How to Check If a Forex Broker Is Licensed?
Just few years ago Forex trading attracted thousands of retail traders with the promise of leverage, generous bonuses and easy profits. This all changed as multiple restrictions, rules and requirements to bring all this excess under control. Currently, traders are encouraged to research the standards they are looking for in a broker as regulatory requirements vary widely from country to country.
Why Is Important For a Broker to Have a Forex License
The Forex Exchange Markets does not have a centralized regulator. In other words, there is no single international authority to check and control all the activities of forex brokers. This is because trading in forex market is based on the independence of individual operators and their interdependence with other operators doing business.
Today, most legitimate brokers seek to obtain a license to assure their credibility to potential clients. The licenses are issued by various financial authorities that regulate broker activity after granting.
How Is The Forex Market Regulated?
A Forex broker’s activities are controlled by Forex Market regulators. The regulators can be local or international financial commissions. Regulators perform three functions concerning the Forex Broker.
The regulators perform these tasks:
- Verify that the broker complies with the license requirements
- Monitor compliance during trading and other transactions
- Revoke the license when the broker violates the regulations
The main role of the regulator is to prevent situations in which brokers fail to meet their obligations to traders. Regulators provide legal protection to traders and investors in the event of disputes, investigate their complaints and conduct broker inspections.
The Most Popular Forex Regulators
The regulators licensing the Forex brokers are sometimes divided intro reputable and non-reputable groups. However, this is a wrong way to look at things. Regulators differ in their requirements for issuing licenses to brokers and the degree of control they exercise over broker activity. Therefore, the credibility of a licensed broker is often determined by the level of control exercised by regulators.
- USA has two major regulators. These organizations shall be referred to the first level as they are the most demanding of their brokers.Commodity Futures Trading Commission and the National Futures Association and the National Futures Association
- UK Financial Regulatory Authority and the Australian Securities and Investments Commission make up the second level.
- CySEC and Malta Financial Services Department also have serious requirements, but their reporting and monitoring is generally simpler. Therefore, they considered to be placed on the third level.
- The Financial Services Commission BVO and the Belize International Financial Services Commission are regulators placed on the fourth level. Their registration is much simpler and the audit is not very detailed.
- The fifth and sixth include all other offshore commissions.For example, the Seychelles Financial Services Department and the Saint Vincent and the Grenadines Islands Financial Regulatory Authority are members of these levels.
Steps To Check If a Forex Broker Is Licensed
Conclusion
Licensed Forex brokers are in stark contrast to this. Regardless of license level, such brokers are financially and legally liable to their clients. In the event of an adverse situation, regulators and laws help protect traders/investors and repay lost deposits from broker reserves. Therefore, all traders and investors must have a valid license. We recommend working with a broker that has valid license.
