If you are looking for a regulated forex broker in the United States, there are two major regulatory agencies that you should know of. These are the National Futures Association and the Commodity Futures Trading Commission.
The Commodity Futures Trading Commission, also known as CFTC, is an independent financial regulatory body in the United States that was established in 1974 and is responsible for regulating the trading activity of futures, swaps, and other financial derivatives that include Forex and CFDs.
You should note that the CFTC has no responsibility in regulating the stock market, and securities in the United States are highly regulated by the Securities Exchange Commission (SEC).
In this guide, we listed three top CFTC regulated brokers, explain the reasons why you will benefit to trade with one of these brokers, and include important factors when choosing the most suitable CFTC regulated broker for your needs.
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The Best CFTC Trading Platforms
As US regulatory agencies are known to be professional and very strict, it is clear that CFTC forex brokers are among the most reliable brokers to trade with. Furthermore, the process of getting a CFTC approval is quite difficult and requires full transparency and financial stability. As a result, there are only a few brokers out there that have gained a CFTC license. Here are our top picks for the best CFTC Brokers as of 2020.
2. IG - Best CFTC Regulated Broker with Years of Experience and Competitive Spreads
Established in 1974, IG Group is one of the leading Forex and CFD brokers in the world with more than 178,000 clients worldwide and a market cap of 2.882B. IG Group is a public company traded on the London Stock Exchange under the ticker symbol IGG. Within the United States, IG is a trading name of IG US LLC. The company is registered with the Commodities Futures Trading Commission (CFTC) and member of the National Futures Association under the registration number 0509630.
Launched in February 2019, IG US is a relatively new player in the US Forex market. The greatest advantage of IG compared to any regulated broker in the United States is simply the low spreads it offers. The broker takes pride in offering up to 20% lower spreads on major currency pairs that start from just 0.8 pips for EUR/USD and the average spreads of 0.9 for all currency pairs.
In addition to offering highly competitive spreads on over 80 currency pairs, it is also one of the few brokers that offer the MetaTrader4 for US traders. IG offers clients a choice between MT4 and its proprietary trading platform but more than, traders can get access to Virtual Private Server (VPS), and automated trading. Finally, IG offers ProRealTime, which is a professional online charting software for experienced traders who use advanced technical analysis strategies.
- Offers the lowest spreads for FX pairs in the United States
- A leverage ratio of 1:50
- Automated trading is available
- An account balance must be over 5000 USD in order to use a Virtual Private Server (VPS)
- Limited selection of payment methods
3. Oanda - Best CFTC Trading Platform For Beginners and Programmers
Oanda is another US CFTC regulated broker that is best known for its easy-to-use trading platforms and the low trading costs it offers. The Oanda Corporation is a registered Retail Foreign Exchange Dealer (RFED) with the U.S. Commodity Futures Trading Commission (CFTC), and a Forex Dealer Member of the National Futures Association under registration number 0325821.
Oanda tries to differentiate itself by offering low trading costs and a selection of trading platforms. The US-Based Forex broker provides more than 70 currency pairs and a selection of powerful trading platforms and tools. In terms of trading platforms, Oanda offers four ways to trade – The Oanda Trade Web (browser-based platform), the Oanda Trade Desktop, Oanda Trade app, and MetaTrader4. Oanda is mostly suitable for beginners who are looking for an easy-to-use trading platform or trading programmers who are looking to use an API service or automate their trading.
In terms of regulation and safety of funds, Oanda is not only regulated by CFTC but also holds licenses in Canada, Europe, Asia-Pacific, and Australia.
- A wide selection of partner tools and APIs
- Highly regulated Forex broker
- No minimum deposit requirement
- Limited advanced trading tools
- Offers only two account types (Standard and Premium)
What Should You Look for in a CFTC Trading Platform?
CFTC ensures the integrity of forex brokers and a reliable market trading activity. It is well-known that CFTC regulated brokers are subject to strict regulatory requirements that include financial stability, transparent operation, funds security, and Anti-money laundering.
By now, you have a list of the best CFTC regulated forex brokers to choose from but if you are still in doubt as to which broker will be the most suitable for you, here are some significant factors to take into consideration.
Regulation and Safety of Funds
Nowadays, there are two regulatory agencies responsible for regulating the US Forex market; the Commodity Futures Trading Commission and the National Futures Association. However, every forex broker operating in the United States must be registered and regulated by the CFTC.
