In a letter to its clients today Phillip Capital announced it would no longer offer Forex Trading to its clients located in the United States. The letter cited the recent announcement by the SEC (Securities and Exchange Commission) banning Retail Forex Trading from being offered by US Broker Dealers. Previous to this announcement those firms that were dually registered with both the SEC and CFTC as an FCM (Futures Commission Merchant) were exempt. This move demonstrates that US regulators like the SEC are determined to rid retail Forex from the US landscape. Fortunately for Phillip Capital, they have several regulated jurisdictions that they operate from and have referred non-US clients to.
SEC States the Only exemption for Forex Providers is an ECP or Eligible Contract Participant
The only exception that is left in the US is the ECP or Eligible Contract Participant. An ECP is defined as an entity or individual with more than $10 million in assets. This limits Forex to a product only to be offered to Institutional Investors. This move does not impact the current handful of FDMs that are the only ones that can provide margin Forex to the retail public. This will probably result in even more consolidation in the US Retail Forex Space. E-Trade the well-known online stock brokerage site which using a white label of FXCM and TradeKing who acts as an Introducing Broker to Forex.com are a couple of examples of the consolidation that is happening in the US.
Most Likely There will Be more to Leave the US Market
It looks highly unlikely that there will be any new participants in Retail Forex in the US. Over the past eight years, the regulations have become daunting. The current net capital requirement for an FDM is $20 million plus 5% of the client deposits. US regulators have also taken away the ability to place a hedge position on a Forex Pair. Recently regulators banned deposits from credit cards which in Retail Forex is a standard method of receiving deposits. For now, it looks like US Retail Forex will continue to be dominated by the likes of Oanda, FXCM, and Forex.com.