The Dodd Frank Act
It's well-known that a lot of international more... have regulations that restrict US traders. A lot of US residents will be denied accounts from a lot of the international Forex brokers.
The bulk of these brokers are regulated and we can look at their reasons for them doing this. Strict regulations exist that place a limit on conducting business with US citizens. Most of these regulations stem from the US government. A lot of international offshore brokers will accept US citizens so these regulations will not totally prohibit them from being opening accounts. Below is the main reason why some offshore international Forex brokers do not accept US citizens.
The Dodd-Frank Act has recently been signed into law by Barack Obama. It first became operational on July 21, 2010. It is a reform agenda, developed to regulate the financial market. The act brought forth new rules designed to regulate all financial markets including stocks, futures, options and Forex.
The Dodd-Frank act decrees that for a Forex broker to take on US citizens as clients, they must be registered with the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). This is very difficult for a lot of international forex offshore .
Recent statistics show that many of these international brokers are not registered with these two US regulatory bodies. These will be mostly regulated offshore brokers and legal brokers. Rather than go through all the red-tape, they just don't accept US citizens. Due to the unforeseen expenses, it can be simpler for them simply not to accept US citizens.
The declining of US citizens by international Forex offshore brokers is mainly attributed to the implementation of the Dodd-Frank act. There are also other reforms and changes in the financial market services that the US government has provided that prevent their citizens from opening accounts with international brokerage companies. The activities of the CFTC are linked to a number of these regulations. Some of them have been directly implemented by the US government. As well as this, the Dodd-Frank act has a number of other disadvantages. The main one is how this regulation prevents some foreign banks accepting US citizens. Furthermore, the bulk of Forex brokerage services have been changed hugely because of the minimum account trading, spread levels and leverage for US citizens.
Some offshore international Forex brokers are still accepting US citizens despite the restrictions that the Dodd-Frank act has imposed. If you are a US citizen, it's possible you can still open an account with an international broker that is not registered by the US regulatory bodies (NFA and CFTC).
US citizens can only be accepted via the US-based affiliate broker firms of the offshore brokers.
The regulation of offshore Forex brokerage companies requires them to register with the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) before accepting US citizens has both its advantages and disadvantages.
The main advantage is the safety of the US residents funds. This is the aim of the regulation. What's more, as the funds stay within the US, the US treasury should see some benefit from this regulation.
But there are a number of disadvantages that this regulation will bring to the government and US citizens.
First of all, if an international broker is not regulated by the US government, US citizens cannot enjoy their services.
What's more, brokers that accept US citizens have increased their minimum capital requirements substantially. So now this regulation has subjected US citizens to weaker trading conditions; lower leverage and lower spreads.
|The Dodd Frank Act page created by Maynard Ortolf|