Talking about Regulation

[DaveyBoy]

Big play by many brokers about the jurisdictions / countries where they are regulated.

Some will obviously be better than others, but it's easy to hide regulatory status behind "off the shelf" kind of places. Some of the remaining off-shore zones spring to mind here. Places like Lichtenstein, Panama, Liberia.

What's the consensus amongst forum members?

Are the "off-shore" zones safe havens for our trading accounts or only for the broker's?

Do the benefits of using a UK / USA or EU regulated broker for example outweigh any potential spread savings from the "off-shore" guys?

Interested to see people's responses here.

Thanks.

[Enivid]

With the recent regulatory updates in US, I bet that most of the American traders will move to offshore brokers.

[domkscott]

I think that right now with the risk of withdrawl problems, sudden closing of accounts, not to mention rates manipulation, only the brave ones will go “off-shore”. Newbies and the faint at heart will probably stay with the regulated brokers, preferring to pay a little more per investment rather than taking a bigger risk at losing all their money to dodgy brokers...

[robsam]

If you go for off-shore broker, definitely its going to give you the better results depending upon the chosen trade and broker. No matter its from UK/US or from EU. Mr. Domkscott has his own opinion. I agree with that. Thats I am suggesting to be careful.

[marshal]

The suggestion to be careful is really necessary here, but if we look on the picture in the USA in general we have the chance to see that most of the Americans who are involved in trading possess the mind that maybe it will be better to move to the off-shore brokers. Still in my mind it is better to save your money with the regulated brokers and not to risk with your money because you can suffer from losses.

[molbollinger]

I´d be very careful with offshore brokers. Normally they belong to small countries with very limited negotiation power in case of a crisis.

What would happen in case of a crisis? For example, in the US they are making efforts to unify regulation standards, so they are doing in the EU with the MiFID.

Let´s imagine for a moment that the G7 would get together in order to unify currency exchange matters. Automatically all the offshores would be kept out of the game, and the funds likely frozen. Would you like to be kept there?

Plus, european brokers offer fund securities for european citizens. Except for the american traders seeking higher degrees of leverage, I do not see the point in moving towards an offshore broker.

There is an interesting and very relevant business case in the poker industry. I would not like to go off topic, but I can give more details per PM or if somebody asks.

[Enivid]

US Forex regulator CFTC acts against Dodd-Frank act violators:

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) announced that it simultaneously filed 10 enforcement actions in Federal District Courts in Illinois, New York, Utah, and Wyoming, alleging that 11 entities are illegally soliciting members of the public to engage in foreign currency (forex) transactions and are operating without being registered with the CFTC. These cases follow on the CFTC’s January 26, 2011 filings against 14 other entities for similar violations (see CFTC Press Release 5974-11).

According to CFTC Director of Enforcement David Meister: “These actions reflect the CFTC’s continued resolve to make the forex market safer for investors by strictly enforcing the CFTC’s new forex regulations, which became effective in October 2010. These new regulations require entities that wish to participate in the forex market to register with the CFTC and abide by regulations that are intended to protect the public from potentially fraudulent operations.”

The following companies were sued by the CFTC as part of this sweep:

1. 1st Investment Management, LLC, a Wyoming LLC;
   
2. City Credit Capital, (UK) Ltd., a United Kingdom company;
   
3. Enfinium Pty Ltd., an Australian company;
   
4. GBFX, LLC, a New York LLC;
   
5. Gold & Bennett, LLC, a New York LLC;
   
6. InterForex, Inc., a British Virgin Islands company;
   
7. Lucid Financial, Inc., a Utah corporation;
   
8. MF Financial, Ltd., a Belize company with offices in New York City;
   
9. O.C.M. Online Capital Markets Limited, a British Virgin Islands company
   
10. Trading Point of Financial Instruments Ltd. a Cyprus company; and
    
11. Windsor Brokers, Ltd., a Cyprus company.

What do you think?

[Numa]

Dear Enivid,

thanks for this useful list from the US-regulatory office. Some of the sued ones are not small ones for example Windsors borkers is officially regulated by couple of europen authorities.

[Numa]

P.S.: Is there anything known how the US-rules "protect" the customer? What are the improvements of these US-rules? Anybody any idea?
I'm just wondering whether it will be better to choose an US-broker in the future instead one in the UK...

[Enivid]

US rules require all Forex brokers to be registered with the CFTC and NFA. They also add some limits to how trading can be performed and introduce minimum capital level of the brokers. But they protect only US citizens. If you are to join US broker from outside of US you'll probably be directed to some international division.