Cftc regulated broker

Family VIII · Regulation

Not to be confused with forex broker, broker, broker insolvency.

CFTC-regulated broker is a firm that carries on retail commodity, futures or options business subject to the oversight of the U.S. Commodity Futures Trading Commission. Registration with the CFTC, usually through the National Futures Association, is a legal precondition for soliciting U.S. retail customers in those products. The scope of permitted business, leverage limits and capital rules are set by federal law and vary by the specific registration category the firm holds.^[1]

What registration covers

Registration is not a single status. A firm may be registered as a futures commission merchant, a retail foreign exchange dealer, an introducing broker or a commodity trading advisor, and each category carries different capital, record-keeping and reporting obligations. A firm registered in one category is not automatically authorised to conduct business in another.

Retail off-exchange forex transactions with U.S. customers are permitted only for firms that are registered and meet the applicable financial requirements. Leverage available to retail customers in those products is capped by federal rule, though the exact figure depends on the currency pair and the rule in force at the time.

Checking registration status

Registration can be verified through the public registers maintained by the CFTC and the National Futures Association. Those registers record the firm's registration category, its current status and any disciplinary history. A firm that appears in a register under one category should not be assumed to hold every permission that category implies; the register entry states the scope.

Registration status is not a guarantee of solvency or of the safety of customer funds. It indicates that the firm has met the entry requirements for a category and remains subject to supervision, not that any particular trade or product is suitable.

Worked example: verifying a firm

Registration check

Firm nameSearch public registerEntry found

Registration categoryRead register entryRetail foreign exchange dealer

StatusRead register entryActive

Permitted businessMatch category to activityRetail forex only, not futures

Often confused with

forex broker: A forex broker is defined by the product it offers, currency pairs, whereas a CFTC-regulated broker is defined by its registration with a specific U.S. regulator; the visible sign is whether the firm appears in the CFTC or NFA register.
broker: A broker is any intermediary that executes orders for clients, while a CFTC-regulated broker is a broker whose commodity and futures business is registered with the CFTC; the visible sign is the registration category shown in the public register.
broker insolvency: Broker insolvency is the failure of a firm to meet its financial obligations, whereas CFTC-regulated broker describes a firm's regulatory status; the visible sign is that insolvency is an event, not a registration category.

References

↑ Commodity Futures Trading Commission and National Futures Association rules on retail off-exchange foreign currency transactions. United States. Retail forex leverage is capped well below common offshore levels.

Family: VIII · Regulation · Index A–Z