Cftc approved forex brokers
CFTC, or the Commodities and Futures Trading Commission, is an independent agency of the United States Government that is responsible for monitoring and regulating the many futures as well as options contracts in the US financial markets.
The CFTC works along the lines of the rules set forward by the Commodities Exchange Act, which stipulates several strict guidelines for ensuring the transparency and integrity of the markets by avoiding systemic risks such as market manipulation, financial fraud, and consumer abuse.
Ever since the market turmoil of the financial crisis, the CFTC has been reforming its operating protocols to set more severe guidelines for CFTC regulated brokers as well as member firms, which aims to improve the overall trust and confidence among investors regarding the protection of their funds and trading capital.
CFTC does not cftc approved forex brokers brokers or financial companies directly. Instead, the NFA is the sole agency responsible for cftc approved forex brokers businesses and individuals that seek cftc approved forex brokers carry out any financial activities in the US.
The CFTC and NFA work together towards eradicating all types of financial crime and investor abuse through constant monitoring of activities by member firms. Such a type of dual regulation not only increases the transparency of broker operations but also renders more security against financial malpractice.
CFTC is responsible for continuous improvement of the financial regulations and for amending rules that govern broker operations. Although the CFTC has a good track record of maintaining a transparent financial marketplace, the financial crisis of put a severe strain on the US markets, which forced the CFTC further to reform cftc approved forex brokers statutory guidelines for better broker regulation.
Here are a few regulatory guidelines that are imposed on CFTC regulated brokers for catering to traders and investors in the US market:.
CFTC is more proactive and highly concerned about trader welfare by tweaking the Forex trading conditions on the pretext of saving investors from losses and the high-risk nature of Forex trading. Tweaking the trading conditions can cftc approved forex brokers be considered as a double-edged sword, as it can both work for and against a trader. First In First Out — The FIFO cftc approved forex brokers only allows a trader to close or liquidate their open positions in a single currency pair according to the order in which the positions were opened.
CFTC Forex brokers should factor in such a rule into their cftc approved forex brokers program to disallow any traders from deviating from such a law. Therefore, if a trader attempts to close the second position, the first position will be closed automatically. Hedging is the process of buying and selling the same currency pair, which cftc approved forex brokers protect a trader against highly volatile market situations. The CFTC believes that traders are at a loss by opening a hedged position, as they have to account for double the spread and would eventually suffer from added trading costs as a result of hedging.
Although a lower leverage is ideal for minimizing the risk of Forex trading, scalpers and high-frequency traders might feel left out due to the lowered leverage and higher margin requirements. CFTC updates its online scam watch and the RED List Registration Deficient List on a consistent basis to offer investors with better insight into the highly rated and reliable CFTC regulated brokers that are guaranteed to provide safety of client funds. CFTC has imposed heavy fines and sanctions on multiple mainstream Forex brokers for alleged financial misconduct, which has helped in increasing investor trust and confidence.
The CFTC has outlined a detailed procedure for tackling client abuse and has a well-defined process for taking up a complaint against a financial company.
CFTC Forex brokers should try to resolve every consumer complaints through the proper channels, failing which; the CFTC will take necessary actions to protect an investor. CFTC has indeed become one of the most preferred regulatory organizations in the world, albeit, they do have some ridiculous Forex trading conditions that might alienate a significant proportion of genuine investors.
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