Where to Trade Crypto via MT5?
https://fx-list.com/brokers-for-us-traders
After the global financial crisis of 2008 which had its origins in the US subprime mortgage market, there were general calls for better regulation of the various markets operating in the United States. The Dodd-Frank Act was a direct consequence of this agitation. This law strengthened the Commodities and Futures Trading Commission, enabling it to oversee not just the conventional financial markets, but also the swaps market which was valued in trillions of dollars.
Changes to the way business was conducted in the US financial markets were sweeping and aggressive. Some of the changes which were directly targeted at the retail segment of the market were as follows:
- A) Introduction of leverage caps in forex and options, pegging leverage at 1:50 for forex majors, and 1:20 for forex minors, and forex options trading.
- B) Elimination of hedging ability via the introduction of the First In, First Out (FIFO) Rule. Thus rule states that a position on an asset must first be closed before another can be opened on the same asset. The FIFO rule effectively ended the hedging style of traders placing opposing positions on the same asset.
- C) Stratification of traders in the FX market was institutionalized, as these rules were targeted at the so-called "unsophisticated" investors, defined as traders with assets that are less than $10million, as well as small businesses. Professional and commercial traders (investment banks) were largely exempted from these changes.
According to the CFTC, these rules were meant to protect the retail clients from overexposing their money to the market and from taking excessive risk. But to what extent these rules have actually protected the retail consumers of forex products in the US is anyone's wildest guess.
What the regulators of the US financial markets will not readily reveal, is that many traders in the US simply exited the US market and migrated their accounts to brokerage platforms in other countries. Forex brokers located in the US have had whatever market share they had badly eroded, and brokers without the kind of purposeful structure that the former US brokers suddenly emerged as less desirable but ready alternatives to traders who were unwilling to trade under the new conditions in the US.
In other words, the Dodd-Frank Act actually stifled the forex brokerage business in America and the statistics do not lie. During the good times, more than 40 retail FX brokers were serving both US and international clients. Ever since Dodd-Frank became law, that number dwindled to the three brokers mentioned above, and the international clientele base simply moved away from the US and on to brokerages in the UK, Europe, Australia and the Caribbean. A lot of the damage in the US forex brokerage business environment came as a result of the $20million bond which was imposed as a requirement for starting a forex brokerage business in the US. Tax reporting requirements have also scared off many brokerages from accepting US clients. Clearly, no foreign forex company wants to get the same kind of attention that Huawei got from the US government in 2019, or what TikTok got in 2020.