The FDIC propose Forex rules – are the big US banks coming?
The FDIC propose Forex rules explained by professional Forex trading experts the “The FDIC propose Forex rules” FX trading team.
The FDIC propose Forex rules
A couple of recent and similar moves by two US regulators, the FDIC (or Federal Deposit Insurance Corporation) and the OCC (or Office of the Comptroller of the Currency), went largely unnoticed in the Forex industry, and in our view were somewhat misinterpreted by those who did notice. However, these moves spoke volumes to us about future competition in the Forex business – in particular about the potential entry of several large US banks into the business.
First, a little background. The OCC is technically the regulator of all US banks, and supervisor of the agencies of foreign banks in the US. The FDIC is not technically a regulator of US banks, but by virtue of its role organizing and managing deposit insurance in the US it too sets certain rules for the banks and is responsible for inspecting the soundness of the banks.
In early May both the OCC and FDIC introduced rules allowing their regulated / supervised institutions (i.e. US banks) to offer leveraged Forex trading to clients, with very similar rules (e.g. 50:1 max leverage on Forex major pairs, 20:1 on others…) to those already put in place by the NFA and CFTC, which regulate the existing non-bank Forex firms (such as FXCM and Gain Capital). There were some small subtle differences between the OCC’s and FDIC’s proposals, as pointed out by Skadden Arps in an interesting legal-focused summary piece, such as differences in proposed dispute resolution – the FDIC prohibits pre-dispute arbitration agreements, while the OCC’s proposal allows them.
As the OCC’s and FDIC’s proposals basically mirrored the existing NFA rules, not much attention was paid to their announcements. However, it has been indicated to us by leading Forex attorney Felix Shipkevich (thanks, Felix) that both the FDIC and OCC rarely introduce rules without a reason or need, such as behind-the-scenes lobbying by its member institutions which would like to enter a market. And that is the key here – our “reading between the lines” would indicate that there are likely several (major?) US banks which would like to look at launching online Forex businesses, leading to more potential competition in the US market and beyond.
The FDIC propose Forex rules Conclusion
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