"Entering the foreign-exchange market can feel like stepping into an enormous bazaar, one stall promises tight spreads, another advertises high leverage, and a third tempts you with "zero" commissions. The real distinction you should care about, however, isn't spread size or leverage multipliers; it's whether the broker is regulated or unregulated. Regulation might sound dry and bureaucratic, but it is the single most important line of defence between your hard-earned capital and a host of potential pitfalls."
"Agencies such as the U.S. Commodity Futures Trading Commission (CFTC), the U.K. Financial Conduct Authority (FCA), and the Australian Securities and Investments Commission (ASIC) inspect broker books, mandate periodic audits, and levy fines when rules are breached. These measures ensure that regulated Forex brokers maintain standards that protect their clients. While no regulation can guarantee a broker will never fail, working with regulated brokers dramatically reduces the odds that a failure will wipe out client balances."
Entering the foreign-exchange market presents many competing broker promises such as tight spreads, high leverage, and zero commissions, but regulation is the crucial distinction. Regulation exists to safeguard client funds through segregation, enforce fair dealing and transparent execution, and provide legal avenues for dispute resolution. Modern regulatory frameworks trace back to the 1930s U.S. commodity boom when bucket shops exploited retail speculators. Regulators like the CFTC, FCA, and ASIC inspect broker records, mandate audits, and impose fines for rule breaches. Regulated brokers maintain standards that protect clients and reduce the risk that broker failure will wipe out client balances. Unregulated brokers often incorporate in lightly regulated jurisdictions, avoid capital requirements, cut corners on liquidity provision, and may operate B-book dealing desks.
Read at London Business News | Londonlovesbusiness.com
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