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.

Retailis, 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 – RetailForeign 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.