Managed Forex Accounts for US Residents

In recent years, it has become increasingly hard for US residents to access managed forex accounts, as a result of new CFTC regulations relating to how forex services are offered within the US.

These regulatory moves are becoming increasingly frustrating for US residents, especially given the fact that no such restrictions exist for managed forex accounts for Canadian residents

The history behind the new rules is rather convoluted and complex.  The US Congress in 2000, amended Section 2(c)(2)(B) of the Commodity Exchange Act (7 USC 2(c)(2)(B)), setting out who is allowed to serve as a counterparty to a retail off-exchange forex transaction; these are often referred to as “eligible” counterparties. Among the eligible counterparties were affiliates of CFTC-registered FCMs and financial institutions (which includes foreign banks). It was through these two categories that off-shore entities were allowed to serve as counterparties.

By way of background, the Commodity Futures Trading Commission (CFTC) is an independent agency responsible for regulating the retail spot forex market in the United States along with the National Futures Association (NFA). A primary goal of both US regulatory organizations is to protect investors.

In recent years, two key changes have taken place. First, in 2008, the Congress passed the Farm Bill, which directed the CFTC to register counterparties as either FCMs or Retail Foreign Exchange Dealers (RFEDs). The final rules, which came into effect on October 18, 2010, reflected this statutory mandate, so as of October 18th, foreign affiliates of US FCMs were no longer able to offer to serve as counterparties to US retail customers unless they became registered with the CFTC as FCMs or RFEDs.

Secondly, although foreign banks were for a while able to offer to serve as counterparties, the recently passed Wall Street Reform and Consumer Protection Act has once more amended Section 2(c)(2)(B) eliminating the provision permitting foreign banks to serve as counterparties. These changes became effective in July of 2011.

As a result of all these changes, many brokers had to close down the accounts of US residents. Athena Capital was among the many money managers who were initially affected by these changes, and we had to close down a large number of managed forex accounts of US residents. However, we have fortunately been able to find a broker who is fully European regulated, and who has been able to find a way to work around these regulations.

For more information on how Athena Capital can service US residents, please contact us.