Despite being the world’s largest financial market, the forex industry is mostly uncontrolled.
There is no international institution or global agency that regulates and oversees the worldwide interbank currency transactions.
Because the spot FX market is unregulated, it provides a chance for forex scams and fraud.
While there is no international body like S.H.I.E.L.D. to protect forex traders, there are governments that monitor and control forex trading activity, including forex brokers, that occurs within their borders.
If you are trading forex in the United States, you should be aware of two important regulatory agencies.
Commodities Futures Trade Commission (CFTC)
In the United States, we refer to the CFTC as… Brother No. 1.
The Commodity Futures Trading Commission (CFTC) was established in 1974 to protect individuals involved in futures and commodity trading.
The CFTC “naturally” safeguards forex traders because futures involve the currency mark
The CFTC has undergone numerous adjustments from 1974 to the present in the hopes of improving trading conditions and ensuring a level playing field for everybody.
The CFTC is also in charge of issuing the Commitments of Traders Report (COT) every Friday (the CFTC receives data from reporting businesses on Wednesday and corrects and verifies it for publication on Friday).
The Commission is made up of five commissioners selected by the President, the Chairman’s office, and the agency’s operating components. Along with its headquarters in Washington, D.C., the Commission has three other offices in Chicago, Kansas City, and New York.
These cities also have futures exchanges. So, if you have an issue with them, you may go over there and spray them with your uzis. I’m kidding. Do not do this; they are the good folks. They are here to assist you.
Consider the possibility that there is no group to safeguard you. There would be far more scammers, and brokers would defraud their consumers in an instant. In an otherwise chaotic market, the CFTC provides orders.
The mission of the CFTC is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodities and financial futures and options. In the “unregulated” forex market, this regulatory agency will help you determine if a forex company is reliable or trustworthy.
The CFTC’s Website can be found here:
If you need to file a complaint or report suspicious activities:
http://www.cftc.gov/consumerprotection/redressreparations/index.htm
National Futures Association (NFA)
The NFA is a self-regulating industry organization that was founded in 1982 to govern the futures market in the United States.
By self-propelling, we mean that the NFA collects dues to support itself without relying on taxpayer funds.
If the CFTC is Big Brother, we prefer to refer to the NFA as…Biggest Little Brother. The Commodity Futures Trading Commission (CFTC), the federal organization in charge of regulating the US futures business, oversees the NFA’s activities.
The NFA’s mission is to:
- Ensure futures industry integrity
- Protect market participants
- Enforce NFA members to meet their regulatory responsibilities
Almost every firm or individual who transacts futures or options on futures transactions with the general public must be registered with the CFTC and a member of the NFA. The NFA handles registration on behalf of the CFTC.
Commodity Trading Advisors (CTA), Commodity Pool Operators (CPO), Futures Commission Merchants (FCM), and Introducing Brokers (IB) are all NFA Member types.
To conduct any business in the futures market, you must be a member of the NFA. To become a member of the NFA, an organization must pass an NFA screening and adhere to NFA norms and regulations.
These laws and regulations ensure market integrity and a level playing field for everyone, not just investors.
They have made great improvements over time. In 1983, the NFA established an arbitration system to handle future-related disputes. A mediation program was created in 1991 as a faster approach to resolve disagreements.
The NFA began accepting claims online in late 2001. In 2002, members could now begin registering online.
The NFA began submitting digital pictures of fingerprint cards to the FBI in 2004, allowing for faster background checks and shorter registration times. What a busy organization! This demonstrates that they keep up with the times. Who knows, maybe they’ll build their own iPad app. Ha!
The NFA, in collaboration with the CFTC, offers investors and people with security and protection from fraud and scams.
The NFA’s website is available at http://www.nfa.futures.org/index.asp.
How can I learn more about the forex broker with whom I am trading?
Only regulated entities, such as banks, insurance companies, broker-dealers, or futures commission merchants, and affiliates of regulated corporations, are permitted to engage in off-exchange forex trades with retail consumers in the United States.
You can check the CFTC registration and NFA membership status of a specific business or individual, as well as their disciplinary history, by phoning NFA at 800-621-3570 or visiting the NFA’s website’s broker/firm information section (BASIC).
BASIC is a free tool for researching the background of forex brokers operating in the United States.
If you live outside the United States, make sure to ask the forex broker how it is regulated and to confirm the specific broker’s registration status and background with its regulator.
What should I do if I have a problem with my forex account?
Any industry is destined to have disagreements from time to time.
Your initial action should be to contact the firm with which you disagree and attempt to negotiate an arrangement.
Both the CFTC and the NFA have systems for resolving monetary disputes regarding your FX account.
However, whether the NFA or the CFTC would accept your case is dependent on a number of circumstances, including the entity you are suing.
How to File a Claim if You Believe You’ve Lost Money Due to Unfair or Improper Treatment by an NFA Member
To assist customers and NFA Members in resolving issues, NFA provides an arbitration service. NFA’s arbitration program can be found by contacting 800-621-3570 or visiting the Dispute Resolution portion of its website at www.nfa.futures.org.
How to File a Claim if You Have a Dispute That Can’t Be Resolved with a CFTC Registered Firm
The CFTC offers a reparation program for resolving disputes. If you want information about filing a CFTC reparations complaint, contact the CFTC’s Office of Proceedings at 202-418-5250 or visit the CFTC’s website.
How to File a Complaint or Report Suspicious Business Practices
Furthermore, if you suspect any wrongdoing or unlawful business behavior in your FX account, you may contact or make a complaint with NFA by calling 800-621-3570 or going online at www.nfa.futures.org/basicnet/Complaint.aspx.
You may also submit a complaint to the CFTC. To aid the public in reporting suspicious activities or transactions, the CFTC has created a questionnaire form.
The questionnaire form can be found on the CFTC website at http://www.cftc.gov/enf/enfform.htm.
