Here is a business proposition for you. You need to start a business in a highly competitive market but you will be $20 million in the hole (net capital requirements in the US). You will also be restricted from offering your clients the ability to hedge which your competitors in other countries do offer. You will also be restricted from offering your clients the ability to fund their accounts by credit card which your offshore competition does allow.
Welcome to the World of Retail Forex
Welcome to the world of Retail Forex Brokerage in the US. To nobody’s surprise, we have seen very few new entries in retail forex in the US since the massive changes took place a few years back. The latest on the list of the consolidating Forex Brokers is IBFX which had sold its business to TradeStation (an online trading broker that specializes in systems creating software). IBFX had also sold its Australian based accounts to FXCM back in 2014. IBFX was a major player in the US market at one time but as many others have seen its business fade with the challenging regulatory environment. Now TradeStation has decided to get out of the Forex Business and has sold the remaining IBFX accounts to Oanda.
Few Players in the US
There are really only three major players left including FXCM, Forex.com, and Oanda. Some would include Interactive Brokers but their main focus is on the US and international equities. FXCM is still in the middle of its negotiations on the terms of its loan with Leucadia. Their future remains questionable and their stock price is trading around $11 a share. Gain (Forex.com) has seen ups and downs in their trading metrics but any of the ups haven’t reflected in their share price which remains around $7 a share.
US Regulators are Getting Their Wish
It looks like it is nearly mission accomplished for US regulators that have been trying to drive the retail Forex Market out of the US. It seems like it is just a matter of time for the next shoe to drop. Is it fair to deny US traders access to markets that traders from other countries enjoy? The argument from the regulators perspective is that they are looking out for the best interest of retail trader. They fail to cite the loss rate of traders on their futures sanctioned or on their Binary Options exchange NADEX which really has a market maker behind it. A regulatory structure in Retail Forex is needed and understandable with all of the past abuses but it seems Un-American to deny people the right to access to different markets.
Trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary