Regulation of Forex Brokers (Part 1)

As beginners or experienced traders in Forex and other financial markets well know, online brokers are a vital part of this business. These companies function as intermediaries that place our money in the market and allow us to speculate on the up and down movements of assets. Because the business of the financial markets is so big, the number of brokers has been almost exponentially multiplied in recent years. Now here is the issue that all traders have to encounter :

How can we choose an honest broker that meets our needs？

One of the criteria by which we can be guided is the regulation of brokers. When we speak of regulation in relation to brokers, we refer to whether they are registered and duly regulated by an important financial regulatory body, either in their country of origin or in the country where they have their base of operations. Generally, these entities, especially in the US and Europe, have strict requirements to accept any company that provides any type of financial service, like a bank or a broker, in this case. In this way, it seeks to ensure the legality of its operations and that its clients' money is insured. For example, in the US and other developed countries, it is required that any of these companies have a certain level of liquidity so that it can cover its operations, to ensure that it has the means to pay and continue operating under any circumstances. This does not mean that an unregulated broker is necessarily synonymous with scam where we are going to lose our money, but the reality is that by opening an account and depositing money with a company that does not have any regulation, we are risking losing money despite how hard do we obtain it.

On the other hand, if we open an account with a duly regulated broker, we make sure to, at least, deposit our money and trust in a company that meets at least certain standards. Likewise, in case of a problem, there is a possibility, even a little one, of presenting our complaint. But in the case of an unregulated broker whose base is thousands of kilometers from the country where we live, there is no way to solve a problem of this type, it only remains to trust the goodwill - if there is any - of the broker's staff.

Of course, trading with a regulated broker is not an absolute guarantee that we will not have any problems. In fact, there have been, and still are some brokers with multiple regulations and licenses that offer poor service. It is like in any other sector, there are good and bad companies. However, in the end, using the services from a regulated broker offers multiple advantages, such as those mentioned above. Also, regulated brokers are usually the ones with the best reputations.

Here is a list of some main global financial services regulatory entities that control companies providing financial services such as brokers:

- British Financial Regulatory Body : FCA (Financial Conduct Authority)

- Australian Financial Regulatory Body : ASIC (Australian Securities & Investment Commision)

- Cypriot Financial Regulatory Body : CySEC (Cyprus Securities and Exchange Commission)

- German Financial Regulatory Body : BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht, in English : Federal Financial

Supervisory Authority)

- Spanish Financial Regulatory Body : CNMV (Comisión Nacional del Mercado de Valores, in English : National Stock Market )

- Financial Regulatory Body of the USA : NFA (National Futures Association) and CFTC (Commodity Futures Trading Commision)

- Etc.

(To be continued ... )