Forex in the U.S. - how do brokers work there?
Many of us have heard scares about the Forex market in the United States - someone thinks that trade on currencies in the country of the star-striped flag is completely prohibited, someone on the contrary believes that "everything in America is definitely honest!." And what really?
Since the 2008 financial crisis, the U.S. government has been greatly concerned about regulating the financial system, putting forward a number of strict restrictions and rules. All this is obliged to stabilize the financial situation in the country and protect capital from a sharp collapse of the market. Some of these restrictions directly affect the forex market, making virtually any operations on it outlawed.
The high-profile story came just recently when the largest US broker, FXCM, was permanently expelled from the national ground. The Commission relies on the fact that from at least 2009 to 2014 the company misled clients, claiming that there was no conflict of interest, then beat, acting as an intermediary in transferring applications to banks and other liquidity providers. The results of the investigation are reflected in a published document, which claims that a substantial part of the liquidity was not identified in the public accounts, in fact, being the result of a marketing algorithm.
Thus, no forex broker operating in the United States is protected from such actions by the state, even if it is a company with huge turnover and an established brand. On the note, for December 2016 the share of the company was exactly one third of the total retail forex in the USA. This shows the attitude towards the decentralized currency market as a whole, campaigning for more traditional methods of investment on domestic exchanges.
Restrictions for traders
Compliance with the FIFO rule (First In, First Out - first entered, first out). According to the FIFO rule, the oldest items open on the same currency pair should be closed first. If you try to close a later position, the trader will be warned to close the earlier positions first.
Prohibition of hedging, then beat, opening of multi-directional positions on one instrument. Such a decision the regulator explains the impracticability of such tactics, so it will not be possible to block the position on the account of the American broker.
After 2008, the national regulator began to take tough measures against derivatives, completely prohibiting trade in CFD instruments in the United States.
Restriction of marginal trade. The regulatory body decided to limit the maximum size of the credit arm to 1:50 (in particular for the main currency pairs) and to 1:20 for the less liquid assets.
If you are an American citizen and live outside of America, you have a chance to circumvent some of the regulatory restrictions. But, that would require proving being outside the states to his broker. Otherwise, other companies hosting US traders remain to be sought. Unfortunately, these are usually small or highly questionable offices (e.g., FXChoise). Currently, American citizenship and full trade on forex are incompatible things.