Forex Broker Regulations in the U.S.

Worried about forex broker regulations? Check out IG Markets, OANDA, or FOREX.com as your highly regulated and trusted forex broker.

Forex trading is an option for just about everyone and attracts many people because of its ease of access and the lure of quick and easy profits. Retail traders can sign up with an online broker, deposit funds and begin trading.

For the broker, however, it is not as easy as just offering various foreign exchange pairs to trade. Numerous countries have put strict online forex broker regulations in place to ensure those firms domiciled within their legal jurisdiction meet official criteria so individuals can trade safely through them.

Although you might think the foreign exchange market is unregulated, forex market regulation rules do exist to protect retail forex traders. These rules help keep online forex brokers honest and protect unsuspecting traders from the risk of dealing with an unregulated broker.

Do Forex Brokers Have to be Regulated?

A duly overseen forex-regulated broker will typically be subject to any regulations and official scrutiny that are legally required for them to operate in their respective jurisdictions. This ensures they comply with any laws and ethical standards put in place by governments or their regulatory agencies. 

Although the interbank forex market remains basically unregulated, the regulation of the retail forex industry puts a system of checks in place to ensure the online forex market stays safe for individual traders. These checks include a set of legal and ethical standards applicable to forex brokers domiciled within a particular country or region as well as the careful oversight of the broker by official regulators or watchdogs.

Any decent online forex broker worth entrusting your margin deposit with should be regulated to protect you against fraud. If you choose an unregulated forex broker, you can risk losing your entire deposit with little legal recourse if the broker turns out to be a forex scammer. 

Because quite a few online forex brokers remain unregulated and lack any official agency to monitor their actions and discipline them for transgressions, this situation can result in the complete loss of your trading capital if you entrust them with it. 

It is important for forex traders to check that any broker they are thinking of doing business with is regulated either in their own country or in another jurisdiction where the broker submits to strict regulatory oversight. In short, it is unwise to open an account with an unregulated forex broker. 

How U.S. Authorities Regulate Forex Brokers

If you’re interested in forex trading in U.S. locations, it is important to understand how U.S. authorities regulate online forex brokers and how they can protect retail forex traders. U.S.-regulated forex brokers are overseen by two main regulatory bodies, which are listed and described below. 

Commodities Futures Trade Commission (CFTC)

The CFTC is an independent U.S. government agency founded in 1974. The CFTC was created to oversee all derivative markets, which include futures, swaps and certain options. It also now has responsibility for overseeing online forex brokers. 

The Commodities Futures Trade Commission protects the public from fraud, manipulation and abusive practices related to transactions in futures and options as well as online forex transactions. The agency investigates and prosecutes fraud occurring under its oversight to protect the U.S. public.

Furthermore, the CFTC’s regulatory oversight of the derivatives and online forex markets tends to encourage competitiveness, efficiency and trust by ensuring integrity among market participants like online forex brokers. 

National Futures Association (NFA)

The National Futures Association is an independent self-regulatory organization designated by the CFTC to oversee the U.S. futures, derivatives and online forex trading markets. The NFA is a registered futures association that aims to safeguard the integrity of the derivatives and online forex market. 

The NFA’s primary finance comes through dues and fees paid by members and participants of the derivative markets. This regulator helps protect individual traders by ensuring that online forex brokers that accept U.S. clients adhere to its strict standards. 

Members of the NFA must fulfill their obligations to the regulator. Any failure to comply with its set rules could lead to fines or even membership cancellation that would effectively prevent an online forex broker from continuing to do business with U.S. clients.  

How US Regulations Differ

A clear forex broker regulation framework is in place in the U.S. to protect large corporations and businesses, small retail forex traders and everyone in between. Care must be taken by an online forex broker to verify all key factors about a client such as who owns a trading account and where they reside. 

However, most online forex brokers are based outside the United States, so you need to make sure they are authorized and overseen by their country’s regulator to do business as an online forex broker. Even if they are regulated in their host country, this does not certify the broker to accept U.S. clients. 

If you are concerned about the regulatory requirements for online forex brokers operating in the U.S., you can read through the pertinent regulations regarding maximum leverage ratios, how deposits are held and other forms of retail trader protections that can vary from country to country. 

To be safe as a U.S.-based trader, you should make sure any online forex broker you deal with is duly regulated by the CFTC and the NFA and remains in good standing with those agencies. 

