President Trump's intention to repeal the Dodd-Frank Act may alter the trading options of American citizens.
Among Donald Trump's many electoral promises was one which caught the attention of the Forex and CFD industry.
The new President of the United States announced his intention to limit or completely eliminate the 2010 law known as the Dodd-Frank Wall Street Act, which drastically changed the image of one of the largest financial markets.
Finance Magnates takes a closer look at Donald Trump's promise in the latest edition of the Quarterly Industry Report, seeking answers to the question of what the implications are for the derivatives industry, which has changed enormously in the United States since the 2008 crisis.
[gptAdvertisement]
A market where no one can survive?
Before Barack Obama signed the Dodd-Frank act, American traders could avail themselves of the services of 40 local online providers and a whole set of foreign financial firms. Currently, this number has been reduced to just 4, and brokers outside the US cannot offer their services to US citizens.
However, when analyzing the current requirements for setting up a brokerage in the US, no one should be surprised that the number is so low. According to Dodd-Frank rules enforced by the CFTC, companies wishing to offer retail trading in the forex market must maintain a minimum capital of $20 million. What’s more, this amount increases if a broker’s liabilities to retail forex traders are higher than $10 million. In such a case, the licensed company's net capital requirements are raised by 5% of that sum. For example, if financial obligations equal $15 million, the broker needs to increase its available funds by $0.75 million.
In addition to this, obtaining a license in the US can take as long as two years.
Add to the mix the maximum leverage of 1:50, the hedging ban and the need to implement the FIFO (first in first out) rule, and you get a recipe for really difficult market conditions. Brokerage operations are far more difficult than for example in Europe, where the Cyprus Securities Exchange Commission (CySEC) and the British Financial Conduct Authority (FCA) impose significantly lower requirements.
Trump's administration should adjust the rules to limit market consolidation
Using the experience of European supervision committees, there are several important issues that could change the face of the retail forex market in the United States.
First and foremost, American customers should have the choice - cutting them off from non-US brokers only limits freedom and does not provide proper protection. Profitability statistics from the first quarter of 2017 show that average trader profitability stood at 40%, which is a very good result, showing that US investors know how to multiply their funds.
It is necessary for the regulators themselves to make the market more attractive and to simplify access - the return of PAMM accounts and adjustment of capital requirements to those in Europe would undoubtedly attract new industry players. Cyprus has a license waiting period of 3 to 6 months, and in the UK it lasts a maximum of 15 months. In the US, however, it may take up to two years to obtain final authorization - simplifying the regulatory machine and reducing the complexity of the whole process also seems to be an indispensable step.
Although the first changes in Dodd-Frank have already been announced, the FX/CFD industry still has a long way to go. So far, brokers can only accept the reality as it is and prepare for future changes to make the most of their possible presence in the US market.
Among Donald Trump's many electoral promises was one which caught the attention of the Forex and CFD industry.
The new President of the United States announced his intention to limit or completely eliminate the 2010 law known as the Dodd-Frank Wall Street Act, which drastically changed the image of one of the largest financial markets.
Finance Magnates takes a closer look at Donald Trump's promise in the latest edition of the Quarterly Industry Report, seeking answers to the question of what the implications are for the derivatives industry, which has changed enormously in the United States since the 2008 crisis.
[gptAdvertisement]
A market where no one can survive?
Before Barack Obama signed the Dodd-Frank act, American traders could avail themselves of the services of 40 local online providers and a whole set of foreign financial firms. Currently, this number has been reduced to just 4, and brokers outside the US cannot offer their services to US citizens.
However, when analyzing the current requirements for setting up a brokerage in the US, no one should be surprised that the number is so low. According to Dodd-Frank rules enforced by the CFTC, companies wishing to offer retail trading in the forex market must maintain a minimum capital of $20 million. What’s more, this amount increases if a broker’s liabilities to retail forex traders are higher than $10 million. In such a case, the licensed company's net capital requirements are raised by 5% of that sum. For example, if financial obligations equal $15 million, the broker needs to increase its available funds by $0.75 million.
In addition to this, obtaining a license in the US can take as long as two years.
Add to the mix the maximum leverage of 1:50, the hedging ban and the need to implement the FIFO (first in first out) rule, and you get a recipe for really difficult market conditions. Brokerage operations are far more difficult than for example in Europe, where the Cyprus Securities Exchange Commission (CySEC) and the British Financial Conduct Authority (FCA) impose significantly lower requirements.
Trump's administration should adjust the rules to limit market consolidation
Using the experience of European supervision committees, there are several important issues that could change the face of the retail forex market in the United States.
First and foremost, American customers should have the choice - cutting them off from non-US brokers only limits freedom and does not provide proper protection. Profitability statistics from the first quarter of 2017 show that average trader profitability stood at 40%, which is a very good result, showing that US investors know how to multiply their funds.
It is necessary for the regulators themselves to make the market more attractive and to simplify access - the return of PAMM accounts and adjustment of capital requirements to those in Europe would undoubtedly attract new industry players. Cyprus has a license waiting period of 3 to 6 months, and in the UK it lasts a maximum of 15 months. In the US, however, it may take up to two years to obtain final authorization - simplifying the regulatory machine and reducing the complexity of the whole process also seems to be an indispensable step.
Although the first changes in Dodd-Frank have already been announced, the FX/CFD industry still has a long way to go. So far, brokers can only accept the reality as it is and prepare for future changes to make the most of their possible presence in the US market.
Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.
Interactive Brokers Expands Offerings with Daily Options on French Stocks
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
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20-22 MAY 2024
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Looking to expand your network in #Africa?
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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