CFTC Client Advisory Highlights What Clients Should Know Before Trading Forex OTC

washington d.c.The Commodity Futures Trading Commission today issued a client advisory warning the public to thoroughly research potential investments in over-the-counter (OTC) currencies. currencies). The new notice Eight Things You Should Know Before Trading Forex, provides potential investors with eight cautionary tips on the risks of OTC currency trading. To help protect against fraud, the advisory encourages potential investors to research an OTC forex broker thoroughly before making deposits or sharing personal information. It also outlines what being a forex dealer signup entails and why it’s important, as well as common signs of fraudulent OTC forex websites.

The CFTC has seen a growing number of complaints from customers who deposited money into accounts with unregistered OTC currency dealers, but were then unable to withdraw their principal or earnings. There are several tactics commonly used by fraudulent dealerships, including soliciting customers on social media; require payment in bitcoins or other digital assets; manipulate currency prices and trading results; offering exceptionally high leverage; and denying or ignoring customer withdrawals.

Disciplinary record and background checks are particularly important when researching OTC currency dealers, as clients only trade against their dealers in OTC transactions. When a customer buys, the reseller is the seller; when a customer sells, the dealer is the buyer. Dealers also control the information customers see on trading platforms and apps, including prices and account balances.

About the Office of Customer Education and Awareness (OCEO)

OCEO is committed to helping customers protect themselves against fraud or violations of trade in goods law through the research and development of effective financial education materials and initiatives. OCEO is committed to outreach and education to retail investors, traders, industry organizations and the farming community. The bureau also frequently partners with federal and state regulatory agencies as well as consumer protection groups. The complete directory of CFTC customer training materials is available at:

The customer review is available in full below and at


The Commodity Futures Trading Commission advises the public to research OTC foreign exchange (“forex”) brokers thoroughly before making initial deposits or transmitting sensitive personal information. The search should include verifying that the dealer and its employees are registered with the CFTC and checking the dealer’s disciplinary history with the National Futures Association (NFA).

Why registration is important

CFTC and NFA registration indicates:

  • Directors and associates have conducted extensive background checks.
  • The company meets certain financial requirements.
  • The addresses and contact details of the main establishment and branches are verified and accessible to customers.
  • The business or individuals must submit to regulatory reviews and oversight.
  • The business or individuals must submit to regulatory reviews and oversight.
  • The Associates have passed the required tests and meet the other proficiency requirements.
  • The business or individual must comply with disclosure requirements and standards of conduct.
  • If there is any problem, customers can ask for help through the CFTC Redress Program or NFA Arbitration Process,

Visit to learn more.

Recently, the CFTC has seen an increase in fraud complaints from clients who have deposited large sums with unregistered offshore forex traders. Customers have found these dealers through social media friendships or referrals. However, when customers attempted to withdraw their money, dealers either failed to respond or demanded additional payments.

Registration alone may not protect you against fraud, but most fraud is committed by unregistered resellers and individuals. Financial requirements, reviews, and state and federal laws are also intended to ensure that a registered reseller meets its obligations. This is important in a market where the dealer is your only counterparty.

8 things you might not know about Forex

  1. You are trading against the dealer. Unless you are buying currency futures or options on a regulated exchange, you are trading “off-exchange” or over-the-counter (“OTC”). This means that you are not trading on an open market, you are only trading against your dealer. When you buy, your reseller is the seller; when you sell, your reseller is the buyer. Your broker makes money when you trade more frequently, lose money, or pay fees, spreads, or commissions.
  2. Two out of three customers lose money. Most OTC forex clients lose money when all credits, finance charges, fees and other expenses are taken into account. Over the past year, around one-third of registered OTC forex broker clients have made a profit, while two-thirds have lost money.[1]
  3. The dealer controls the trading platform. When you trade on an electronic trading platform, mobile app, or a dealer’s website, you are not connecting to a live exchange. You connect to the retailer, who controls the information you see on your screen, including prices. In many cases, unregistered offshore dealers used popular trading software to provide a veneer of legitimacy, but manipulated trading data to steal customers. Compare prices with third-party sources to verify that you are seeing legitimate price movements and levels in the market.
  4. Your ability to close or offset positions is limited to your broker. Since you are trading against the dealer on their platform, you are limited to the prices and terms offered by the dealer.
  5. Your deposits are not protected. If a dealer disappears or goes bankrupt, you may not be able to get your money back. Before opening an account, be sure to receive and carefully follow review your account agreement to see what rights and protections you have. Next, check the account’s funding and withdrawal requirements, including related fees. Fraudulent dealers typically refuse withdrawals until customers pay expensive, undisclosed commissions, pay made-up taxes, or invest more to achieve higher account-level status. You should never have to pay more money to get your money back.
  6. You could lose all your margin and more. OTC forex trading uses margin. Dealers will require a minimum amount to open and hold a position, which usually depends on the volatility of the currency pair you want to trade. For example, a 2% margin requirement means you can open a $100,000 position with only $2,000 in your account. This high degree of leverage magnifies both gains and losses. If the market moves against you, you will need to add more money to your margin account or close the position. You may also be liable for additional losses beyond your initial deposit.
  7. Sellers may have hidden conflicts. Dealership may employ vendors, social media influencers, or affiliate marketers to bring customers to its platform, but these relationships may not be known to customers. Sellers may have no business expertise and be paid based on the number of new customers they deliver. Carefully consider any statement that contradicts or minimizes any of the issues listed in this notice or other risks described in the mandatory risk disclosure statement you must receive before opening an account.
  8. Many scams start on social media. Be especially careful with anyone who approaches you on social media, dating apps, messaging apps, or through unsolicited email and wants to discuss forex trading. Common warning signs to look out for include:
    • Pushing you to move the conversation off-platform to a private messaging app.
    • Outsized and often guaranteed returns promising in a short period of time.
    • Direct you to an unregistered reseller with no physical presence in the United States.
    • Giving you more leverage than allowed by law in the US (2% for major currency pairs or 5% for other pairs).
    • Only accept bitcoin, ethereum or other digital assets as payment.
    • Having a website that does not display the physical address of the head office or branches, or the addresses do not exist when you search the map at street level.
    • Using a WhatsApp customer service number or having no phone number at all.

If you think you have been the victim of fraud, visit To check registration and disciplinary history, visit

This article was prepared by the Commodity Futures Trading Commission’s Office of Client Education and Outreach. It is provided for general informational purposes only and does not provide legal or investment advice to any person or entity. Please consult your own legal advisor before taking any action based on this information. This notice refers to non-CFTC websites and organizations. The CFTC cannot attest to the accuracy of the information contained in these non-CFTC references. Reference in this article to any organization or the use of any organization, trade, firm or company name is for informational purposes only and does not constitute an endorsement, recommendation or favor of the from the CFTC.

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