| NEW YORK, March 2
NEW YORK, March 2 Retail currency brokers are
considering operating in the United States after a nearly
seven-year absence, if President Donald Trump is able to carry
through on his pledge to deregulate financial markets.
The prospect of lighter regulations has revived interest in
the country among foreign exchange brokers such as UFX and
Alpari, which cater to small and individual investors. It has
also brightened the outlook for an industry that has struggled
and lost market share to places with looser regulations in Asia
"Key players in the vast retail FX market are gearing up for
a hopeful re-entry," said Paul Sirani, chief market analyst, at
online currency broker Xtrade in Limassol Cyprus. He declined to
identify those retail FX players.
Sirani's observation is shared by many market participants
such as Javier Paz, senior analyst at research firm Aite Group,
and Meir Velenski, a long-time FX practitioner who set up his
own financial consulting group.
A return to the United States could mean physically setting
up an office in the country as a U.S. entity, or in some cases
maintaining an overseas headquarters while soliciting business
in the United States.
At the heart of the forex brokers' optimism is the possible
repeal of the Dodd-Frank Act.
Signed into law in 2010 in response to the global financial
crisis, the Dodd-Frank financial reform legislation aims to
overhaul business practices on Wall Street and protect
consumers. But its passage caused the demise of many U.S. retail
In 2006, there were 40 companies operating in the United
States offering FX trading to retail customers. After
Dodd-Frank, that number has shrunk to three -- GAIN Capital
Holdings, Inc.; Canada-based Oanda, and TD Ameritrade
Under Dodd-Frank rules, enforced by the CFTC, firms offering
retail forex trading in the United States must maintain minimum
capital of at least $20 million, plus 5 percent of the amount by
which liabilities to retail forex customers exceed $10 million.
By comparison, the minimum capital requirement in Cyprus,
where many FX brokers have moved, range from 40,000 euros
($42,680) to one million euros ($1.067 million). Cyprus, with
many FX brokers under its jurisdiction, has become popular with
market participants because its European Union membership allows
companies based in that country to provide FX services to other
Dennis de Jong, managing director of retail forex trading
firm UFX in Limassol, Cyprus, said he would "absolutely" be in
favor of a move to the United States if the minimum capital
requirement is reduced.
"Obviously the regulators need to be very strict in terms of
how you protect the client...but in general lowering the
(capital) threshold would be good," he added.
The Trump administration has not said anything specific
about FX regulation under Dodd-Frank. But House Financial
Services Committee Chairman Jeb Hensarling said in a CNBC
interview this week that much of the law could be undone through
a number of ways.
"The $20-million bond required of U.S. retail FX business
pretty much precludes anyone from founding a start-up in this
business," said Joe Trevisani, chief market strategist, at
WorldWide Markets, an online multi-asset trading platform in
Woodcliff, New Jersey.
WorldWide Markets, regulated by the Financial Conduct
Authority in Britain, does not take U.S. clients.
Trevisani was a partner at currency broker FX Solutions,
which exited the U.S. market in 2013, a Dodd-Frank casualty.
Dodd-Frank also prohibited FX overseas firms from soliciting
Russian currency broker Alpari, which left the United States
in 2011 due to onerous regulations, is keen to see what happens
with the new Trump administration.
"We are in standby position. Everybody is looking at the
U.S. right now for business and we're curious to see how things
change," said Roberto d'Ambrosio, chief executive officer at
Alpari Research and Analysis Limited in London.
D'Ambrosio said Alpari's decision to return to the United
States would hinge partly on easing regulations such as rules on
"The reporting requirement is really, really heavy," said
the Alpari official. If the costs of reporting could be eased
somewhat, then this would help, he added.
SHRINKING U.S. MARKET
U.S. retail FX trading volume has shrunk since Dodd-Frank,
In 2016, the U.S. share of the $374 billion daily global
retail currency trading volume has been cut in half to just 3
percent, or $11 billion, according to estimates from research
firm Aite Group. Prior to Dodd-Frank or in 2009, the U.S. share
was 6 percent, or $17 billion, of what was then a global daily
retail market of $276 billion.
Some market participants have pointed to the CFTC,
Dodd-Frank's regulator, as the culprit. Dodd-Frank gave the CFTC
regulatory powers to oversee the U.S. retail FX sector.
"The CFTC could have created a safe environment in U.S.
retail FX by working more closely with the industry," said
Aite's Paz in Salt Lake City, Utah.
(Reporting by Gertrude Chavez-Dreyfuss and Dion Rabouin;
Editing by Megan Davies and Chizu Nomiyama)