The U.S. Securities and Exchange Commission (SEC) last week reminded brokers and dealers that are not registered as Retail Foreign Exchange Dealers (RFEDs) that after the 31st of July they will not be permitted to provide retail foreign exchange.
In the aftermath of the financial crisis in 2008, the Dodd-Frank bill introduced new rules for retail foreign exchange brokers and clients in the U.S. At the time it became clear that the only brokerages that will be able to provide retail foreign exchange services to clients are the RFEDs registered as such with the National Futures Association (NFA).
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Back in 2013 the U.S. regulator took the decision to provide an extension to brokers such as Futures Commission Merchants (FCMs) and Broker Dealers (BDs). The regulator adopted a transitional rule that provided an extended period for the brokers and dealers to suspend their retail forex business.
The extansion will no longer be effective from the 31st of July 2016 after the Dodd Frank rule that affected BDs and FCMs was originally adopted in July 2011. Amid the industry’s remarks, the SEC has provided the companies with enough time to gradually phase out their services to retail forex traders and investors.
In total, brokers had five years to prepare for the final deadline on the 31st of July 2016. Currently none of the companies is offering its services to retail foreign exchange clients. There have been no expectations within the industry that the rule could have been extended further and all brokerages are well prepared for the move.