CFTC Regulated Brokers

CFTC (Commodity Futures Trading Commission) is an independent federal agency in the United States government that was formed in 1974 to regulate the futures and options markets. According to the Commodities Exchange Act, the CFTC is tasked with fostering open, transparent, competitive, and good markets, avoiding systemic risks and protecting market participants, clients, and their funds from fraud, manipulation, and other crime.

Periodically, CFTC publishes a list of agencies that provide futures trading services illegally in the US. CFTC also prohibits forex brokers from offering investment schemes with fixed returns. The form of punishments imposed on violators of the CFTC regulations is divided into several levels, ranging by fines, freezing of activities, to permanent termination.

As the main regulatory body in the United States, CFTC has a superior data named CoT (Commitment of Traders). The CFTC Commitment of Traders was first published in 1962 for 13 types of Agricultures commodities monthly data. Starting in 2000, reports were released once a week. Since then, the contents of the report have also become more diverse, including information on forex futures trading. The CoT CFTC report is aimed at increasing the transparency of the futures trading market in the United States.

Here is a list of CFTC-regulated forex brokers:

Advantages and Disadvantages of Trading in CFTC Regulated Brokers

CFTC has been known as one of the most respected forex broker regulators in the world. Strict registration requirements, data transparency, and thorough supervision are the quality assurance of CFTC regulated brokers. To be able to obtain CFTC regulations, forex brokers must have a business capital of at least 20,000 USD, be willing to audit regularly (daily, weekly, quarterly, annually), place customer funds in segregated accounts, and promote honestly.

On CFTC regulated broker promotion material, it is common if we find the words "Forex trading is a high-risk activity. (Numbers of) traders experience losses when trading on this broker". That is a requirement of the regulator. That way, prospective traders will be more aware of the risks of forex trading. On the other hand, the broker will make maximum efforts to provide education to traders so that their reputation is good. This policy is also useful to dismiss the notion that the broker earns income from the trader's losses.

The disadvantage of trading at a CFTC broker lies in its less flexible trading conditions and the limited promotion. Maximum allowed leverage is 1:50, hedging is not allowed and FIFO rules apply. CFTC also prohibits its brokers from accepting clients from outside the United States, so many CFTC regulated forex brokers have alternative regulations. Also, registering on CFTC regulated brokers requires complicated data and client examinations, compared to off-shore brokers that simpler and newbie-friendly. However, those steps needed to ensure the client's fund safety.

FAQ

What does CFTC regulated mean?

Being regulated by CFTC means operating under the standards of the United States financial regulator. To acquire a CFTC license, forex brokers must have a business capital of at least 20,000 USD, be willing to be audited regularly (daily, weekly, quarterly, annually), place customer funds in segregated accounts, and promote honestly.

What are the CFTC rules?

As one of the most respected forex broker regulators, CFTC enforces strict registration requirements, data transparency, and thorough supervision to its registered brokers.

Maximum allowed leverage is 1:50, hedging the same currency pairs at the same time is not allowed as the FIFO rule is in effect. CFTC prohibits its brokers to accept non-US clients, and registering with a CFTC regulated broker requires a series of complicated data and client examinations.

What is the main purpose of CFTC?

According to the Commodities Exchange Act, the CFTC is tasked with fostering open, transparent, competitive, and good markets, avoiding systemic risks and protecting market participants, clients, and their funds from fraud, manipulation, and other crime.

What are the powers of CFTC?

The form of punishments imposed on violators of the CFTC regulations is divided into several levels, ranging from fines, freezing of activities, to permanent termination.

If you are interested to open an account in one of the brokers in the list above, make sure to try the forex demo account before proceeding to register in the live account.