If you are an investor and looking to succeed in online forex trading, the very first step is to choose an appropriate broker to work with. Of the most important criterion to be considered is whether the broker is regulated or not. If the trader works with a regulated broker ensures that the amount of risk is the least and this will help the trader’s investment safe. The trader can choose to work either with an individual broker or a brokerage firm. With increased ease of access to the Internet, online forex trading has become very easy. Individuals can trade from wherever they like in the world at times that are convenient to them. All that a trader needs is a computer, an appropriate broker to work with and an Internet connection that is fast and reliable.
What is Regulation
Compliance to regulations by any financial organization is indicative that the organization is functioning for a genuine purpose and also lets the world know that they are ready to comply with certain standards that are set up by the authorities. Forex brokers, sign a contract that obligates them to follow certain rules. This is compulsory if they want to run their businesses in different parts/countries of the world. A local financial regulator sets up these rules that the forex brokers have to necessarily follow. In principle, these rules state how the online forex trading business is to be run and provide a set of guidelines that set up a framework for the financial and behavioral ethics that are to be followed.
As per regulations, it is compulsory for the brokers to submit specific financial reports at regular intervals. The reports include company account statements that will be subject to timely audits. The capital amount of the company to be set aside and liquidity that the company needs to possess are clearly stipulated by the regulatory authority. This is done to enable uninterrupted operations. The most trusted brokers are the ones that are ready to abide by these rules that are set up. If the brokers refuse to comply with the regulations, they may be forced to terminate their operations and duly return the money due to clients. The brokers may also be subject to punishments and penalties.
Regulated Forex Brokers – Why Should Investors Choose Them
Working with regulated brokers means that the capital of the clients remains safe and secure. All the operations of the brokerages are supervised by an authority to the relief of the clients. It is easier to resolve disputes if any between the clients and the brokerages. It will also keep the brokers’ actions in check and be the cause for lesser number of frauds and malpractices. The regulations also help to set up a minimum standard in terms of the customer service and support to be given to the clients by the brokers.
When brokers comply to regulations, they are forced to maintain the customers’ funds and company’s funds in separate accounts. This means that the client’s fund remains safe in case the broker develops financial troubles. If the funds are maintained separately, the cleint’s funds can be duly returned to its rightful owner in case of a problem.
How To Tie Up With A Regulated Broker
The trader should ensure that the chosen broker complies with regulations before depositing funds and opening an account with them. Brokers that function from many parts of the world usually comply with different regulatory bodies of different nations. It is always a good idea for the investor to link with a local broker. The local language can be used for communication with the broker and can make things easy for the trader. However, this is not a rule. A client is free to link up with any broker from anywhere in the world.
Whereas the best forex brokers in the UK are regulated by the FCA, the US is usually answerable to the NFA. Brokers that run multinational operations are usually members of more than regulatory authority. Each nation has its own regulatory body that sets up the rules and framework. European regulatory bodies include CySEC and MiFID. Forex brokers have websites to facilitate online trading and those that are regulated have relevant information like the registration details on their website pages.