A New Era of Regulation for OTC Retail FX


Well-known member
376 45
If you are a U.S. based FX Retail Trader, then 2011 will be the last year that you will be able to hold and maintain a Non-U.S. FX Intermediary Account. Of course, you have your friendly government to thank for this mess and that piece of legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, H.R. 4173 2010. What an oxymoron - "consumer protection." What consumer gets protected by this? They are treating Retail FX Traders as if they were all about 7 years old. This is not like 401ks, pension plans, retirement plans (qualified and unqualified), etc. This is nothing more than United States Government meddling in the affairs of its citizens and taking away both Freedoms and Personal Rights.

Basically, if you trade "Retail" you will be forced to trade inside the United States at a maximum of 50:1 leverage and with absolute no way to hedge your positions until a major pivot point on a trade that initially went against you.

These people know nothing about trading, yet they make laws that regulate it. They can't even get the math straight, failing to realize that an increase in cost basis per trade at 100:1 leverage, can net the same gain or loss as a specific decrease in cost basis at 50:1. Yet, they call themselves "protecting the consumer." This is no protection of the consumer. This is all about moving the Futures Markets back into vogue. They were losing dollars/revenue to the OTC FX market and whether individual Retail Traders win or lost all their money entirely, means absolutely nothing to either Dodd or Frank. It was the FCM Lobbyists who did this in America.

Here's the link to a good explanation of what just happened:

Here's what someone could or might do:

1) Form a legal entity to conduct your trading business, whether you have a billion dollars to open an account somewhere or not. The point is that you should have been trading under legal business entity from the word go.

2) Make the legal entity either an LLC, LLP or Corporation registered in the nice state of Nevada. A stronghold for many business entities that belong to MANY United States Congressmen and Congresswomen (but, of course, they don't tell you this). Delaware, used to be a good state for this, but they have become lax over the years and more reciprocal with the Federal Government over the years. Or, create a foreign legal entity (limited liability company and/or corporate structure) and register that entity as doing business in the state of Nevada (establish a business address locally).

3) Open/establish a primary holding bank account of your legal entity with an foreign bank. Preferably, Swiss, but the Caymans, Bahamas, etc., works as well.

4) Open/establish a foreign FX Commercial or Institutional Trading Account - preferably with a foreign FX Intermediary that also happens to be a bank regulated outside the United States.

5) Create a small foreign charity or philanthropic NPO of your own selection having its "headquarters" outside the U.S. Then register that NPO as having a "presence" in the United States.

6) Open/establish a business account for the foreign NPO, here in the U.S., with you as the Founder/President/CEO [which will justify the compensation and benefits package paid to you each year]. If you list yourself as the "Janitor" and you net $1MM per year in total compensation, that won't fly. Unless you are the CEO of Waste Management, that certainly won't fly.

7) Establish a smaller personal bank account locally, here in the United States, from which you pay your normal and routine monthly expenses. Don't let hat account balance exceed $100k. When it does, open another personal bank account locally and repeat the process. Keep most of your trading capital inside the commercial/institutional trading accounts of the trading firm established above (where of course, you are Managing Director/Chief Trading Strategist/CFO/COO - as well as having CEO authority, or some title(s) like those).

NOTE: I am NOT an attorney and I am NOT giving legal advice. Seek legal advice from your attorney. I'm merely stating what someone could or might do. Not what someone should or would do.

As Traders, we should all stick together. The powers that be don't care one wit about your "consumer protections." However, this one things is true about all politicians: The will NEVER write laws that hurt themselves, their families and most important (to them) those who fill their campaign coffers with money each election.

And, that is why there will always be a legal and ethical way around their attempts at sticking it to the so-called "little guy." You have a legal requirement to NOT break the law. However, as the new leader of your business concern, you NOW have a Fiduciary Responsibility to lower your costs and maximize your organizations profits. Just like the "big guys."

Good government is non-intrusive, supportive to the people, proficient and highly effective. Bad government does the EXACT opposite. Democrat, Republican, Independent - it matters not. The sooner the world wakes up and realizes this, the better off we will all be.

Take that CFTC.

Oh, I almost forgot:

To all of you so-called "Institutional FX Intermediaries" out there outside the U.S., pretending to "absolutely need" $1MM before you will open an account, you should seriously consider lowering your deposit requirements for Commercial and Institutional FX Trading Accounts, so you can take advantage of the new business that's coming your way. ;)

As far as you U.S. based Retail FX Traders are concerned - 50:1 is lousy, sure, but zero hedging is absurdly ridiculous and antithetical to a good Trader's Tool Chest. Hedging IS a consumer protection, yet it was taken away by those feigning to be interested in protecting and preserving your capital. What a joke. They claim to protect you, yet they rob you of one tool that can prevent loss, until the market hits a strong pivot point from which you can recover and in some cases, even go on to make a profit off of what would have been a naked loss.

