The Best USA Forex Brokers

The forex market in the United States is regulated by the Commodities and Futures Trading Commission (CFTC). Regulation covers not only forex brokers, but virtually all individuals and entities that have some kind of business to do in the forex market. Forex brokers are required to be members of the National Futures Association (NFA), which is the self-regulatory body that regulates member brokers.

USA forex brokers are by definition, forex brokers that are located in the United States of America, and which serve American citizens and residents of the USA. USA forex brokers typically are very selective of who can do business with them; they mostly restrict their business to the local US market. The following sections will provide some insight as to the characteristics of USA forex brokers, and what it takes to trade forex with these brokers.

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Min Deposit :
$10
Deposit $1200 minimum for a 100% bonus
Avg Spread :
0.4pips
  • Mobile Trading
  • MT4 platform with robot trading capacity
8/10

 

USA Forex Brokers: Rules for Doing Forex Brokerage Business in the USA

Any broker expecting to operate as a USA forex broker must abide by the following guidelines regarding conduct of forex brokerage business.

1) Leverage Requirements

One of the changes introduced into the US forex market in 2010 was the adjustment of leverage by the CFTC and NFA for forex traders. Leverage limits were set at 50:1 (i.e. a deposit requirement of 2% on the notional value of a forex trade) for the major currencies (British Pound, Canadian Dollar, Swiss Franc, Euros, Japanese Yen, the Aussie and Kiwi Dollars, as well as the Swedish, Norwegian and the Danish Crowns or Krones). Furthermore, the limits were reduced for minor currencies to 20:1 (or 5% deposit requirement of the notional value of forex trades). According to the regulatory authorities, this was aimed at ensuring that only investors who had the knowledge and required capital to trade were the ones trading. Any broker that offers leverage beyond what has been stated above cannot be a US forex broker.

2) OFAC Restrictions

Some may be asking: what does the US Office of Foreign Assets and Control (OFAC) have to do with forex trading in the US? The answer is: a lot. Forex trading and forex business involves the movement of large amounts of money, mainly across borders. Therefore, finding payment services providers for forex brokerage business is a critical component of the business. The US has strict laws on how financial entities can receive money and who they can receive money from, and these laws are enforced to a large extent by OFAC. When it comes to what banks US forex brokers can lodge their clients’ funds or who can process these payments, there are restrictions.

3) Tax Compliance

The Foreign Accounts Tax Compliance Act is a US law which mandates compulsory reporting by financial institutions across the world to the IRS of the financial and transactional details of all US citizens that hold accounts with them for purposes of taxation. The US government’s tax laws mandate that all income earned by US citizens all over the world must be taxed. This legislation caused the unbundling of the operations of several forex brokers. Many companies now have divisions which work exclusively as US forex brokers to be able to serve the local market and fulfill the FATCA-reporting obligations.

4) FIFO

FIFO is the acronym for the First In, First Out rule. This is a rule that has been set for retail forex traders by the National Futures Association (NFA) regarding the use of hedged trades and the order in which trades in the same currency pair should be closed. According to the FIFO rule, any trade entries that were first made before other trades should be the ones to be closed out first. By virtue of this rule, traders cannot hold opposing trades on the same currency pairs as any existing trades on a currency pair must be closed out first. This is in accordance with NFA Compliance Rule 2-43b. This rule has altered the sequence in which traders can enter trades, forcing US forex brokers to alter their trading platforms to adhere to this rule.

5) CIP

The Customer Identification Program (CIP)is a protocol set out under the amended bank Secrecy Act, which requires all financial institutions (including forex brokers) to maintain a strict regimen of identifying who their customers are prior to opening accounts for such customers. The amendments are clearly spelt out and only US forex brokers comply with these requirements as detailed in Section 326 of the US Patriot Act.

How Traders Can Identify a USA Forex Brokers

USA forex brokers tend to do business with Americans. If you are a US citizen living in the US, locating a US forex broker will not be a problem. However, Americans who live in Europe and other places may be hard pressed identifying a true USA forex broker. The following tips should help you identify an NFA-regulated, CFTC-licensed USA forex broker.

a) Status Verification Using BASIC

Some brokers may provide a USA address and attempt to use this to trick prospects into believing that they are USA forex brokers. Hold it; there is an easy way to verify this information. The National Futures Association (NFA) operates a web search portal known as the Basic Affiliation Status Information Centre (BASIC), which is a portal that provides background information on all regulated entities and individuals in the US forex market.

Information that can be obtained about a USA forex broker include:

  • Current and historical CFTC registration and NFA membership information.
  • Financial information for futures commission merchants (FCMs).
  • Regulatory and non-regulatory actions contributed by CFTC, NFA, and the futures exchanges in the US.
  • Business address of the brokerage firm.
  • Principals of the firm.
  • Former and “doing business as” names of the brokerage.
  • Exemptions and No-Action Letters.

You can also search brokers by the ID number assigned to the firm by NFA, or by the name of the forex brokerage.

b) License Number

Every USA forex broker is expected to state their license number on the website. If this number is missing, that is the first pointer that something is wrong. If the license number is clearly stated, you can comfortably use this to perform the background search on BASIC.

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