How to Know If a Forex Broker is Regulated in 2022

The foreign exchange market, or Forex, is the world’s largest and most liquid financial market. It is open 24 hours a day except for the weekends. Forex is a decentralized market, meaning that no single entity or institution controls it.

With the advent of the Internet, a lot of trading platforms have emerged, providing investors with the opportunity to trade Forex online. Unfortunately, not all trading platforms are trustworthy.

If you are on the lookout for a trading platform, make sure that you select a licensed broker that has permission to operate in your country of residence. The different countries have their regulatory authorities, meaning that regulations and enforcement may differ. The regulatory authorities have to make sure that the broker adheres to specific requirements and protects traders’ best interests.

Which are the Most Trusted Forex Regulators?

The regulatory agencies can fine or even revoke the licenses of Forex brokers who violate the established framework of rules. If a company loses its license, it cannot continue operating legally in the given jurisdiction any longer. Some regulatory agencies are known for their strictness and reliability, while others are less credible.

The reliable regulatory agencies include the Futures Trading Commission (CFTC), the National Futures Association (NFA), the Financial Services Agency (FSA), the Financial Conduct Authority (FCA), the Investment Industry Regulatory Organization of Canada (IIROC), the Cyprus Securities and Exchange Commission (CySEC), the Malta Financial Services Authority (MFSA), the Securities and Futures Commission (SFC), and several more.

Many forex brokers prefer to obtain a license from an offshore jurisdiction (including but not limited to Belize, the British Virgin Islands, Kenya, South Africa, and Mauritius) because it is fast, cheap, and there is no strict enforcement of the rules.

Why to Select Licensed Forex Brokers?

Unlicensed forex brokers claim that they want to cut their operating costs in order to offer better trading conditions. Some rookie traders might bite the hook, but that is why we are here. The primary reason to avoid unlicensed forex brokers is that they do not comply with consumer protection rules. In other words, there is no telling whether you will be treated fairly and you will receive your money.

Furthermore, no regulatory agency has the power to protect your interest and resolve disputes between you and an unlicensed broker. Even if you generate some winnings, you may not be able to cash them out. In a nutshell, anything goes with unlicensed forex brokers, so better avoid them.

Forex brokers can obtain licenses only after undergoing some strict checks. Should the trading platform receive the stamp of approval from the appropriate authority, it shows that the broker conforms to the established regulations. Here you can find IC Markets regulation details as well as many other independent forex broker reviews.

How to Check If a Forex Broker Has a License?

There are several ways to determine whether a forex broker is licensed and trustworthy. Licensed forex brokers usually carry a seal of approval from a regulatory agency at the bottom of their sites and display the ID numbers of their licenses. But do not trust the information on the company’s website blindly.

Every regulatory agency has an official website and a database, allowing investors to check whether the forex broker’s license is valid. Traders are also advised to check if the broker’s contact details listed on the website match with the ones listed on the regulatory agency’s website.

Furthermore, select a forex broker with a physical office in the country of your residence. Note that some forex brokers benefit from the regulatory differences between the markets to bypass the unfavourable regulations. This practice is also known as regulatory arbitrage.

For example, a forex broker may have a license from a strict regulatory agency and establish a separate company under the same brand licensed by an offshore regulatory agency. Therefore, make sure to set up an account under the jurisdiction you want.

If you have already selected a forex broker, do not make large deposits. Instead, fund your account with little money. Once you generate some profits, request a withdrawal to see whether you will actually receive the money. If everything goes smoothly, you can rest assured that the forex broker is reliable. But if you start receiving phone calls prompting you to add extra funds to your account, better select another forex broker.

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