In October of 2010, the Commodity Futures Trading Commission (CFTC) implemented changes to the regulations that govern retail off-exchange foreign currency (or “forex”) trading in the US. Barring some exceptions, these new rules require that any firm operating as a counterpart to certain retail forex transactions must register as a Retail Foreign Exchange Dealer (RFED) or Futures Commission Merchant (FCM). Further, any individual acting as a forex solicitor or account manager must register as an Introducing Broker (IB), Commodity Trading Advisor (CTA) or Commodity Pool Operator (CPO).
Ensure you are working with a registered managed forex broker by checking the National Futures Association Background Affiliation Status Information Center, or BASIC.
Here’s how to use it:
1. Enter either the NFA ID, firm name, individual name or the pool name.
2. Click “Go” in the box you completed.
3. BASIC will return search results that fit the criteria you specified. The Current Status fields will identify the registration status of the company for which you searched. For example, Colonial Capital Advisors is an Approved Forex Firm, Approved NFA Member and a Registered Introducing Broker.
Requiring brokers to register minimizes fraud and puts more control into the hands of investors. Before you work with any forex broker, be sure to check BASIC to confirm their registration status.