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A CFTC forex broker refers to a forex (Foreign Exchange) brokerage firm which is regulated and authorized by the United States authority called Commodity Future Trading Commission (CFTC).
The CFTC was established in 1974 and is one of the 4 independent US market regulators. The other three regulators in US trading are the NFA, FINRA, and SEC.
There is a limited number of brokers who have one of these regulators in place and so, finding the ideal broker for US traders can sometimes be difficult. Brokers that are regulated under CFTC (Commodity Future Trading Commission) regulations though can offer trading opportunities in a number of markets. These include commodities, futures, and other derivative products within the US market.
In this article, we have collected some of the best CFTC brokers. Here’s what was taken into consideration by the InvestinGoal team when putting together this top 7.
- If the broker was fully regulated in the USA
- The minimum deposit of the broker/provider for CFTC clients
- Deposits and withdrawals accepted for CFTC clients
- If USD currency was available for CFTC clients
- Spreads charged for CFTC clients by the broker
- Leverage available for CFTC clients
- If the Negative balance protection was in store for CFTC clients
- If a rebate program or bonus was available for CFTC clients
What are the best CFTC forex brokers?
Below is our curated list of the best forex brokers regulated by the CFTC, with details and information about the regulation, the features, and the characteristics.
How does the CFTC work?
The role of the CFTC in regulation is to promote trading in commodities and derivatives markets within the United States to forex traders and others alike. They also perform the role of ensuring these offerings from brokers are not fraudulent. They have a collaborative relationship with US institutions, particularly in finance and the NFA, often working together in tandem.
The CFTC protects the market and traders within the market by looking out for any of the following:
- Fraudulent firms
- Firms that manipulate the market
- Firms that offer illegal instruments such as CFDs
- CFTC rules violation
- Other violations such as inadequate oversight of traders
What are the characteristics and benefits of CFTC?
The CFTC provides forex traders with a maximum leverage of 50:1 on major forex pairs. This is more than allowed for forex trading in the EU under CySEC. Although the CFTC does not provide any negative balance protection or automatic refund in the case of fraud, they are known to be very helpful and active in the investigation of such cases.
For these reasons and the fact that they require brokers to hold funds in segregated accounts that protect the trader, the CFTC is considered to be one of the most stringent regulatory authorities in the world.
What are the prohibitions with CFTC?
Since the CFTC regulates forex, commodities, and futures markets, these and other derivatives are all considered legal to trade in the US. CFDs on the other hand are not legal for trading in the United States.
Differences between CFTC Regulated and CFTC Licensed Brokers
There is indeed a difference between a broker that is CFTC regulated, and one that is CFTC licensed. A regulated broker is one that holds a CFTC registration number that is required for it to operate within the United States.
A CFTC licensed broker is one that just requires written permission from the body to offer services in the US. This permission can be given in different situations, but generally, the reason is that CFTC has treaties with other regulators outside the US market. So, since they apply the same rules, the financial institution can offer its services within the US without an actual CFTC regulation and associated number.
How to check if a broker is CFTC regulated
Since they work hand in hand, all CFTC regulated brokers can be double-checked through the NFA website. All of this information can be taken as verified and official from a CFTC standpoint.
The NFA website allows you to search for the company. All you need to do is input the business name that you can often find at the bottom of your forex brokers homepage.
How does CFTC intervene in case of financial abuse?
The CFTC has wide-ranging powers to intervene if they feel that forex brokers have broken any of the regulations providing protection to you as a forex trader in the US. The case in point here may be FXCM who were banned from the US market in 2017 for claiming to offer negative balance protection.
They were banned from both CFTC and NFA regulation for this issue and fined $850,000. This ban still stands in US markets.
How CFTC can help you
If you have any regulatory questions, issues, or feel you may have been the victim of a forex scam broker, the best thing you can do is go to the CFTC official website and contact the CFTC Division of Enforcement.
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