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Forex

NFA bans Credit Card deposits

Nasir Mohammad | Dec. 2, 2014

AtoZForex.com Lagos — It’s been a long time coming, but it has finally been decided. Forex firms in the US have officially been banned from taking credit card deposits from clients in the US, in a case which has dragged on for about a year and a half. It was first proposed by the NFA early in 2013 and has been accepted by the CFTC, which also affects electronic methods of payments like paypal.

The law is expected to take full effect by January 31, 2015. The idea is to safe guard clients from trading Forex and futures on borrowed money. These instruments are high risk investment tools and are therefore not suitable for many people who none the less have an acute interest in trading these markets. A total loss of capital can be incurred in such markets, hence, only risk capital should be used to trade. It is obligatory for brokers dealing in such instruments to declare this to their clients.

The NFA stated that the ban was a direct result of an extensive study of Forex traders’ activities, as well as broker practices. NFA looked at more than 15,000 retail Forex accounts and noted that an overwhelming amount of these accounts were funded by small retail customers using a credit card or borrowed funds, and a majority of these accounts were found to be unprofitable.

When the rule was brought up, the US market has restructured, with firms such as Alpari and FXDD, exiting the US retail market and selling their assets to others like FXCM, OANDA and GAIN Capital, whose aggregate business operations span a wide range of countries and markets, therefore their US operations only account for a fraction of their overall activities.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.