U.S. derivatives regulators are weighing tighter oversight ofretail currency brokerages' overseas units after FXCM Inc. washobbled by client losses last month.

The Commodity Futures Trading Commission (CFTC) is consideringrestricting how much firms can be exposed to highly-leveragedtrades made by clients outside the U.S., Chairman Timothy Massadsaid in Washington on Wednesday.

“We're looking at our rules,” Massad told lawmakers at a Househearing. He said many U.S. brokerages wind up assuming risk fromtrades made through foreign affiliates, which permit higherleverage than the 50-to-1 ratio allowed in the U.S.

The CFTC could restrict firms' transactions with their foreignaffiliates or require higher standards for assessing risk inoverseas arms, Massad said. The CFTC is working with the NationalFutures Association, the industry-funded front-line regulator, onpotential rule changes.

FXCM, the largest U.S. retail foreign-exchange broker, lost morethan $200 million after the Swiss central bank's Jan. 15 decisionto let the franc trade freely against the euro. A $300 millionbailout from Leucadia National Corp., owner of investment bankJefferies Group LLC, saved FXCM from violating capitalrequirements.

Most of the client losses at FXCM stemmed from overseas currencytrades, a person with knowledge of regulators' review of thebrokerage said last month.

Customers in some countries traded with as much as 200-to-1leverage, meaning they could make big bets with little money down.Amid the volatility, FXCM wasn't able to close out some clients'accounts before they lost more than they had on deposit, leavingthem with negative balances.

–With assistance from Zeke Faux in New York.