A vast number of retail forex brokers have exited the US, following the introduction of the Dodd-Frank Act. Now, Trump's transition team is planning the cancellation of the reform. Donald Trump to revive US Forex market?
14th November, AtoZForex – The transition team of the Republican party is planning to revoke the Dodd-Frank Act. The reform which caused a lot of retail FX brokerages to withdraw from the US market. Will the US Forex market revive?
The Dodd-Frank Wall Street Reform Act was signed by Barack Obama in 2010 as a response to the 2008 financial crisis. The changes brought by the reform had an effect on all federal financial regulatory bodies and imposed restrictions on retail FX firms. Hence, a lot of retail brokerages withdraw from the US, leaving the electronic trading environment of the US to Chicago’s listed derivatives firms, proprietary shops. There are currently only three domestic retail forex brokerages including GAIN Capital, FXCM, and OANDA.
Donald Trump to revive US Forex market
Now, as the Donald Trump has been elected and the Republican party’s transition Team has vowed to revoke the Dodd-Frank Act, the FX industry in the US might revive.
The transition team of Donald Trump “will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.” Trump has enlisted support from Paul Atkins, a former Republican member of the Securities and Exchange Commission and longtime Dodd-Frank critic, to advise policies on financial regulation.
Nevertheless, there are a number of obstacles. Firstly, $20 million net capital put aside for regulatory purposes. Secondly, clients who are not US residents or citizens are not allowed and overseas firms can’t solicit for business in the United States. Furthermore, the introduction of the Volcker Rule that banned proprietary trading in any capacity outside OTC derivatives. According to the Volcker Rule, a bank or an institution that owns a bank is prohibited from owning or investing in a hedge fund or private equity fund and from engaging in proprietary trading.
The potential for the US
In case the restrictions on FX trading are eliminated, there is a potential for the US to act as a bastion of high quality. Since the Commodities Futures Trading Commission (CFTC) along with the National Futures Association (NFA) will not allow wrongdoings. In the upcoming year, it would be interesting to observe to which extent the Dodd-Frank Wall Streer Reform act would be abolished how many firms would be able to benefit from it.
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