One of the first steps a new trader will have to take on their trading journey is deciding which FOREX broker to use. The decision is not one to be taken lightly and there are a number of considerations to keep in mind.
The FOREX market is a global network that brings together traders, financial firms, banks and liquidity providers from around the world. The role of a FOREX broker is to connect traders to this global network, acting as the middleman between every participant. While the extremely wealthy have access to their own private trading desks, regular traders need to employ the services of a brokerage firm to buy and sell.
There are hundreds, if not thousands of brokers currently in operation. Choosing the right one can be a daunting process, so here are a few key points to keep in mind.
While not the most glamorous aspect of FOREX trading, regulation is nonetheless crucial. FOREX brokers are often registered with Offshore Financial Centres, which are typically small island nations such as the Seychelles, Mauritius or the Cayman Islands. Brokers can also be licensed by much larger authorities, such as the Financial Conduct Authority (FCA) in the UK, or the Australian Securities and Investment Commission (ASIC). Some brokers fall under the jurisdiction of multiple different authorities.
Licensed FOREX brokers are subject to financial and legal obligations that unlicensed brokers are not. The licensing authority dictates exactly what a broker can and cannot do. In order to receive regulatory approval, brokerage firms must comply with a number of requirements, including Know Your Customer (KYC) rules, Anti-Money Laundering (AML) rules, as well as financial conduct and transparency standards. It is vital to understand that not all jurisdictions are equal. Some financial authorities are more stringent than others and therefore offer greater customer protection, which is why it is important to research where the potential broker is registered and what such a registration entails.
The more reputable authorities, such as the FCA and ASIC, take things a step further by requiring FOREX brokers to keep their clients’ funds in segregated accounts, protecting them in the event of fraud, insolvency or other unforeseen events. Such a requirement has in fact become standard across the industry and most brokers, whether falling under the above jurisdictions or not, have adopted the same practice. This should be checked on a case-by-case basis.
On the broker side, it is in their interest to acquire a more reputable licence because it gives them access to more markets, allows them to use major payment processors such as Visa or Mastercard, offers more secure banking relationships and grants them a greater air of legitimacy.
An easy way to check a FOREX broker’s lawfulness is to navigate to their main page, scroll all the way down and read the small print at the bottom. This is where brokers will typically give their licence number, which can be looked up on the website of the relevant authority. By doing this, traders can check whether or not a broker is indeed legitimately registered, and with whom.
Try it for yourself!
Эрсдлийн дохио : Худалдааны дериватив ба хөшүүрэг бүтээгдэхүүн нь өндөр түвшний эрсдэлтэй байдаг.
ДАНС НЭЭХ
