I mentioned back in November that the NFA had implemented new net capital requirements for Forex brokers that went in effect on December 21st, 2007.  In a nutshell, brokers that offer 100:1 leverage needed 10 million in net capital and brokers offering 50:1 leverage needed 5 million in net capital.

If you missed that post, you can find it at http://www.forexproject.com/Blog/Investing_and_Trading/Forex_Brokers_Will_Be_Affected/

The CFTC has only released net capital reports up to October (November should be out any day now) but there are several brokers that could be in serious trouble.  If you go over to http://www.brokerontop.com/small_futures_commission_merchant.htm, any of these small-cap firms (< 10 million in excess net capital) could soon have a problem if the NFA start enforcement of the new requirements.  I'd be seriously hesitant depositing any money or having any money at these firms.   Do your own research but based on my understanding, the recognizable firms in trouble could be:

• CMS Forex (need 10 million, barely compliant based on October report)
• Hotspot FX (need 5 million, barely compliant based on October report)
• Forex Club (need 10 million, seriously undercapitalized based on October report)
• MB Trading (need 10 million, seriously undercapitalized based on October report)
• Easy Forex (don't know their leverage but still seriously undercapitalized based on October report)
• Alpari (need 10 million, seriously undercapitalized based on October report)

Read or add comments about this item.

No. 1 :

Rich,
There must be SOMETHING that is behind the scenes. Because MB Trading, Hotspot and Alpari are very well known firms. Thanks for the info.

Submitted by Alex • 2008-01-07 01:57:43

No. 2 :

Many of them are based in Offshore Pirate Havens or in Eastern Europe.... Be careful.

Submitted by Forex Trader • 2008-01-08 21:19:41

No. 3 :

I know that many of the small FCM fishes have become IB's to established FCM's in December or sold their books to the likes of FXCM. But ALL of the names you mention in your note have posted the higher capital (I know for a fact that MB Trading and FX Club have). Alpari is a new comer to the US, but very well establihed in Eastern Europe. The higher net cap requirement of $10m is no surprise to FCM and they've had months to prepare and get the capital in order. You wont get the DEC data from the CFTC site until 6 weeks from now, though.

Submitted by Forexds • 2008-01-09 11:59:06

No. 4 :

Forexds, great information. Thanks.

Submitted by Rich • 2008-01-09 17:11:46

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