What bunch of regulatory fools they turned out to be with respect to Retail FX. Knowing nothing, helping no retail trader and creating a legal gauntlet that now everyone has to circumnavigate. Yep, that made a whole lot of sense.


Well-known member
376 45
Excerpt from above link will release some of us from the leverage burdens of CFTC's draconian 50:1. This of course, assumes that one has a Retail FX Account with a U.S. based "look alike" (Spot) FX Intermediary AND holds in excess of $10MM in assets. Very interesting, indeed. However, this says nothing about allowing those who meet the $10MM in assets requirement, the freedom to continue using Hedging on all "look alike" (Spot) FX transactions (trades).

If this is the case, then one could remain a U.S. based FX "Retail" Trader (according to the CRA/CFTC), if they report to their U.S. based FX Retail Intermediary, that they meet the $10MM asset "class" test. That is, of course, if you so desire to maintain your U.S. trading account(s) to begin with. Quite frankly, I think the U.S. government is hostile towards the U.S. Retail FX Trader, as a rule. So, why would I stay my account "here." Why would anyone (who can meet the test) stay their account "here," given the blatant hostility shown by the U.S. government.

"Leverage Restrictions:

The final rules limit leverage for retail clients (non-ECPs) through a mechanism whereby the CFTC has set parameters and will delegate authority to the NFA to set specific limits within those parameters. The initial rules release provides for a maximum of 50:1 leverage on major currencies and 20:1 on all other currencies. While these parameters are stricter than the 100:1 limitation that currently exists in the market, they are far looser than the 10:1 level proposed in January. The CFTC received a record number of comments against the 10:1 level and has relaxed that level in response to the overwhelmingly negative response.

It is important to note that the final leverage restrictions will only affect retail clients. This does not include commodity pools that are run by a registered CPO with greater than $5 million in assets or CTA firms whose clients are all ECPs, including individuals or entities with greater than $10 million in assets. It also does not affect individual traders with more than $10 million in assets."

So, there you have it. This does NOT apply to all of us so-called "Retail 'Look Alike' FX Traders.

See, I think this is part of the problem. They keep changing and altering the meaning and definition of "Retail" without giving some definition to the "Commercial" and/or "Institutional" OTC account status/level. And, why $10MM - why not make it $100MM, or $1BLN for that matter. Or, how about drop the definition of "Retail" down to $500k. Put everything above $500k - $20MM in the category of "Commercial" and everything else above $20MM as "Institutional." But, allow anyone, Retail, Commercial or Institutional, to establish their accounts with whomever they select as their Intermediary.

I don't get the monopolization requirement that forces anyone to do business with a particular group of service providers. This needs to be removed and repealed from the legislation as it is inherently unfair for the U.S. Retail class under $10MM (current rules) and it gives the foreign Retail class a MASSIVE edge on any U.S. Retail Trader.

The new CRA/CFTC/Dood-Frank rules/legislation is inherently unfair to any U.S. based Trader, irrational on its face and illogical to the core.

LOL, everybody was sitting around wondering about the "new CFTC ruling," when you were all getting torpedoed, NOT by the CFTC ruling directly, but by Christopher Dood and Barney Frank, indirectly. This stuff came straight out of the Cloak Room of the United States Congress, not some non-descriptive bureaucrat sitting behind a desk at some back ally office of the CFTC.

They blind-sided you. They had your head looking one way and then they came the other way and swept your legs out from under you while you were not even looking. What a rip! Everybody was writing letters to the CFTC, when they should have been sending their letters to:

Congressmen Barney Franks, 202-225-5931:

The Honorable Barney Frank
United States House of Representatives
2252 Rayburn House Office Building
Washington, D.C. 20515-2104

Congressmen Christopher Dodd, 202-224-2823:

The Honorable Chris Dodd
United States Senate
448 Russell Senate Office Building
Washington, D.C. 20510-0702

These two Congressmen are the people responsible for the Retail FX fall-out to date. Yet, the CFTC had us sending them email, faxes and letters. What a snow job that was. That's how they work - putting the knife behind your back in Congressional Cloak Rooms. This is not serving the American People. This is screwing the American People in the back.

How many of you sent communications to the CFTC direct, instead of these two back-stabbing Congressmen. They wrapped this little puppy up in a far bigger and much broader piece of legislation. And, the American FX Retail Trader under $10MM in assets got body slammed in the process.

