It’s not a news anymore that CFTC has sued 14 foreign brokers (and IBs) on January 26 in what they call a “nationwide sweep”. But only now I’ve really understood how stupid it all is, and not without the help of CFTC representatives (kudos to them for that!).
According to the Dodd-Frank regulations that became enabled in October 2010, the foreign exchange companies that offer their services to US traders should be properly registered with CFTC and meet certain capital and record maintaining requirements, introducing brokers should also be properly registered with CFTC. Since many foreign Forex brokers aren’t registered with CFTC and don’t restrict US citizens from trading with them, the Commission had little trouble finding someone to sue. The following companies were sued:
EuroForex Development LLC, a Delaware LLC;
FIG Solutions Limited, Inc., a Delaware corporation;
ForInvest, a Delaware corporation;
FXOpen Investments Inc., a foreign entity with various business operations located throughout the United States;
FXPRICE, a Delaware LLC;
GIGFX, L.L.C., a Delaware company;
InovaTrade, Inc., a company with purported offices in Florida;
InstaTrade Corporation d/b/a InstaForex, a British Virgin Islands company;
InvesttechFX Technologies, Inc., a Canadian corporation located in Toronto;
J&K Futures, Inc., a company with purported offices in California and New York;
Kingdom Forex Trading and Futures, Ltd., a Nevada company;
Prime Forex, LLC, a Delaware LLC;
Wall Street Brokers, LLC, a Delaware LLC;
ZtradeFX LLC, a Connecticut LLC — an alleged IB for InstaForex.
You can read their official complaint against InstaForex and ZtradeFX in the court of the District of Columbia.
This Friday, CFTC has tried to make me a part of this process. Their Senior Trial Attorney e-mailed me to ask for the contacts of the US reviewers of one of the sued companies. It looks like they are looking for the US traders that would be willing to testify against their foreign brokers. Isn’t that absurd?! “We’ll do whatever we can to protect you from those vile foreign currency companies, small helpless traders, even if you don’t need any such protection.”
While I was quite happy to see such names as InvestTechFX and Prime Forex on the list, seeing InstaForex and FXOpen (brokers that brought a lot of innovation and competition into the online Forex market) is rather sad. Now, I really hope that this “nationwide sweep” fails, creating some good precedent court cases for the future of the better US Forex market. Although I and the majority of this blog’s readers believe that some regulation of the Forex market should exist, what happens now is an obvious over-regulation that reduces the industry’s competition level and is raising the end costs of trading for the US residents. Good job, CFTC!
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