RFED

Investors discontent with the equity, especially, during the upheavals like a bear market or corporate scandals invest through retail spot Forex trading as a substitute for long term stocks investing.

Retail is, primarily, a short term speculator market and it suggests any transition from stocks, mainly, constitute equity investors operating in similar time frames with similar objectives.

• A retail customer trades directly with the other party without the involvement of exchange of central clearinghouse to back up the transaction and in such cases, the off-exchange trading is subjected to limited regulatory oversight. 

• The risk associated with the fluctuations in the foreign exchange rate is very high. The exchange forex market is a large liquid market tied with financial organizations, government agencies, insurance companies, and banks.

• In recent years, the secondary off-exchange market for Forex has developed for retail customers. Some customers view Forex as a possible investment opportunity or portfolio risk management strategy. 

• There are certain regulated entities that can act as counterparty to the foreign exchange transactions like RFED – Retail Foreign Exchange Dealers. 

The CFTC allows the sale of OTC Forex futures and options to retail customers if and only if the counterparty is one of the regulated entity like a financial institute (like a bank or saving association),

or a registered broker or a dealer/affiliates, or an insurance agency, or a financial holding firm or an investment bank holding firm.

Under the CEA, the CFTC can shut down any unregulated entity which acts as a counterparty to Forex futures or options transactions with the retail buyers. 

A retail foreign currency markets’ exchange dealer is the entity that can act to provide exchange transactions with a person who is not eligible contract participant in certain conditions like a futures contract –

where the option on a futures contract or an option contract is offered, or one enters into on a leveraged or marginal basis or is financed by the offerer or a person acting in perspective with a counterparty or the offeror on a similar basis.