Futures For You by Carley Garner
FUTURES VS. FOREX
What are the advantages of trading currency futures as opposed to forex?
The popularity of foreign exchange (spot currency) trading has exploded, thanks to low margins, seemingly low transaction costs, and flashy trading platforms. However, there are a few things that you should consider before choosing forex over currency futures like those traded on the Chicago Mercantile Exchange (Cme):
• Government regulation: The National Futures Association (Nfa), the Commodity Futures Trading Commission (Cftc), and the futures exchanges themselves all work together to create and enforce rules and regulations over industry participants. More specifically, each of these entities attempt to produce an environment in which solicitors such as brokerage firms, brokers, and commodity trading advisors are conducting business in an honest and candid manner.
The forex market, on the other hand, is global in nature and due to the lack of a physical trading floor or headquarters, regulation of operations doesn’t fall within any single jurisdiction. Although the Nfa and the Cftc have made strides in the right direction when it comes to enforcing compliance rules for those soliciting forex in the US, there are still operations abroad (and in some cases domestic) doing business without the necessary restrictions.
As a retail trader, I find it important to realize that forex clearing firms located in the US are currently required to register with the Nfa, leaving them subject to government regulation. However, Nfa registration, and thus regulation, is not necessarily required of those soliciting trading accounts, trading systems or signals, and software. Further, many forex salespeople are comfortable in exercising what they consider to be their right to freedom of speech, regardless of the credibility of the claims that they make. Of course, not all forex affiliates are in the business of misleading the public and not all futures industry participants are noble, but there is relatively more opportunity for wrongdoing in the world of forex than in others.