Forex trading is a booming industry that anyone can use as an investment vehicle. It has become a highly popular option, especially during the COVID-19 chaos that has kept most people at home during the lockdowns. In fact, during the first half of 2020 a surge in trading volumes was recorded.
To trade currencies online, the services of a Forex broker are needed. The brokers provide clients with free access to trading platforms like MetaTrader 4 or 5, via which trades are executed. Numerous Forex brokers operate across the continents, with Asia and Europe being the most popular locations.
The US is a favourite with Forex companies as a place to do business because of the huge population. Also, the United States is home to some of the world’s largest major financial exchanges. But did you know that Forex trading has not been easy in the Donald Trump era, which has been responsible for the dominance of the USD in the world, both for those few companies left in the States and traders? In this blog, we’ll give you some pointers as to why that is the case.
Rigorous Regulations
The Forex industry is highly regulated in the US to protect the public from fraud and scams. Therefore, any Forex brokers interested in entering the US market have to obtain licenses from and to comply with regulations set by the country’s major financial agencies, the National Futures Association (NFA) and the Commodities Futures Trading Commission (CFTC). Applying for and gaining approval for such has never been easy.
To provide a safer environment for trading Forex, which is a highly volatile market, the NFA and CFTC have implemented stringent rules and guidelines that have pushed Forex brokers away from the US market. In fact, several Forex companies have already fled the US market to shift their operations to countries with more relaxed rules and guidelines.
One of the main concerns of Forex companies is the huge capital requirement set by the US agencies. When obtaining a regulation from European regulators, a broker must have at least $100,000-$500,000 locked capital. But in the US, the lock capital requirement amounts to a staggering $20 million. That is way higher, which makes it extremely difficult for financial companies, especially the smaller ones, to meet the requirement.
