Regulators: Commodities and Futures Trade Commission US CFTC summary

 Prerequisite:   Before you complain to regulators 
Prerequisite2:  NFA  National Futures Association

CFTC is one of the most stringent regulators that I’ve come across.  A quick look at their enforcements feed will show 6-8 figure judgements against those who are found in violation of laws under CFTC jurisdiction.   Very recently there was a case with over $1 billion USD settlement.  I could write 1 article for each major enforcement undertaking that they do; that’s how comprehensive the CFTC enforcement of forex and futures is.

According to eCFR Title 17 § 1.17,  the minimum capital requirements to maintain a license is $20 million USD for Forex Brokers who operate as a broker.  This is the highest requirement of any jurisdiction.   in comparison with another jurisdiction like ASIC, the requirement is $1 Million AUD.  So any CFTC regulated fx broker will likely be well capitalized.   I do also believe these requirements create a disincentive for OTC forex to ever be able to compete with the fx futures contracts (there is some de-facto bias towards exchange-traded products).  (minimum requirements for FCMs who do not offer otc fx contracts is “only” $1 Million USD.

Also, there is another rule (delegated to NFA 2-36) that upon request, a broker is required to give the trader specific details about an executed transaction such as

• • date time stamp with millisecond accuracy,
  • quantity,
  • currency pair,
  • markups/commissions and also
  • up to 15 transactions +/- 15 minutes before and after the transaction (for the same transaction). 
  • certain other price information identical to that of a commodity exchange.
  • Brokers are prohibited from directly or indirectly canceling or adjusting the price unfavorably of executed customer orders
    • any qualifying exception, the broker must apply adjustment evenly (no cherry-picking of which accounts to adjust).
  • any unfavorable price adjustments must be specifically notified to the customer within 15 minutes of the price discrepancy.  
  • broker must send copy of customer record request and broker response to NFA 

And check out other “silly” rules claiming to promote transparency:

• • Customer market or limit orders must be executed at prices close to orders of other customers during the same time period have been executed.  Price feed should “reasonably resemble” real market conditions of the time.
  • Slippage must be symmetrical and evenly applied regardless of market direction, and across all customers.  Broker must have written policy on how slippage is dealt with on the platform.  

Imagine how many scam alerts FPA forum would have if just 50% of these rules were standard operating procedure across the industry.

You will notice very few retail fx brokerages that still exist in the USA as of 2022.  Those that do have very high spreads compared to their counterparts in other jurisdictions like Australia, UK, etc. So what is the point of having such high quality regulation if very few retail customers are willing to pay for it?

How to complain:

There are several ways to complain to the CFTC,  One way is to just file a general tip, which has no whistleblower protection.   This is more of a suggestion.  Then there is also the Reparations Complaint, which is more or less like arbitration.  You pay a fee between $50-250 and it can take up to 12 months to proceed.

They also have a dedicated whistleblower program which can be used in cases where the corruption is such that you might fear for your life should there be a real chance that you are bullied or threatened.

#RegulatedFool

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