Forex Regulations (Forex Trading)
This is significantly more than, for example, the stock and futures markets. It’s no surprise, then, that foreign exchange regulations are on the rise in Europe, the U.K., the U.S. and Canada. In fact, countries and institutions around the world are constantly trying to effectively monitor and regulate the powerful foreign exchange market.
Japan, for example, is one of the world’s most active retail forex markets. There, it is the Financial Services Authority (FSA) that regulates all markets, including the foreign exchange market. The authority has been proactive in reducing the maximum leverage limits available to traders.
Also in the U.S., SEC regulations state that those who are not registered with retail foreign exchange dealers (RFEDs) may not offer retail foreign exchange services. Once a retail foreign exchange firm is a foreign exchange dealer, brokers must comply with similar consumer protections related to risk management as well as other regulations.
Alternative Trading Systems
Alternative trading refers to a basic system that lacks the regulatory oversight of regular exchanges. Instead, these electronic communication networks (ECNs) simply match buy and sell orders. Most regulations require them to register as broker-dealers rather than exchanges.
Note that these alternative systems do not implement regulations to manage subscriber behavior. They only deal with the electronic aggregation of orders. These systems actually play an essential role in providing liquidity, and their global popularity is increasing.
Copying trading rules
Despite the lack of a comprehensive order book, it is clear that social trading with Exness in Thailand is becoming increasingly regulated. In the process, users copy the strategies of other traders. In fact, a number of bodies are bringing in regulations that require copy services to register as investment managers.
Disadvantages of regulated brokers
There are both advantages and disadvantages of regulations for electronic trading. The first disadvantage of choosing a regulated broker is that you limit your access to a huge number of potential brokers. Many of them offer high quality products and fantastic trading features.
There is another serious disadvantage. If you are a citizen of the US or Europe, many regulated brokers will not be available. This is because strict local laws and restrictions on US traders or EU traders prevent many legitimate but cautious brokers from opening their doors to US or EU citizens.
My conclusion on the regulation of online brokers
Overall, the regulations are designed solely to protect consumers. So regardless of whether you’re trading currencies or speculating in stocks, choosing from a list of regulated brokers can be a perfectly reasonable decision. So make sure you check a broker’s credentials, account regulations, policies and reputation before handing over any capital.
Nowadays, actually every reputable broker has a license. Especially if you want to trade Forex or CFDs, you should pay attention to regulation as there are some fraudulent websites out there.