Repercussions of the Launch of CFPB on the Forex Industry

Tuesday, 23rd August 2011

The Frank-Dodd Reform and Consumer Protection Act that was passes one year ago will finally make its presence felt. One of the regulations for Forex industry laid down under the Act mandates that only regulated brokers who stringently follow all the guidelines laid down by CFTC can practice Forex Trading. All the others have been directed to stop operating.

Of the brokers who have stopped operating are Dukascop, MIG and ACMarkets. TadawulFX closed its doors on 8th July 2011 and many others did so much earlier than that. The deadline for the implementation of the Act was 15th July 2011.

The guidelines laid down for brokers regulated under CFTC are: -

1. RFEDs and FCMs are required to maintain a net capital of $20 million along with an added amount of 5% by which obligation to retail Forex customers surpass $1 million;
2. The leveraging to be offered by brokers has been reduced to 1:50;
3. Brokers will now have to maintain records strictly aid according to the requirements of specific reporting.

CFTC has filed a suit against brokers such as FXOpen, GIGFX, InstaForex and others for operating without a license. They have also been accused of luring traders with false promises.

Traders can withdraw their amounts by making the request in the same way as they deposit it. Accounts of traders that remain open as on 15th July 2011 have been automatically closed. Such traders have been advised to find new brokers.