Daily forex trading signals
If you’re a forex trader resident in the United States trying to find a forex broker, you have to consider that there a limited number of companies that work with US clients. That is so because the US enforces strong regulation on brokers who want to work with US retail clients.
Forex brokers that work legally with US clients, are organised and controlled by regulating associations. The NFA (The National Future Association) and the CFTC (Commodity Futures Trading Commission) are obligatory regulating organisations for forex brokers that are based in the US or want to work legally with the US residents.
Forex brokers that are run by investment banks bond and stock dealers are regulated by FINRA (Financial Industry Regulatory Authority).
1. Requirements for Forex brokers regulated by the NFA and CFTC
- Forex brokers are FBI background checked. All forex brokers have to follow a strict application process. Every person who works in the foreign exchange market has to pass FBI background checks.
- The NFA has the authority to deny any firm's or individual’s registration. Each Forex trading broker has to pay registration fees and membership dues. Forex brokers working under NFA of CFTF not only follow the strict rules, but are also paying fees to keep their status updated.
- Forex brokers must have to have a minimum of 20,000,000 USD capital. The NFA sets certain capital requirements for regulated forex brokers, minimum 20,000,000 USD.
- Forex brokers must provide traders with daily reports. Forex brokers must submit daily reports regarding their account balances to the customers. After the end of each month brokers provide client with monthly operational and risk management reports. Four times per year the brokers submit quarterly reports containing the most updated performance disclosures required by CFTC regulations.
- Licensed and trained staff. NFA regulated brokers must have a licensed and specialty trained staff. All involved employees and their supervisors must pass two exams - the National Commodity Futures Examination and the Retail Off Exchange Forex Examination.
- Leverage 1:50. NFA requires to collect and maintain a minimum security deposit of 2% of the notional value of transactions in the 10 major foreign currencies and 5% of the notional value of other transactions. Leverage ratio is 1:50 in major currencies and 1:20 in minor. That means that for every dollar you put up, you can trade $50 of a major currency. Under extraordinary market conditions these requirements can be changed.
- First-in, first-out positions. NFA and CFTC enforce offsetting politics. Compliance rule requires offset positions in customer account on a first-in, first-out rule. That means if you have multiple positions in the same currency pair, the position which was first opened will be the first to be closed. This is a common practice in the US equities and futures markets.
2. The requirements for investment banks, stock and bond dealers offering forex trading are supervised by FINRA (Financial Industry Regulatory Authority)
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Educational requirements. All brokers that are licensed by FINRA must pass qualification exams and comply with continuing educational requirements. FINRA supervises all brokers in the US and is entitled to suspend or fine them.
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Commercial honor and principles of trade. Forex brokers must not act the following:
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Manipulate or provide client with false information;
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Create false books, records or reports;
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Fail to disclose to customers about risks;
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Make fake price adjustments that are inappropriate and adverse to the customer;
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Introduce customer with forex trading or forex dealer without doing expected checking;
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Make false accounts that do not accurately reflect the risks of forex trading;
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Incorrect communication with the client, including conceal about possibilities of profit or the risk of trading, lie about compensations and not giving access to the interbank currency market.
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- Communication with the public is transperant and honest.
In summary, if you want to find a forex broker that can work legally with US based traders, you can only chose between brokers registered with FINRA or the NFA and CFTC. Check the websites of the NFA, FINRA and CFTC to see the current status of the forex broker you are considering.