Originally Posted by forexsavior

I have been hearing a lot about FXDD and people have been asking me about their regulatory status. So what's the scoop?

FX Direct Dealer is a New York City based broker located in Manhattan . FXDD used to be affiliated with Tradition Securities. However, today Tradition only owns a small percentage of the firm. Thus FXDD is in no position to claim Tradition as a parent company for regulatory purposes.

So aren’t they then required to register according to the law? Not according to FXDD. Here is a response I got from a customer service rep over at FXDD when I asked them this question on their chat:



Uh, someone should let FXDD Know that OTC spot forex IS regulated in the United States and they ARE subject to regulation by the CFTC.

I have put the question to FXDD by email but have yet to get a response. Customers need to be aware that this firm is swimming in some very murky regulatory waters. The CFTC could crash through FXDD’s door at any moment and demand the firm shut down their business because they are not regulated. Every retail forex dealer in the United States has accepted the CFTC as their regulator but FXDD is claiming they have no jurisdiction? This firm in my opinion is a very risky place to put your money. Buyer Beware.

Originally Posted by talktome

Since Forex is unregulated in US, Forex Broker is not required to be registered. And CFTC can not deal with unregistered broker. Am I right?

Originally Posted by forexsavior

For all the problems that exist in the U.S. domestic retail forex market they still pale in comparison to the problems that exist in the unregulated retail forex market. And it is here on the periphery of the respectable forex world that a whole host of firms operate outside any kind of regulatory scrutiny providing their customers with scant funds protection or any means to conduct any form of due diligence. In short, these firms are the damned of retail fx and woe be to the trader who opens an account with one of them since they are merely playing a game of Russian Roulette.

In the last few years firms have set up shop in unregulated locales all over the world from the Cayman Islands to Cyprus. From the British Virgin Islands to the Philippines to Belize. Yet no part of the world has attracted more unregulated forex broker dealers than has Switzerland.

Ah, Switzerland. Land of fine watches, exhilarating ski slopes and tasty chocolate. Renowned for its banking prowess and for being a pillar of international finance. On the face of it seems like Switzerland would be an ideal place to open a forex business since the Swiss of all people should be very knowledgeable about this most complicated of financial instruments. But that facade is easily torn away once you do some further digging and discover that the vast majority of Swiss forex broker dealers are not in the least bit regulated and for the most part are completely ignored by the Swiss Regulatory Establishment.

"But I go to the websites of these Swiss brokers and see all sorts of regulatory Acronyms referenced. What is that all about?"

Good question Smithers. You see, while Switzerland is well known for being a haven for high finance they are also well known for being a haven for drug kingpins, terrorists, Ex-Nazis on the run, deposed third world dictators, former Refco/Enron Executives and other money launderers and money swindlers as well. So to counter the problem the Swiss government requires any firm that holds customer assets belong to a self-regulatory body which requires member firms to obey certain anti-money laundering guidelines. There are a whole host of these organizations from OAR-G to Polyreg and ARIF. Membership in these associations does not mean the association is checking in on how the firm runs it forex business. Nor can one go to any of these organizations to ask for background information on their member firm. And if the firm goes bankrupt these associations could care less about helping you get your money back. In short, these anti-money laundering organizations are useless to the average forex trader. Listing membership in such an organization is in my opinion patently offensive since membership in that organization is of no benefit to traders.

There is one government body however that does regulate forex trading in Switzerland: The Swiss Federal Banking Commission. True, they regulate banks but they also offer licenses to Securities Dealers as well. Synthesis Bank has just such a license. You can also verify that license by going to the SFBC's website directly: SFBC - Swiss Federal Banking Commission

Yet the majority of Swiss forex brokers are not licensed by the SFBC because as the SFBC states on its own website (SFBC - Frequently asked questions) "Foreign Exchange dealers, provided that they exclusively deal in foreign exchange, are not subject to supervision by the SFBC." That lack of "supervision" is on full display right now in the case of Tradex Swiss AG (Tradex Swiss AG).

Tradex Swiss AG
Earlier this year the NFA barred Tradex from soliciting clients in the United States due to the fact they were not properly registered (BASIC Details). As a side note the head of the Boston office of Tradex, Craig Karlis, is apparently trying to move on to bigger and better things. Several times this year Karlis tried to register a new firm by the name FX Nation Inc only to withdraw the FCM application with the NFA (BASIC Details.) The latest withdrawal being as recently as July 30, 2007. Considering people can't even get money out of the last firm he was involved with you would think Karlis would know when to call it quits. Talk about churn em and burn em.

Anyway getting back to the main actor, Tradex Swiss AG. It appears that Swiss authorities shut them down. Although since Tradex has been very tight lipped it is hard to tell what is going on: Handelsregister des Kantons Schwyz
But the bulletin boards have been flooded with angry customers (Tradex Swiss AG) who can't get their money out. And Tradex is not exactly going out of their way to provide their own traders with any information. One click on their website and all you get is this very disturbing message:

Dear Tradex Swiss AG Clients
Due to technical reasons, we wish to inform you that for the time being, we cannot accept any new account opening requests, or receive payments on existing accounts. For the same reason we also request all clients to close any open positions on their accounts, and to refrain from trading until further notice. We apologise for any inconvenience caused, and we expect to restore all operations in the near future.

Some inconvenience! Such is the peril of investing with an unregulated Swiss Broker. When things go wrong you are completely in the dark with no one to turn to. One day you are trading with such a firm, the next you go to the website and it is kaput while your funds are lost in purgatory.

The lesson? Avoid unregulated Swiss Brokers. The following Swiss brokers, like Tradex Swiss Ag, are not regulated:

WestCapFX
ACM
MIG
DukasCopy
GFX Group (Forex.CH)
Crown Forex

Forget the fancy sales pitches. Forget the Acronyms of the anti-money laundering organizations they belong to. Forget the spreads or the rolls or the foreign currency bank accounts they have. Ask them a simple question: Are you regulated and if you are please provide me with your registration number and a link where I can go and independently verify that you are indeed regulated. Absent that stay far, far away from Swiss Forex Broker Dealers. It just isn't worth the risk.

Originally Posted by lepiricus

Its good to see that GAIN appears to be in good shape. I am looking for another MT4 based broker that is healthy. I am using IBFX right now but want to add another just in case.

I was looking at Velocity4x becaue I think they are an IB for Forex.com which is a division of GAIN. Can anyone confirm this or have another suggestion on which MT4 broker is healthy? Thanks!

Lep

Originally Posted by jafar00

Actually, I believe Velocity4x was taken over by Gain after falling foul of NFA rules which is a nice example of what these new capital requirements rules from the NFA are for. To allow the big few to swallow up their nearest competition.