so I want to keep doing what I'm doing.

-Trader 5of7 of TheCollectiveFX-

 

[Black Knight]

The problem is, the Dodd-Frank Wall Street Reform Act pretty much closed the "offshore" loop hole.

Any foreign broker with a US office MUST transfer the accounts of any clients residing within the US to their US branch. Those of you with FXCM UK or FXDD Malta accounts, for example, should have received notifications that you are now a client of FXCM US and FXDD US, and thus subject to the new trading restrictions.

Brokers without US branches are not allowed to take on US accounts (go to FxPro.com, for example, note there is no "United States" on the drop down list of their online application). Any which still do are treading on shaky ground, and I - for one- wouldn't feel exactly safe with my money with them.

About the only way to get around the ridiculous new CFTC rules about how you can and cannot trade your own money is to form an offshore corporation or trust, and then open your (offshore) brokerage account in that entity's name. I have run this by both FXCM's and the NFA's top legal counsel, and they confirmed that, even if you are the 100% sole owner of said entity, regulations are still applied according to the entity's "residence" and not your own.

The downside is that many brokers (due to pressure from their regulators) now carry much stricter requirements for corporate accounts than they do personal ones. Be prepared for higher minimum deposits (typically 10K), more paperwork, and you will be forced to disclose all shareholders and beneficiaries of said entity with a greater than 5% stake.

In other words, while this method may help you "comparison shop" for your preferred regulation and trading conditions, do NOT use it to attempt to sidestep your tax obligations. The corporation is taxed according to the laws of the country where you incorporate it, that is true, but any money you take out for yourself as "salary" or "profit" is still subject to the personal income tax laws of the country where you reside. Fail to report it, and there's a very strong chance that someone else will.