Offshore Brokers Vs US brokers
Following the Financial crisis of 2008, many big US banks went bankrupt, which made regulators change tact by bringing in regulations to fill in loopholes in the financial sector. As a result, all US forex brokers are regulated by the National Futures Association (NFA) and the Commodities and Futures Trading Commission (CFTC), both of which impose strict rules compared to other FX brokers from the rest of the world.
Under these regulations, US brokers can only offer their clients a maximum leverage of just 1:50, meaning that US Citizens and Residents have much less leverage advantage compared to other global traders who enjoy leverage from 1:100 to 1:2000 with offshore Forex Brokers. US brokers also cant allow any hedging and instead must implement FIFO (First In First Out), which means if you open more than one position on a currency pair, you must close the first before closing the second one. This rule doesn’t apply with offshore brokers.
There is a lot of red tape for US traders who sign up to US brokers, with long checklists to complete as well as providing your Tax information, whereas with offshore brokers the sign up process is quick and easy. US traders cant deposit using are not allowed to use their Credit card to fund their Forex Trading account or access any add on services such as signals and indicators.
Why don’t brokers accept US clients?
The Dodd-Frank Act requires that a Forex Broker who wants to operate in the US has to be registered both CFTC and NFA. This requires brokers to put up a lot of capital as security as well as meet tedious and costly reporting requirements. For example, the license fee of NFA and CFTC is 20 million USD alone.
To avoid paying this high fee, most forex brokers decided to just stop accepting US clients rather than face the costly operational fees and expenses.
Therefore, the Dodd-Frank Act is the main reason many Forex Brokers have decided to decline US Citizens or Residents as clients.
Why are some Forex Brokers still Accepting US Clients?
Despite the regulations, US Clients CAN STILL open a Forex trading account with offshore and foreign brokers who do accept US clients.
The US regulation (CFTC) has a signed Memorandum of Understanding (MoU) with many foreign governments. Although the MoU agreements put pressure on these foreign governments (who signed the MoU agreement) to decline US Citizens from opening a Forex trading account with Forex Brokers in their jurisdictions, there are still many countries who haven’t signed the MoU agreements and so don’t have to comply with US pressure or regulations.
This means that in countries where there is no signed MoU, brokers can accept US clients.
Is Forex trading legal in the US?
Yes! Under current US law, CFTC has no authority to stop or prevent US Traders who trade through offshore Forex Brokers that are beyond the reach of US regulation.
The US government requires that US Citizens report offshore accounts which people hold to the IRS but, they cannot prevent US Citizens from having those accounts. The Act affects the Forex brokerage not you as an individual, so as long as you report what is required to IRS the everything is completely legal.
Best Forex brokers for US clients 2020
The best Forex brokers for US clients are offshore brokers because they offer more freedom, better trading conditions, less hassle and few limitations. Chose a broker who offers No FIFA rule, allows hedging, scalping and EA trading.
|Broker Name||Broker Type||Leverage||Raw Spread Account Fees||Spreads on Standard Account||Fair Forex||ECN||Up to 1:400||$5 per lot-from 0.0 pips||From 0.8 pip|
|KOT4X||STP/ECN||Up to 1:500||$7 per lot -from 0.0 pips||From 1.2 pips|
|Hugos Way||STP/ECN||Up to 1:500||$5 per lot-from 0.0 pips||Not Offerred|
|Traders Way||STP/ECN||Up to 1:1000||$6 per lot-from 0.0 pips||From 2.0 pips|
|LMFX||STP/ Market Maker||Up to 1:250||$4 per lot-from 0.2 pips||From 1.4 pips|
|FX GLory||Market Maker||Up to 1:1000||Not Offerred||From 2.0 pips|
|LQDFX||STP/ Market Maker||Up to 1:500||$7 per lot - from 0.0 pips||From 1.0 pip|
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