What do you mean my funds are not protected?

When doing business with a Forex Broker it is important to know that your funds are not secured as they would be in a bank. In fact, you are not even considered a secured creditor. This means if the firm you are trading with was to go bankrupt tomorrow you could lose everything. Even when everything is liquidated you would be at the bottom of the barrel in regards to who would get paid. The NFA (National Futures Association) is a governing body that is becoming more and more present in today’s Forex marketplace. Globally being a member of this association is not a requirement to offer spot Forex; however, the majority of the Industry leaders have joined this association which gives the NFA permission to regulate them.  One of the requirements of the NFA is that each firm must maintain a minimum of $10 million in excess net capital. This number was just raised to $10 million from $1 million and there are already plans to increase it again to $20 million. This will help push out some of the small fries who may not be as dependable in the long run. So be aware of the net capital and make sure that you are not trading with a firm that is on the fringe of what is required.

Traders lose 70% of their margin in broker bankruptcy

Recently a firm was shut down for falling below the net capital requirements and inevitably filed bankruptcy. I knew several traders that were using this small firm and they have reported to me that they will get around thirty cents on the dollar back after all is said and done. The whole process has been several months at this point and could potentially go on for several more months.

The reason that you do not take priority is because you are not considered a secured creditor. A secured creditor is a creditor which has the benefit of a security interest over some or all of the assets of the debtor.

In the event of the bankruptcy of the debtor, the secured creditor can enforce their security against the assets of the debtor, and avoid competing for a distribution on liquidation together with the unsecured creditors.

So how do you become a Secured Creditor?

First, let me say that it is not necessary to be a secured creditor and at almost any firm you trade with you will not be a secured creditor.  In my research I have found one way to become a secured creditor in the Forex, and that is by opening a Segregated Account. The FSA (Financial Services Authority), which is a UK based regulatory agency, is one of the world's most respected financial regulatory bodies. Under their regulations any account opened with Forex Capital Markets, LTD (FXCM UK) are deemed fully segregated in accordance with UK financial regulations and therefore in the unlikely event of FXCM UK's bankruptcy, clients of FXCM UK would be considered secured creditors and receive priority in bankruptcy proceedings.

FX Dealer Select can make this process extremely easy.