FOREX Fraud, Scams, and Off-Exchange

Even though there is no exchange (central clearinghouse) for currency trading, broker-dealers who operate from telephone boiler rooms are still referred to as off-exchange. Beware of these practitioners and avoid them like the plague. Most of them have no website or a few shoddy pages built in straight HTML and operate primarily through telephone solicitations. They typically sell FOREX options. (See Options and Exotics, for information on legitimate, regulated FOREX options trading.) The number of these has decreased dramatically, but a few are still in operation.

These operations are almost never registered with the CFTC, NFA, or any recognized regulatory body.
If in doubt you should do an Internet search of their name for more information and check the NFA website for registration and complaint details.

Tip: A broker-dealer may be unregistered for perfectly sound reasons: it does not wish to participate in U.S. retail business and the regulatory burden of same, or perhaps it promotes a trading system that uses hedging, also against U.S. regulations. The best of these firms will have prime broker agreements and a bullet-proof cash custodian relationship with a major bank. But these firms are on the CFTC radar and may have complaints filed against them if only as a test of regulatory muscle.
By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2020. Content published with author's permission.

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