I pinched this post form Ross's forum.
A Whopping 66% of Forex Brokers Will Close Their Doors December 21, 2007.
Starting this month, U.S. forex dealers will have to meet certain requirements to stay in busi*ness. The NFA (National Futures Association) is raising the capital requirements for these U.S.*based firms. According to the new rules, all forex dealers must have USS5 million in "net excess capital" to keep their firms open.
Now, for large forex firms, this won't be an issue. However, only about 1 /3 of the 30 forex dealers in the U.S. are expected to make the cut. In other words, roughly 66% of forex brokers will be forced to close their doors when these rules go into effect later this month.
With these new regulations, many brokers will he scrambling to get more capital on their books so they can remain open. If they can't meet the newest capital reserves required by their regulators, then they'll have to close their doors. Many are so small that this will be the case. These new regulatory requirements go into effect Dec. 21st!
So What Can You Do if You Already Have an Account?
1. Check out your broker on this public site to see how much they have in "net excess." Don't rely on them to tell you. See for yourself by visiting http://www.cftc.gov/marketreports/fi...fcms/index.htm. While the minimum requirement is going up to US$5 million, you really want a firm with US$20-30 million set aside. The more padding they have, the more your forex accounts are protected.
2. See if your forex broker is regulated else*where. Check if your broker is regulated in Europe, Canada, Hong Kong, etc. If so, that's even better because more regulators are watching over their shoulders. Also, they'll have to meet capital requirements in those countries, too. So if they're regulated in several places that's good news for you. Canada, the U.K., Hong Kong and the U.S. offer some of the best regulation out there. Believe it or not, the regulation in Switzerland really isn't that great. If a firm is regulated outside of these areas, it's a red flag that your broker doesn't measure up. Why are they dodging the most credible sources of regulation? For instance, those that run to Belize are dodging the strict regulators for loose regulation.
3. Look at a firm's size and regulation first. Pick a well-capitalized firm (the bigger the better). Their size and regulation are the most important, and then you can look for a broker's pip spreads and slippage, etc., after that.
4. If you choose a "no dealing desk" type of broker (ECN) then hopefully you're not going to have them trading against you. The biggest Firms will even have multi*ple inter-banks competing in their quotes to win your business. A dealing desk is taking the other side of your trade and you'll find that slippage is much worse especially around news events.
5. Ask how many employees they have. This will give you an idea of how many accounts they may have to service and how much customer service means to them. Believe it or not, some firms only have 20-30 employees. They also can't even be reached 24 hours a day (in a 24-hour tradable mar*ket). You want a firm with 100-500 employees. Then you know they're accessible when you need them. It is also "proof" of their size and capitalization. After all, a firm isn't going to have US$5 million to their name and 500 employees too.
6. If they will tell you, ask them approx*****ly how many accounts they service. Some only have 2,000-10,000 accounts while others have 90,000+ accounts.
What To Do if Your Broker Doesn't Measure Up
If you find that your broker doesn't make the cut after you ask them these questions, you should promptly move your money over to one of the bigger firms. Be sure to "interview" them with these same questions before going with them also. Be comfort*able with your choice.
So what happens if you just stick it out with a small firm that has to fold and close up shop? You may be delayed in getting your money back if they're
forced to close. Worse case scenario: You won't get your money back. Some firms could have your assets tied up in bankruptcy court for quite some time.
Either way, it spells disaster, so choose a well*capitalized, well-regulated firm so you can avoid any of these headaches this holiday season.
For more details be sure to read this week's Chartscan which will come out Friday, but you need to act NOW, TODAY! Friday may be too late.
JR
A Whopping 66% of Forex Brokers Will Close Their Doors December 21, 2007.
Starting this month, U.S. forex dealers will have to meet certain requirements to stay in busi*ness. The NFA (National Futures Association) is raising the capital requirements for these U.S.*based firms. According to the new rules, all forex dealers must have USS5 million in "net excess capital" to keep their firms open.
Now, for large forex firms, this won't be an issue. However, only about 1 /3 of the 30 forex dealers in the U.S. are expected to make the cut. In other words, roughly 66% of forex brokers will be forced to close their doors when these rules go into effect later this month.
With these new regulations, many brokers will he scrambling to get more capital on their books so they can remain open. If they can't meet the newest capital reserves required by their regulators, then they'll have to close their doors. Many are so small that this will be the case. These new regulatory requirements go into effect Dec. 21st!
So What Can You Do if You Already Have an Account?
1. Check out your broker on this public site to see how much they have in "net excess." Don't rely on them to tell you. See for yourself by visiting http://www.cftc.gov/marketreports/fi...fcms/index.htm. While the minimum requirement is going up to US$5 million, you really want a firm with US$20-30 million set aside. The more padding they have, the more your forex accounts are protected.
2. See if your forex broker is regulated else*where. Check if your broker is regulated in Europe, Canada, Hong Kong, etc. If so, that's even better because more regulators are watching over their shoulders. Also, they'll have to meet capital requirements in those countries, too. So if they're regulated in several places that's good news for you. Canada, the U.K., Hong Kong and the U.S. offer some of the best regulation out there. Believe it or not, the regulation in Switzerland really isn't that great. If a firm is regulated outside of these areas, it's a red flag that your broker doesn't measure up. Why are they dodging the most credible sources of regulation? For instance, those that run to Belize are dodging the strict regulators for loose regulation.
3. Look at a firm's size and regulation first. Pick a well-capitalized firm (the bigger the better). Their size and regulation are the most important, and then you can look for a broker's pip spreads and slippage, etc., after that.
4. If you choose a "no dealing desk" type of broker (ECN) then hopefully you're not going to have them trading against you. The biggest Firms will even have multi*ple inter-banks competing in their quotes to win your business. A dealing desk is taking the other side of your trade and you'll find that slippage is much worse especially around news events.
5. Ask how many employees they have. This will give you an idea of how many accounts they may have to service and how much customer service means to them. Believe it or not, some firms only have 20-30 employees. They also can't even be reached 24 hours a day (in a 24-hour tradable mar*ket). You want a firm with 100-500 employees. Then you know they're accessible when you need them. It is also "proof" of their size and capitalization. After all, a firm isn't going to have US$5 million to their name and 500 employees too.
6. If they will tell you, ask them approx*****ly how many accounts they service. Some only have 2,000-10,000 accounts while others have 90,000+ accounts.
What To Do if Your Broker Doesn't Measure Up
If you find that your broker doesn't make the cut after you ask them these questions, you should promptly move your money over to one of the bigger firms. Be sure to "interview" them with these same questions before going with them also. Be comfort*able with your choice.
So what happens if you just stick it out with a small firm that has to fold and close up shop? You may be delayed in getting your money back if they're
forced to close. Worse case scenario: You won't get your money back. Some firms could have your assets tied up in bankruptcy court for quite some time.
Either way, it spells disaster, so choose a well*capitalized, well-regulated firm so you can avoid any of these headaches this holiday season.
For more details be sure to read this week's Chartscan which will come out Friday, but you need to act NOW, TODAY! Friday may be too late.
JR
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