NFA has gone a long way trying to completely kick retail forex out of the US eventually reducing the number of retail forex brokers from several dozens to just 11. With FX Solutions heading out as well the number of US forex brokers may fall below 10 within few months.
The latest proposal to ban the use of credit cards and ewallets as a funding method is just another nail in the retail forex coffin. However what makes it special is that NFA is bluntly ignoring its own members, namely the Forex Committee and makes a proposal exclusively concerning forex brokers however without even consulting with them. The only FDMs in the US systematically accepting credit card funding are the RFEDs, that is retail forex brokers. Some brokers have over 60% of total funds deposited by credit cards and other electronic wallets.
NFA’s announcement stated that ALL Committees reviewed and supported this proposal: “The CRC directed staff to obtain comments on a prohibition on Members permitting customers to use credit cards to fund accounts from NFA’s FDMs, as well as NFA’s FCM, IB and CPO/CTA Advisory Committees. Each of NFA’s Advisory Committees has reviewed the CRC’s proposal to ban the use of credit cards and fully supports the proposal.“
This is false.
Several members of the Forex Committee confirmed to Forex Magnates that they were never even contacted about this proposal and in fact learned about it only when this proposal was sent to them as a done deal. NFA did not consult with its own forex members – the only ones to suffer from this proposal nor obviously with clients themselves. This move is unprecedented elsewhere in the world.
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NFA is once again here harms the very clients it’s supposed to protect. There are many reasons for brokers and traders alike to object this proposal:
- Such action is not borne out of any customer complaints or abuse
- Credit card funding measure is better than equity broker dealers providing margin credit for customers who put home equity line of credit funds into a brokerage account and then letting those same customers borrow against an equity portfolio on margin
- The FDM’s are not extending credit to the clients; these individuals have already been vetted and approved for credit by the financial institution that issues the credit card, and are monitored for payment by those institutions
- Credit card use provides the customer with the ability to dispute any abuses associated with their credit card, while bank wires cannot be disputed
- Banning the use of credit cards is not supported by the current scope of regulations
- NFA has no legal or compliance basis upon which it can exercise judgment and restrict legal payments
- Clients will no longer have the ability to rapidly fund their account to preserve their positions and avoid liquidation
- Smaller clients who wish to try out the foreign exchange market are discriminated against. They are not normally in a position to take time away form their daily schedule to physically go to the bank and wire money into their account, which in itself is an extra charge
In a series of many actions against the retail forex industry this proposal seems to be extremely one-sided and specifically aimed at retail forex brokers who couldn’t even voice their opinions before the proposal was drafted. It seems the NFA has lost any sense of shame and stopped hiding its anti-forex intentions. Members of the Compliance and Risk Committee are all representatives of exchanges and clearing firms who don’t even deal with retail clients and hence couldn’t care less.
We strongly suggest that the 100,000 or so of the remaining forex trading US clients voice their opinion and get in touch with the NFA and the CFTC protesting this latest nonsensical proposal if they agree with our opinion here. Relevant contacts are below:
NFA: Elizabeth C. Sheridan, Senior Attorney at firstname.lastname@example.org