Luckily, many small and relatively unreliable retail brokers who failed to meet ‘The Farm Bill’ capital requirement (at least $20 million) have disappeared from the US forex market. Traders and investors are also able to file complaints directly to the CFTC in any case of a dispute. Moreover, the CFTC is responsible to protect clients from any fraud, manipulation, or disorders in market activity.
A Leverage Ratio
Leverage is a major contributing factor to the popularity of the forex market. It simply allows users to trade with small capital and increase profitability or loss. However, leverage ratio is limited in the United States, and following the Dodd-Frank Act in 2010, regulatory agencies have set a limit of 50:1 on major currencies and 20:1 on minors.
While most of the stock brokers operating in the United States provide a leverage ratio of up to 50:1, it’s advisable that you check margin requirements on all assets before you choose a Forex broker.
Spreads and Fees
Spreads and trading fees are an important factor in determining a forex broker, particularly if you are actively day trading. Forex.com, for instance, is one of the few forex brokers operating in the United States that is offering a Direct Market Access (DMA) account for traders that make high trading volume. The DMA account allows traders to get access to deep liquidity providers, which increases the effectiveness of execution and provides tighter spreads.
Alternatively, IG US offers extremely competitive fixed spreads that start from 0.8 pips for major currency pairs and 0.9 pips for minor and exotic currency pairs.
Trading Platform/Trading Tools
All of our recommended CFTC Forex brokers offer the popular MetaTrader4, which is the perfect solution for the average Joe. However, if you are looking for a more advanced trading platform or a beginner platform, then you will have to find the trading platform that matches your needs.
For experienced traders; IG offers the ProRealTime, a professional trading platform for those who use technical analysis. This platform has over 100 indicators, it allows you to build your own algorithms, use an unlimited number of timeframes on different trading charts, and automatically place orders according to trend lines. Forex.com offers the award-winning NinjaTrader, which is known as one of the best trading platforms in the market for those taking part in day/swing trading. Oanda, on the other hand, has a great selection of partner APIs and VPS services.
Minimum Deposit Requirement
Most forex brokers have a minimum deposit requirement. While some brokers are focus on ‘heavy’ traders, others allow users to open a trading account with a low minimum deposit requirement. From the choices above, Oanda allows you to open a trading account without requiring a minimum initial deposit. Forex.com and IG maintain a minimum deposit requirement of $50, and $250 respectively.
US traders are experiencing a shortage of forex brokers. Since the introduction of the Farm Bill and the Dodd-Frank Reform Act in 2010, the Forex market has completely changed in the US. In fact, there are only a few forex brokers that are regulated and licensed by the CFTC and NFA as of 2020. But that comes to the Benefit of the traders; US Forex brokers are subject to follow strict laws and regulations in order to provide their services to clients.
The bottom line for you; if you are a US resident and wish to start trading forex, it’s recommended that you start with one of our recommended stock brokers above to make sure you get protection and enjoy an advanced and reliable trading platform.
What is the Commodity Futures Trading Commission (CFTC)?
The CFTC is an independent governmental agency that is in charge on regulating the futures, derivatives, and options markets. As of 2014, the CFTC oversees exchanges, swap execution facilities (SEFs), swap data repositories (SDRs), swap dealers, Forex brokers, and futures dealers.
How do I know if a company is CFTC regulated?
CFTC regulated brokers must display the license registration on their official websites. Additionally, you can go to NFA's official website and search for the company you are looking for.
What are the benefits of a CFTC regulated broker?
Investors that choose to trade with CFTC regulated broker guarantee the safety of their funds and reduce the risk involved with trading activity. Some of the major benefits of trading with CFTC regulated broker include the minimum capital requirement for CFTC brokers of $20 million in operating capital, financial auditing requirement, fair competition rules, and the removal of conflict of interest between the client and the broker.
How much money do I need to start trading with a CFTC broker?
Most CFTC brokers maintain a low initial deposit requirement and a leverage ratio between 20:1 to 50:1 depending on the tradable asset. From the choices above, Oanda does not maintain a minimum deposit requirement. Forex.com requires a minimum deposit of $50 and IG has a minimum deposit requirement of $250.
How do you read a CFTC report?
The Commodity Futures Trading Commission publishes the Commitments of Traders (COT) reports every Tuesday to help the public understand the supply and demand of certain instruments and get a better indication of market dynamics. The data is available from the CFTC's official website and occasionally, the CFTC reports are a catalyst for speculative activity.