The forex market has been known as the “Wild West” of financial markets due to the lack of regulatory oversight. The global nature of the forex market presents a problem for local government agencies to police trading activity around the world. Currently there are no regulatory requirements for an institution to establish itself as an interbank participant; however, any reputable retail currency dealer will register voluntarily with the local regulatory agencies. We already pointed out the CFTC has new regulatory authority over the off-exchange retail currency market through the 2009 Farm Bill. As I write this, the CFTC is proposing new regulations that would require all dealers to register as members of the NFA.
In the United States, the National Futures Association (NFA) has begun implementing rules designed to protect currency traders, although some of its recent decisions have been met with skepticism. In 2009, the NFA banned a practice known as hedging, which allowed a currency trader to maintain opposite positions in the same currency pair, and implemented order execution rules, forcing changes in some dealers’ trading platforms. Although the rules are designed to make trading operate closer to the futures and equity markets, some traders resent the presence of regulators making changes to a market that has been self-regulated since its creation.
In the United States, the National Futures Association (NFA) has begun implementing rules designed to protect currency traders, although some of its recent decisions have been met with skepticism. In 2009, the NFA banned a practice known as hedging, which allowed a currency trader to maintain opposite positions in the same currency pair, and implemented order execution rules, forcing changes in some dealers’ trading platforms. Although the rules are designed to make trading operate closer to the futures and equity markets, some traders resent the presence of regulators making changes to a market that has been self-regulated since its creation.