Foreign Regulatory Bodies to be Aware of

If you wish to trade forex with an online broker domiciled in another country or region, here are a few reputable foreign regulatory bodies you can look to:

• The Financial Conduct Authority (FCA): The FCA regulates online forex brokers in the U.K. as well as banks, financial advisers and other financial intermediaries. It is a strict and very reputable regulatory agency. 
• The Cyprus Securities and Exchange Commission (CySEC): CySEC is the financial regulatory agency of Cyprus in the European Union. While this is not a major regulator, it does enforce all financial regulations and ensure that online forex brokers based in Cyprus comply with the EU’s MiFID II financial harmonization laws. Online forex brokers registered in Cyprus have access to all European markets and can accept clients from throughout the EU.
• The Australian Securities and Investments Commission (ASIC): ASIC is an independent commission of the Australian government that oversees all financial service firms. As a strict regulator of online forex brokers doing business in Australia, it enforces laws to protect Australian forex traders.

How Can I Verify Whether a Broker is Regulated?

Setting up a margin account with a strictly regulated broker is the safest way to start trading forex online. It may seem difficult to determine which brokers are regulated and which are not. Below are some tips to help you verify if an online forex broker is suitably regulated.

Research

A simple web search is the first thing you can do to check any details on a broker. This will bring up recent adverse reports, media outlet articles, disciplinary actions or negative reviews to help you better understand whether the online forex broker is reputable and trustworthy. Financial firms operating in major jurisdictions also generally need to be registered with and licensed by the appropriate regulator. This information will be shared with the public, so check the regulator's website.

Ask Questions

Whichever forex broker you choose should be trustworthy, and you should be able to ask them any questions and bring up concerns you may have. Make sure you find out what type of forex trading services the company offers, what agency it is regulated by and how long it has been in business. 

Establishing a good relationship with your broker can go a long way toward putting your mind at ease so you can focus on trading profitably. A broker’s customer service staff should be able to provide details regarding where they are regulated and by whom.

Check Account Regularly

If you have already opened a trading account with an online forex broker, check your trading account and its balance regularly to detect any mistakes or unforeseen deductions from your account. Not checking your account often could lead to such problems just becoming worse, so approach your broker to resolve them immediately. If you do detect such irregularities, your broker may not be regulated, so you should consider closing your account and finding a new broker. 

Websites

Researching recent news or reviews about a broker you are unfamiliar with can help put your mind to rest. You can also do further research into an online forex broker's exact regulatory environment, its licensing and whether it remains in good standing. The best place to look for that information is on the website of the broker’s primary forex regulator.

Top 5 US Regulated Forex Brokers

Below is a list compiled by Benzinga of the top five regulated best forex brokers for us clients that offer excellent forex trading platforms to help you have a reliable and safe forex trading experience.

1. Best for U.S. Traders: IG Markets

IG offers various trading tools designed to give users the best experience possible. You can open both a demo account and a real trading account, and there are different training methods to help you improve. IG is a highly trusted broker for all traders. The broker is regulated by the FCA in the U.K., the CFTC and NFA in the U.S., and many more regulators in different countries.

2. Best for Beginners: Oanda

Oanda is another great broker, especially for beginners. The broker has operated since 1996, and the company offers tight dealing spreads, good market execution and excellent trading platform tools powered by TradingView. In addition, its research tools and technical indicators make it perfect for beginners. Oanda is regulated in numerous tier 1 jurisdictions, including the U.S., the U.K., the EU and elsewhere. 

3. Best for Multi-Asset Traders: Interactive Brokers

This reliable online broker offers the best user experience. It is safely regulated by major agencies such as the FCA, NFA and CFTC. The company boasts multiple awards, such as Best Online Broker by Barron's. You don’t even need a minimum balance to sign up for an account with IB. 

4. Best for Customer Support: TD Ameritrade

This multiasset brokerage firm has excellent support for customers and offers competitive dealing spreads across all its asset classes. It is one of the largest North American brokers offering online forex trading and is regulated by the Securities and Exchange Commission (SEC), CFTC, NFA, FCA and many more regulators around the world.

5. Best for Dedicated Forex Traders: FOREX.com

FOREX.com trading platform lets you trade up to 80 forex currency pairs as well as thousands of other assets spread across several markets. The company has over 200,000 customers since it was founded in 2001. In addition, its wide range of products and strict regulatory oversight in the U.S. by the NFA and CFTC makes it an excellent option for retail forex traders. 

Favorable Trading Conditions for the Foreign Exchange Market

The US forex broker regulations are designed to protect traders from poor trading practices. They ensure that traders are informed about the risks involved in forex trading and provide them with enhanced protection against fraudulent broker practices.

It is important for traders to understand the regulations that govern their brokers and only work with regulated entities to safeguard their investments. The US forex broker regulatory environment is one that is constantly evolving, and it’s important to stay updated with the latest developments to make informed investment decisions.

Best Forex Brokers Around the World

Choosing a broker and researching the details required can be difficult. Luckily for you, a list of some of the best brokers based inside and outside of the U.S. are listed below.

Frequently Asked Questions