Understand the Forex Regulatory Bodies That You Can Depend Upon
Forex trading has become extremely popular across the world and there are a lot of traders that have started looking into this large playing arena to make some profits.
The number of investors in the forex markets is increasing with each day. Despite this increase in the number of people and the high volumes that are traded each day, there is yet no global forex regulatory body that has formed.
Each country has its own forex regulatory financial body. The standards under which these regulatory bodies operate are different across nations.
The rules are different too. In some countries like Australia all forex brokers and forex institutions are required to be registered while there are others like the United States where this kind of registration or license is not mandatory.
Different Forex Regulatory Bodies across the World
The United States of American has two forex regulatory bodies that govern some aspects of the forex markets. The CFTC looks at the overall market and ensures that there is no forex broker that is engaging in fraud.
This institution also makes sure that these organizations do not employ people or associate with people that have malicious intent.
The CFTC also ensures that the forex market environment remains open and free; something that leads to higher levels of competition that benefits the investor in the end.
NFA, the other forex regulatory body in the US, on the other hand, ensures that the forex brokers associated with it maintain their financial records in the right manner. Members of NFA are considered to be more credible than those who are not.
All members are required to submit their financial records to NFA on a period basis for audit. This ensures that they are in sound health and that the threat of bankruptcy does not loom large.
In the United Kingdom, the regulatory body for forex markets is the FSA or the Financial Services Authority. This institution mandates that all forex brokers maintain separate accounts for the brokering company and each of the investors that they are handling forex trades for.
The benefits of this mandate are extremely clear. In case of a bankruptcy, the investor funds are separate and not harmed in anyway.
While the above mentioned countries have regulatory bodies that are fairly vigilant, there are other countries where the rules and standards are not as strict as the ones in the United States, United Kingdom and Australia.
For example, forex brokers registered only with the Swiss agencies are generally suspect. This is because Switzerland has various agencies like the Organisme d’autoregulation fonde par le GSCGI and the Association Romande des Intermediares Financiers that are private organizations.
These organizations, albeit large, are known to be concerned mainly with money laundering and profits.
While the Swiss Federal Banking Commission is the official regulatory body, there are many forex brokers that look towards private commissions to get some kind of recognition.
New forex traders should look out for such cases and avoid forex broker that are registered only with such institutions.
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