NFA has made it impossible for all but largest of online brokers to survive.
GFT, one of the five largest US-based retail FX brokerage firms, has decided to close shop in its own home market (as well as in Japan). GFT posted a notice on its home page stating that it had “made a business decision to move our U.S. retail forex trading accounts to one of our valued partners [editor’s note: TD Ameritrade].”
GFT earlier this year lost its star research team of Kathy Lien and Boris Schlossberg, who left to start their own FX asset management firm. They do maintain a strong presence in the Far East, recently ranking as the fifth largest online FX firm in Singapore.
When the NFA raised minimum capital requirement for FX (and futures) brokers to $20 million, while simultaneously capping leverage at 50x for major currency pairs, it basically made it too expensive for virtually any firm doing less than $50 billion per month in the US market to make money. Further regulations, such as daily customer fund reports now required by US regulators, has made it even more expensive and difficult to operate in the US.
While these regulations were meant to protect US retail traders, they have effectively harmed them , reducing competition in the domestic market to just a handful of firms. While GFT is the first serious US firms to close shop domestically, we have seen other global firms abandon their NFA regulation and/or leave the US market, the most recent being FX Club.
For the full GFT announcement click here.
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.