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Top 3 tightly regulated financial assets in the USA

iCrowdNewswire   Nov 9, 2020  12:06 PM ET

Although the United States is perceived as one of the most open economies with free markets and free trade, there is actually quite a lot of regulatory scrutiny. Many have mentioned that financial markets in the US are basically being micromanaged by the CFTC and the SEC. But for every law and every set of guidelines there is always a reason, and in the financial markets that reason is the protection of the trader’s or investor’s best interests from machinations or manipulation from service providers.

In this article, we will showcase 3 financial assets that are regulated very tightly by the United States authorities and why they’re under so much surveillance.

Day Trading

Day trading is not necessarily a financial asset, but rather a strategy for trading. But it is so significant to know about this specific restriction that we had to include it in this article as a separate thing.

Day trading is basically if you buy a stock from Apple and sell it the same day before the markets close. The restriction doesn’t ban the strategy completely but regulates it to a point that makes it pretty expensive for an average Joe.

You see, according to the guidelines and recommendations provided by the Securities and Exchange Commission (SEC) a day trader must at all times have a $25,000 equity balance on his or her account.

What this means is that you have to deposit $25,000, add some more on top of that that you will actually trade with and then start trading. If at any point the additional amount you used for trading is lost and you go below $25,000 equity, there may be fines or a complete ban from the platform. This is because the broker or the service provider can’t risk a warning or a fine from the SEC so it’s best if they terminate you on the spot.

This applies to almost any financial asset, be it stocks, currencies, or bonds. The minimum balance has to be $25,000 if you want to buy and sell something on the same trading day.

This is one of the reasons why direct-market forex trading is not as well-received in the US because it doesn’t really add value.

It isn’t really necessary for a small account holder to get their trade to the market as fast as possible if there are restrictions like these. They don’t want to be forced to close something on the same day without having the $25,000 balance. With direct-market trading, things develop extremely rapidly, and the additional leverage that FX traders can use could really mess with the decision making process of many rookies.

Vanilla Options

This financial asset is quite controversial. It is completely banned in the European Union but the United States does allow it to some degree. There are very tight restrictions on who can offer this asset on their platforms. The company needs to be approved by both the SEC and the Commodity Futures Trading Commission (CFTC).

Every single trade that is made on this asset needs to be documented fully and provided to the regulator for review. Should there be any violation of conduct the service provider could face millions of dollars in fines as well as a potential termination of their license.

You see, Binary options are basically like a guessing game. You say that price is either going to go up or down in the next few seconds or minutes. Let’s say that a stock is worth $1 and you say it’s going to be worth more in 1 minute. If you’re correct you get an 80% profit, but if you’re wrong then you lose all of it. It’s basically like a wagering game which is why it’s so tightly regulated.

Plus, you’re basically placing these trades/bets on the broker’s platform without access to the market, therefore it’s in the best interest of this particular company that you’re wrong. Many have been caught manipulating prices to make sure that clients were wrong.


CFD stands for Contracts for Difference. These are basically contracts on the price of an asset rather than the asset itself. For example, imagine you just bought an Apple stock from a stockbroker. You own that stock and can do whatever you want with it. But with CFDs, you don’t actually own the stock, you own a contract that states you bought it at a specific price.

This contract then has an expiration date which will automatically force you to sell or pay a fee to extend it.

This instrument is completely banned in the United States. The reason is that they are an Over-The-Counter (OTC) products that do not pass through regulated exchanges that need to document them and report them to the regulators.

Due to a lack of such a crucial aspect, US authorities thought it necessary to completely ban CFDs rather than go through the arduous process of making new legislation to regulate it properly.

Therefore, if you see a company offering CFDs in the US, you can immediately tell they’re illegal and report them to the SEC or CFTC.


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