Forex market regulators and broker licensing
When choosing a broker, it is extremely important to know not only the trading conditions but also the status of the broker itself, the availability of a license, and which body it is regulated by. When beginners start their way on Forex, they do not know which regulator issued a license to the dealing center with which they are going to cooperate. It encourages many brokers to fraud and dishonest attitude to their duties.
Each broker must have a Forex trading license. They receive it in the country where the company is registered. There are many organizations in almost every jurisdiction that regulate the activities of brokers. All companies that have received a license post the data of the licensing company on their website. This makes it possible to verify the authenticity of the issued license without much effort.
The main thing to remember is that not all regulators are a guarantee of reliability. The attitude to each of them should be completely different.
They inspire confidence
One of the most reliable and best Forex regulators is the FCA (UK) – FINANCIAL CONDUCT AUTHORITY. The main purpose of the institution is to control financial markets and prevent offenses in the economic sphere, and it cannot do without providing legal protection. If a company wants to get a license, they need to meet fairly high requirements:
- A capital of at least 1 million euros.
- Regular reporting.
Audits are conducted at least once a year. The time for obtaining a license is from 7 months to 1.5 years. The licenses of this regulator do not cause any doubts.
BaFin (Germany) is also a reliable regulatory organization. Forex brokers do not often try to get a license from this particular regulator. The reason for it is that many traders are used to seeing licenses from Cyprus and the UK on brokers' websites. Despite this, the company's actions aimed at regulating the work of local financial markets, monitoring brokers, and the banking system do not give reason to doubt the reliability of the licenses issued by BaFin.
In the vast expanses of the European Union, there is a MiFID directive regulating the markets of financial instruments throughout the EU. The main functions of this organization are:
- Elimination of disputes between participants.
- Maximization of open trading processes on the Forex market.
- Providing investment protection.
- Support for healthy competition.
Only professional dealing centers can achieve compliance with all MiFID requirements and apply for their license.
CySEC (Cyprus) can be called the most popular regulator. The purpose of creating this commission is to ensure the control of the financial and investment sectors. The Forex license of this regulator has become popular due to the low requirements for brokers. The time for obtaining a license is up to six months. The minimum capital.com is only 125,000 Euros. Of course, due to the low requirements, there were some problems with brokers who had a CySEC license. However, at the same time, the commission introduced changes that allowed them to correct the situation, punish the perpetrators and prevent the repetition of such incidents in the future.
The strictest rules for the organization of regulation of brokers' activities are in the United States. Residents of America can choose brokers only from those who have a license from CTFT or NFA. We can only say that it will be quite difficult to get them, due to the strict requirements of futures associations.
The average degree of reliability
There is an ASIC regulator in Australia. It is the only commission on the continent that monitors the fulfillment of brokers' obligations, the quality of transactions, and the activities of various funds.
ASIC does not have much influence, but it can help solve a lot of problems. This regulator does not have a guarantee capital, which means that payments are impossible in case of a broker's bankruptcy. However, fortunately, such incidents have not happened so far. The reason for it is likely that ASIC controls brokers quite tightly.
The Financial Services Commission of Mauritius FSS takes a very responsible approach to license. Due to the not very high requirements, the license of Mauritius is gaining more and more popularity. If a broker wants to get it, they must have a minimum capital of 17,000 Euros, no criminal experience, and a business plan for 3 years. The main goal of the commission is to be a guarantor of the stability and reliability of financial services.
It should alert you!
Fraudsters often use licenses obtained on remote islands. Firstly, the regulators of such states do not often cooperate with law enforcement agencies. Secondly, the time for obtaining a license in these organizations is minimal, as is the licensed broker capital. For example, IFSC requirements (Belize): The minimum capital is $50,000. You can get a license in 6 weeks.
To find out if a broker is licensed and worth working with, read more reviews and news at https://tradersunion.com/.
NB! Some dishonest forex license providers sell fictitious licenses in jurisdictions that do not regulate forex activities. These are often Saint Vincent and the Grenadines, Dominica, Saint Kitts and Nevis. Be careful, you may become the victim of scammers!
