As with every other financial market, the Forex trading require laws to help protect the interest of investors. Read more to uncover why you will be safer using a regulated forex broker.
There are different regulatory bodies that control the financial markets. There are overall regulatory bodies and those specific to each and every country. Both the central bank and other regulatory authority are responsible for regulation of financial markets in most countries. In this case, the regulatory authority is either a subsidiary of the central bank or an independent body. Because Forex is one of the financial markets, it is not left out of such regulations. Similarly, there are different bodies that are designed to regulate Forex market. These regulatory bodies vary significantly depending on the country of origin. The primary role of the Forex regulatory body is to strengthen the regulation and monitoring of the Forex market within a given jurisdiction. There are many other roles of these bodies as seen below.
1. Safety Of Traders
Regulation is the best way to safeguard Forex traders a requirement which is very beneficial. Forex regulatory bodies put across strict regulatory measures that ensure traders are protected. Just like any other financial market, the trader can be exposed to high level of risks if the brokers they are using are not regulated. The regulation ensure safeguard of their funds or the trading deposits. They ensure that the clients monies are not used inappropriately e.g. for operational purposes.
2. Protection against manipulative and fraudulent activities
There are so many uncertainties in the financial market that affect the dealing between the trader and the broker. To limit these uncertainties, it is pretty wise to work with regulated Forex brokers. The regulatory body are designed to ensure that you are protected from the manipulative and fraudulent activities by the brokerage company. The substantially safeguard the traders funds.
3. Protection Of Traders Interests
It is logically good to protect the interest of a trader. Often a Forex broker can work against the interest of its clients. Under such cases, the regulatory body comes to help the clients. It is the role of the regulatory body to enforce regulations that makes your broker to stick to the work ethics, be open and lay down they polices well. Irrespective of their countries of origin, all regulatory bodies ensures that the interest of the investor is protected at all times.
4. Protection Of Forex Trading Integrity
The Forex regulatory bodies enforce integrity to be maintained in the Forex trading market at all times. This is not only by the Forex brokerage company but also by traders. There are several rules that are subjected to the Forex brokers by the regulatory body designed to help maintain integrity in the Forex market. This helps maintain conducive trading environment and better relationship between the broker and the trader.
5. Scam And Fraud Protection
It is no secret, there are several scammers using the internet to con your monies. It is usually very difficult to meet a broker physically especially if you are from different countries due to the setting of the Forex market. The role of the Forex regulatory body is to fish out these scammers thereby safeguarding your investments.
Conclusion
Money frequently changes hand and in large sums in the Forex world. A form of regulation must be applied to provide a certain level of control and protection to the parties involved. With strict regulation, it is rare for things to get out of hands. Forex trading significantly requires strict regulations just like in any financial market.
Not all Forex regulatory body applies to all brokers. Every country has its own independent body that regulate the Forex market. This regulation is primarily provided by the government of hat country. Despite the need to protect the interest of the investor, not all Forex brokers are regulated. It is wise to first check the regulation status if the Forex brokerage before you commit yourself.