What a rip.



Well-known member
376 45
Just picked this up off the net. A letter of calm from one Australian based FX Intermediary:

Dear Client,

Following a number of enquiries relating to the new CFTC regulations regarding Forex, we would like to clarify GO Markets position on these regulations.

GO Markets are regulated by ASIC (Australian Securities & Investment Commission) and are not regulated by the CFTC or any other US regulatory body.

We have interpreted the Dodd-Frank bill to mean that we can still offer the same, great trading conditions including full hedging capabilities and up to 500:1 leverage for all clients.

We will continue to keep all clients informed on the matter.

GO Markets Pty Ltd


It would seem like the nose & thumb process has already begun with at least some FX Retail Intermediaries.

I think one of the better solutions for you Retail guys, is for all (that's never been done before) U.S. based FX Intermediaries to simply shut-down all your U.S. operations and then open operations in places like Australia and the U.K. That way, you have zero foot-print here in the U.S. and will not be subject to any CFTC/NFA regulations.

However, the Congress has a particular problem on its hands with legit Banks, like DB and Cito, that also offer Retail FX to U.S. customers. Deutsche Bank and Citi are FINRA/SEC regulated and thus not subject to CFTC rulings. Push come to shove, DB (for example) could simply say, ok- we will no longer offer Retail FX anywhere in the U.S. and originate all FX Retail business out of our German or London footprint, exclusively.

Now, how does that change things? Well, if a U.S. Citizen opens an account with a Swiss Bank, can the CFTC/NFA or the Congress, force that Swiss Bank to comply with U.S. based regulations? Of course, not. The issue, here, is that the United States Government does not know what to do with Internet based International Commerce - bottom line. Especially, those of a financial nature.

If my client connects to a server hosted in Germany, Switzerland, Australia or the U.K. and my account origination documents were sent to an address within one of those same jurisdictions AND my intermediary has no Retail FX Service footprint anywhere in the U.S., then who is the CFTC to regulate that business relationship, as long as the FX Intermediary complies with the laws of the jurisdiction in which it maintains its FX footprint.

This is the Net. Why does any computer have to connect to server that is U.S. based - ever. I say, let's take the whole thing off-shore. In Australia, for example - your funds are placed in Segregated Accounts by law. Not so, here in the U.S. as that was made optional. So, by forcing U.S. Traders to do business exclusively in the U.S., the CFTC has basically put more Traders funds at risk! It makes no sense at all.


Legendary member
5,963 1,501
Not a shock is it ?

These are the same people who decided that new traders need to put $25k in an account to day trading shares in any quantitiy but allow you to open a futures account where your risk per trade is much higher.

So a newbie who doesn't go the forex route can't start off with 10 share lots and practice with real $$$ to hone his skills, they have to open a futures account with a discount broker, put in $2500 and make just a few mistakes before having to top it up. How this is benefitting the little guy is beyond me. Cannon fodder comes to mind.


Legendary member
10,229 2,055
dodd and frank were the ones who created many of the banking regs years back that definitely had a hand in the failures and banking mess. Many large banks were forced to lend to unworthy borrowers so that everyone could get a mortgage regardless of age/race/sex/ability to repay.
not shocking that they continue to create a mess as they go on. Of course I blame the American public....people like them keep getting voted back in office. We get exactly what we vote for.



Well-known member
376 45
I don't have a problem with Government Regulation. I have a problem with DUMB Government Regulation. Regulation, in and of itself can be a very good and necessary thing. What is regulation other than law. Take "regulation" out of the physics that distinguish the strong force from the weak force and what do you get? Take "regulation" out of gravity and electromagnetism and what do you get? Regulations = Laws and laws are a vital part of our known universe. Without them, we would not be here - life itself, cannot be supported without law/regulation.

There is nothing wrong with having Laws. Take away or disturb in any manner, the laws that govern orbital mechanics and exactly how chaotic will our known universe become? How many planetary collisions within our own galaxy would there be in less than one year? No, I have noooooooooooo problems with the Law or with Regulation.

But, I do have a SUPER MASSIVE problem with clueless politicians playing Master of the Universe, by establishing SUPER MASSIVE DUMB public policy that is said to "protect" the public. Lies - all lies. Indeed, I have a problem with dumb laws that only serve to damage as opposed to sensibly regulate. I have a problem with politicians who don't understand an industry, trying to regulate that same industry. How can you possibly regulate that which you don't even understand! My goodness! The elegant universe in which we live, has NO super massively dumb physical laws - at all - not one - not a single one will you find anywhere. And, there are not many of them! But, the ones that are there, happen to be profoundly important for the maintenance of life on planet earth. Remove just one of them and all life ceases to exist - like it never happened. That's highly intelligent law - massively sophisticated and elegantly refined regulation.

