In the ever-changing world of the internet, it’s now just as convenient to set up a complicated company to lure clients or buyers, just to close shop and vanish. Anyone who has ever purchased something or used a program has probably been the victim of a scam at some time. With the rapid expansion of the retail forex market, you, as an investor, must be questioning the credibility of both controlled and unregulated forex brokers. So, what are the advantages of dealing with a licensed forex broker? Can they have something exclusive that unregulated brokers can not, and, more specifically, what exactly can you get as a trader when you deal with a forex-controlled broker in terms of benefits?
What is the regulation?
You may be familiar with certain unusual titles. CySEC, FSA, ASIC, and a slew of other acronyms come to mind. There are financial regulators whose primary function is to oversee the financial markets in their control, which includes insurance providers and, of course, forex traders. Many traders are unaware that the financial watchdog’s oversight and consumer security are restricted to their respective jurisdictions.
This is what CySec means to itself, for example. “The Cyprus Securities and Exchange Commission (CySEC) is an independent public supervisory authority that oversees the investment services industry and transferable securities transactions in the Republic of Cyprus.” In other words, a broker or any financial entity that is “licensed” by the relevant authority receives a license to operate in the jurisdiction and must follow the laws and regulations, which include submitting one’s company to annual audits, providing transparency, and, most significantly, defending investor interests. As a result, if you live in Germany, your best bet is to search for forex brokers that have been approved by BaFIN, the Federal Financial Supervisory Body. Until considering arguments by consumers that are not German citizens, the law guarantees that your best interests are considered first.
The main tool for the beginner to check the validity of the company is to search for the reviews that usually includes a thorough analysis, for example as well as in the case of Milton Prime broker review which has the reviews from the clients and technical indicators at the same time. There is no such thing as a promise in fact. There is no guarantee that your money will be secure, no matter how well controlled a forex broker is. Any instances are as follows: Despite being controlled by the CFTC, one of the most stringent financial watchdogs in the US, MF Global, a well-known US-based broker, went bankrupt.
In Europe, Alpari UK had to close its doors after the SNB shock in January 2015. Despite the fact that the FSA (Financial Services Authority) regulates the industry in the United Kingdom, recent estimates indicate that consumers are receiving $0.79 on the dollar in exchange.
What do regulated brokers offer?
Transparency – Due to the continuous oversight of the financial watchdog, a regulated forex broker must follow the rules and regulations. This covers little items like checks, which have a real-world effect on the trader. A forex broker that is listed as straight-through processing or an ECN model, for example, cannot exploit trades like B-booking.
Insurance – There’s also a better possibility that if your forex dealer goes bankrupt, you’ll get some of your money back. Some financial authorities have a higher degree of protection depending on the regulations in place. Cysec traders, for example, might be members of the Investor Compensation Scheme, which is a pool of funds used to resolve client lawsuits. This, however, varies by jurisdiction, so a trader can first review the forex broker’s terms and conditions as well as legal paperwork.
Anti-Money Laundering – Money laundering is a problem that affects countries all over the world and is a major source of funding for illicit activities. Traders are often required to have identification such as a photo ID and proof of address when dealing with a managed forex broker. It may seem boring to some traders, but it is still preferable to be a part of a managed forex broker that employs due diligence than to be a part of an offshore forex broker that lacks oversight and has little information about how the funds are used.
Fund Segregation – Regulation means that the funds are not kept in the same account as your broker’s. In this way, whenever you file a withdrawal order, a managed broker will still be able to handle it.
Risk Warning – Danger Warnings, which controlled intermediaries are required to use, act as alerts of risk and are intended to save you from being fully distracted by the ability to get rich fast. For the same cause, dangerously high debt options and money-enticing marketing tactics are prohibited.
Summing It Up
Finally, to sum up, In terms of legality as well as protection and safety of your money, a managed forex broker is the easiest and safest forex broker to trade with. Let’s also not forget about trade execution and accountability. Trading is all about risk management, so choose a licensed forex broker rather than dealing with mysterious and shady unregulated brokers that are based in offshore tax havens and are not subject to accountability.