Retail foreign exchange dealer (RFED)
Also known as: RFED, retail forex dealer
Retail foreign exchange dealer (RFED): A retail foreign exchange dealer (RFED) is a US registration category for firms that act, or offer to act, as the counterparty to leveraged off-exchange forex transactions with retail customers.
What does RFED registration mean?
An RFED must register with the CFTC, unless exempt, and become an NFA member designated as a Forex Dealer Member. Its principals and associated persons are subject to background checks and proficiency requirements, and the firm is subject to NFA rules such as minimum security deposits and first-in, first-out offsetting: forex regulation.
How does an RFED differ from an FCM?
Both can act as counterparty to retail forex trades in the US. A futures commission merchant (FCM) is primarily a futures broker that may also offer retail forex, while an RFED is a registration category created specifically for retail forex dealers.
Worked example
Illustrative only: a US resident opens a forex account with a firm whose US entity is registered as an RFED. When the client buys 1 lot of EUR/USD, the RFED is the counterparty to the trade, and the client can look up the entity’s registration and disciplinary history in NFA BASIC.
Sources
- Retail Foreign Exchange Dealer (RFED) Registration, National Futures Association
- Forex Transactions: Regulatory Guide, National Futures Association
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Related terms
- Futures commission merchant (FCM)
A futures commission merchant (FCM) is a US firm that solicits or accepts orders for futures and related instruments and accepts money or other assets from customers to margin or secure those trades.
- Market maker
A market maker broker, also called a dealing desk broker, quotes its own bid and ask prices and acts as the counterparty to client trades instead of passing every order to outside liquidity providers.