Take the law of gravity, for example. Elegant to the core. So elegant, in fact, that without it, nothing on the periodic table could possibly exist - therefore, no life - anywhere in the universe would exist without the elegance and timeliness of the Law of Gravity.

On the other hand, take Dodd/Frank/Finreg with respect to OTC FX.

There are elements of FinReg that make all the sense in the world. But, like a meteor from out of nowhere headed to earth, up springs the most incredulous and the most insidiously insane and rank stupidity that anyone could possibly imagine. Forcing a Citizen of the United States of America into a monopolistic business practice??? That's not only DUMB, that's a clear violation of of United States Code. It is also a violation of the Citizen's right to freely engage an open and fair market place. It dictates to the Citizen, what he/she will buy, when they will buy it, how they buy it and from whom they buy it. This is patently un-American to the core.

Can Government dictate whether or not I fly Air Canada, or United, on my trip to Toronto from Los Angeles? Some will say YES, they already did with de-regulation, as the U.S. carriers went through a major merge-fest after the era of Ronald Reagan and the deregulation Congress of the 1980's. Some will say that I have less choice now, than I would have, had the U.S. airline industry not been de-regulated. So, indirectly, yes - Government has dictated who I fly with.

But, does Government have the Constitutional authority to dictate with whom I bank? Can they then dictate to a Foreign Bank, that it cannot accept my deposits? Can it dictate to me and a foreign bank, precisely what types and kinds of transactions and services that a foreign bank can offer me, or that I use a foreign bank to make? Does that same Government have the Constitutional authority to force me into an exclusionary business practice, by restricting my private banking transactions (including the use of spot foreign exchange services) to only U.S. formulated banks? Somebody needs to challenge this stuff - now.

Smart regulation is the way to go. Designed by people with brains, ethics and a conscious. Regulation that solves real problems and prevents real catastrophes from visiting the public. Intelligently designed regulation (law) is a good thing, as it is not oppressive, unnecessary, irrational and illogical.

FX regulations should place emphasis on preventing rouge intermediaries from entering the business and/or once in the business, from harming traders and/or after harming traders, from getting away with it, without making the trader whole again. That's what FX regulations should be all about. Not, engaging in making private decisions for Private Citizens. If the Citizen decides to trade with 100:1 leverage, then its the Citizens responsibility to be educated about their own decision. If the Citizen decides to hedge their position, then it is the Citizen who needs to understand the implications of doing so. By no means should any government on earth dictate to its Citizens who it can and who it cannot do business with, as long as there are no National Security and Public Safety concerns and/or issues involved in the business transaction. This is common sense rationale.

Where is public safety at risk when someone trades 100:1? Where is the threat to national security, merely because one hedges and open position? How is the trader being "protected" when they are forced to engage in monopolistic business practices by being forced to only do business with domestic FX Intermediaries? And, how can the U.S. government possibly regulate Foreign Banks that offer FX Services to the entire free world, from offering those same services to FREE Americans?

How on EARTH is it possible that in a country that prides itself on "freedoms" and "democracy" and the "spread of democracy" throughout the entire world (even so much as to declare war over the same), can even remotely come close to taking away the freedom of its Citizens to bank where they will and to use the services of the bank they so desire?

Dodd/Frank has some good things in it - but the OTC FX segment of the law that restricts the freedoms and abridges the rights of American Citizens to conduct private business according to their own needs and desires, is patently absurd. It is this segment of the "Wall Street Reform and Consumer Protection Act," that needs to be repealed - immediately.


Active member
102 11
I agree that forcing people to do business with US banks only is unacceptable and I agree that capping leverage at 50:1 is uncalled for even though I think that anyone who uses more leverage is going to be separated from his money by the market very quickly, but I don't understand why you get upset over not being able to hedge open positions - instead of a full hedge just close your open position and instead of a partial hedge close a part of your position; when the market turns around just reopen the parts that you've closed. The net result in terms of transaction costs is identical to hedging so I don't see how anyone would be affected negatively by losing the ability to hedge..


1 0
This thread has gone dormant but I was wondering if anyone has an input on how DODD FRANK looks at this being done?

Legally, it would appear there is no issue since it is NOT illegal to open an Offshore Business (The Benefits of Incorporating Abroad in an Age of Globalization - NYTimes.com) and many are doing this. The question still begs: Is this a legal loophole or can DOOD FRANK insist on its pound of flesh from the US Citzen taking advantage of it?

Any recent thoughts would be appreciated
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