Licensed Forex brokers
How to choose licensed Forex brokers, what regulators are needed, what regulators are reliable for them, whether a license is needed - answers to these and other questions can be found in our article.
To date, there are a huge number of different regulatory organizations that control the activities of Forex brokers. Among them there are state regulators issuing licenses to operate as a broker in the territory of a certain country (for example, Central Banks and Financial Commissions for Securities), as well as independent organizations of professional participants in financial markets, whose role is played directly by Forex brokers. In this article you will find out why regulators are needed, which regulating organizations are the most reliable, and whether licenses are a priority criterion when choosing a broker.
What role do regulators play?
Regulatory organizations perform the role of the supervisory authority exercising control over the performance of the duties of brokerage companies. Depending on the authorities, regulators issue licenses to those brokers that meet the selection criteria (capital and insurance fund size, availability of technical equipment, a settlement account in the bank of the country in which the activity will be carried out and much more), monitor their activities, conduct inspections and Audits, participate in the resolution of disputes between brokers and their clients, and also apply disciplinary sanctions to them up to the revocation of the license.
The most reliable regulatory organizations
We have prepared for you the rating of the most reliable regulators, grouped by the criterion of reliability and the degree of trust of traders:
- State and independent financial regulators under the control of the Ministry of Finance of various states. These are the most reliable regulators, including organizations such as FCA (United Kingdom), NFA (USA), FINRA (USA), CySEC (Cyprus), BaFin (Germany) and other supervisory authorities from EU countries that exercise control activities Brokers in accordance with the MiFID Directive;
- Associations of professional participants in financial markets. These include the Russian regulators The Financial Commission, NAFD (CRFIN), AFD, NAUFOR, KROUFR and other similar organizations. Their main drawback lies in the fact that representatives of brokers are in the Board of Directors of such organizations, which means that one can not speak about the objectivity of decisions with respect to traders. In addition, they do not have the authority to impose disciplinary sanctions, the maximum they can do is to exclude a broker from the association;
- The Office of Financial Regulation in offshore countries. This is the lowest level of the rating of regulators, of which IFSC (Belize), SVGFSA (Saint Vincent and the Grenadines), BVIFSC (British Virgin Islands) and others. All the activities of such organizations are limited to issuing licenses, the cost of which is ten times lower than European regulators.
Licensed Forex brokers - luxury or necessity?
Recently, the question often arises, is brokerage license so important, and what guarantees does it give to traders? First, you need to understand when you might need the help of an independent regulatory organization. First, you need to be sure that your money will be safe and secure. For example, in order to obtain an FCA license, brokers must insure their customers' deposits in the FSCS for up to £ 50,000 in the event of bankruptcy, and in CySEC, customer accounts are insured in ICF for up to € 20,000. If the broker works without a license and does not insure your funds, then in case of his insolvency you will not get a cent. Secondly, the regulator may need you to resolve disputes with the broker when the company refuses to satisfy you of your claim, and you apply to a higher authority. One example of such an organization is The Financial Commission, which, if satisfied with your claim, can pay you compensation up to $ 20,000 from the insurance fund. However, in order to file a claim, you need to understand the legal subtleties and know the language of the country in which the regulator is located. If it comes to litigation, your personal presence may be required, in which case you will need the services of a local lawyer and an interpreter. Sometimes brokerage companies for decades work without a license and provide good trading conditions, but it's better to be safe, especially if you are handling large amounts, and choose a licensed Forex broker.
Why we categorically do not recommend the CBR as a regulator, you can read here.