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US regulator rules for Forex brokers

Published:
July 30, 2021

Everywhere millions of exchange transactions are carried out constantly via OTC markets. Internet network, as a limitless extent, gives for unimpeded accession. In addition, regardless of geographic boundaries, every trader may act in any of the existing currencies. Within the retail Forex market, speculative operations are widely spreading. Consequently, brokers, banking institutions or other may appear who are deal with fraud, the presence of hidden fees or prohibitively high, and so on. Internet-based trading is tranquil, but, at the same time, sites that are not officially registered may disappear at some point, and your money will disappear too. Regulator rules for Forex brokers aim to prevent all such practices and to ensure maximum protection level.

How the US government regulates Forex accounts

NFA acts as a leading provider of innovational regulator rules for Forex brokers designed the derivatives market, inclusive Forex. This organization’s activities include following:

  • ensuring mandatory compliance with all capital demands;
  • issuance of licenses;
  • combating fraudulent transactions and preventing the operations of such entities within the Forex market;
  • monitoring compliance with the reporting and accounting demands in relation to business transactions.

Amongst main stipulations of regulator rules for Forex brokers, drawn up in order to ensure the protection of small investors, some of the following can be distinguished.

  • The leverage ratio is capped at 50: 1 for major currencies that include the yen, pound, kroon, franc and dollar.
  • For small currencies, leverage is 20: 1.
  • First-in-first-out – a point by which contemporaneous saving of units in one Forex asset is prevented, without also the impossibility of hedging performing Forex trading operations.

Differences between regulator rules for Forex brokers in US and other systems

Prior to registering a trading account, you need to ensure you have full ownership, corresponding status and trading company location, mobile application and web resource. Almost all resources are located and are subject to management beyond the United States; accordingly, they cannot be checked and confirmed by a supervisory body within the host country.

Broker confirmation procedure and its status

NFA was provided with a special online verification system, which is abbreviated as BASIC. Through such a system, it is possible to review brokerage company status in the United States by individual NFA ID, name of organization, or by pool.

In general, it can be concluded that the financial field rules are quite compound and subject to frequent changes in accordance with how the market develops. Furthermore, the authorities are constantly on the lookout for a balance, as overly loose controlling may cause ineffective investors protection, and over controlling will lead to activity of economic sector will be reduced.

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