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What Is FOREX?

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FOREX Regulation

Once again, FOREX is a comparatively new trading venue for the average retail currency trader, and with new comes a lack of regulation. In recent years, the NFA (National Futures Association) has begun pulling the reins in on FOREX brokerage firms and their practices, but the jurisdiction of U.S. regulators can’t, and doesn’t, extend beyond domestic borders. Accordingly, as U.S. regulators were scrambling to write, implement, and enforce new rules aimed at protecting the public from misleading or fraudulent activity, traders reacted by opening trading accounts with brokerage firms operating overseas. The jury is still out on whether this global competition is in the best interest of traders; nonetheless, despite a lack of jurisdiction, U.S. authorities are working hard to prevent U.S. traders from using foreign-operated brokerage houses that don’t comply with U.S. regulations. In fact, at the time of this writing, it seemed as though most foreign FX brokers were honoring the wishes of U.S. regulators by either refraining from accepting U.S. citizens as clients or operating a branch of their business according to U.S. rules to accommodate U.S. clients.

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