Why US Clients Are Not Allowed To Open Account With Many Forex Brokerages And The Way To Get Around It
Wednesday, November 9th, 2011It is no secret that a good number of international Forex brokers have regulations that restrict US traders. US citizens are not allowed to open account with several number of offshore international Forex brokers. A good number of these brokers are the regulated ones. The reason for this will become very clear as we tackle every reason. There are strict regulations that limits doing business with US citizens. Most of these regulations originate from the US government. However, this does not completely bar US citizens from opening account with international brokers. There are several offshore international Forex brokers who still accept US traders. Discussed below is the major reason why US citizens cannot open account with some international Forex brokers.
Dodd-Frank Act
The Dodd-Frank Act is the most recent federal statute which president Obama signed into law. The first time it become operational was on July 21, 2010. It is a reform agenda which is purely developed to regulate financial market. The act brought forth new rules that are designed to regulate all financial markets including stocks, futures, futures, options and Forex.
Dodd-Frank Act requires that every Forex brokerage company who wants to do business with US citizens must first be registered with both Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA). Many international Forex brokers find this very difficult for them. Obviously, as at to date there are a good number of Forex brokerage companies are not registered with neither of the regulatory body. This number is constituted by legal and regulated brokers. To avoid the paper mess, they stop accepting us citizen to open account with them. Rather than incur the unforeseen expenses, it is easier and wiser for them to decline US citizens.
The primary reason that has forced international offshore Forex brokers to decline US citizens is the implementation of Dodd-Frank Act. US government has also provided a number of reforms and changes targeting the financial markets that bar their citizens from doing business with international brokerage companies. Most of these regulations are linked to the CFTC activities. The US government have directly implemented some of them. Besides this, the Dodd-Frank Act has many other disadvantages. As a result of this regulation, most foreign banks have also stopped accepting US clients. Secondly, most Forex brokerage services have significantly changed the minimum account trading, leverage, and spread levels for US citizens.
The Solution
Despite the restrictions imposed by the Dodd-Frank Act, some offshore international Forex brokers still accept us citizens. If you are a US citizen, there are chances you can open account with such international brokers not registered by US regulatory bodies – NFA and CFTC. This is only possible under certain conditions. Non-US Forex brokers can only accept us customers to open account but only under their affiliate branches in US.
Read the details of some overseas brokerages that accept US customers at Hot Forex review and RoboForex review.
Conclusion
This regulation requiring offshore Forex brokerage companies to register with Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) for them to accept US trader has both its advantages and disadvantages. The fundamental advantage of this regulation is the guaranteed safety of the US citizens’ funds. This is the intention of the regulation. It is also expected to enrich the US State Treasury since the funds invested won’t be taken out of the USA borders.
Unfortunately, there are substantial disadvantage of this both to us citizens and government. First, the US citizens are significantly barred from using services provided by Forex brokers not regulated by US government. Secondly, for brokerage companies accepting us citizens, they have raised the minimum capital. As a result of this regulation, US citizens are now subjected to unfavourable trading conditions; low spread and reduced leverage. But remember that high leverage or any other regulations won’t matter if you don’t have forex strategies that work.



