Regulation

Regulation is a key attribute of any forex broker in the retail industry.

When investing money with a brokerage it is important to first see if they are regulated as this affords several client protections and safeguards.

The financial services industry is tightly regulated to help prevent illicit behavior and manipulation.

This is not unlike any other industries with a high net worth, that rely on transparency.

Each asset class has its own set of protocols put in place to combat their respective forms of abuse.

In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order.

Why Regulation Matters in FX

There are several regulators globally that help police the forex industry. Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.

First and foremost, regulators help ensure the filing of reports and transmission of data to help oversee and monitor the activity by brokerages.

Moreover, regulators also serve as a deterrent against market abuse and malpractice by brokers.

Brokers that engage in services with clients must adhere to a set of rules that ensure they are in fact authorized to provide investment activities in a given jurisdiction.

Unfortunately, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.

Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.

In terms of reporting, retail brokerages are also required to regularly file reports about their clients’ positions to the all requisite authorities.

Brokers also typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.