online commodity broker

Americas: Online broker becomes FCM, The

New York-based Forex Capital Markets, an online currency broker, has become a futures commission merchant. "We are the first foreign exchange specialist to become an FCM since the Commodity Futures Modernization Act was enacted in December 2000," says Marc Prosser, chief marketing officer for Forex Capital Markets.

The act, which re-authorized the Commodity Futures Trading Commission, grants the CFTC authority over retail foreign exchange trading. Under the new law, firms must register with the CFTC as an FCM or with the Securities and Exchange Commission as a broker-dealer to offer foreign exchange trading to private clients with less than $10 million in assets.

Prosser says the law effectively could force many financially shaky companies offering currency services in the United States out of business, since they will not be able to meet registration requirements.

"In the United States, retail foreign exchange has been known as the Wild West of financial services," Prosser says. "There were no requirements or regulations regarding firms offering spot foreign exchange services."

The CFTC is already using its new jurisdiction over foreign exchange trading to close down operations. The first round of legal actions was taken in May against several currency "boiler room" operations in Florida and Georgia.

For the past five years, European companies have capitalized on the lack of regulation in the United States to win customers, Prosser says. The change in regulation puts US firms in a good position to capture market share from European competitors, he notes.

Prosser says Forex Capital Markets executes $10-$12 billion in trades each month, or more than its three closest US rivals combined.

Copyright Global Finance Media Inc. Aug 2001
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