Overview of FX Trading Regulation – What You Need To Check Before Starting To Trade


Regulation for FX trading remains a key focus even now in 2021, when many new retail traders are joining the market. Working with a regulated broker is important because that ensures a strong and safe infrastructure, negating any financial or privacy vulnerabilities.

The FX market is back into focus as the US Dollar nears a 16-month high, making some of the most liquid currency pairs more active. In case you aim to start trading FX, here are some things you should consider before opening an account.

1Regulation is different across the world

Depending on jurisdictions, regulatory requirements are different. In Europe the MiFID II Directive regulates CFD and derivatives trading, limiting access to higher leverage for inexperienced traders. Only those who manage to meet a list of requirements can gain access to professional trading services. Brokerages operating across the Old Continent comply with these standards and that has important implications on how traders can conduct their daily operations.

Tight regulation exists in the USA as well, even though in this case, the retail brokerage industry is self-regulated. Several large brokerage firms formed FINRA (Financial Industry Regulatory Authority), a private entity regulating how member firms operate in the financial industry.

In South Africa, the Financial Sector Conduct Authority is in charge of licensing brokerages and also sets up clear guidelines on how these companies operate. For Australia, ASIC (Australian Securities and Investments Commission) is in charge of these regulatory tasks.

2A reliable broker should ensure funds protection

A responsible Forex trader will take a close look at how the broker manages to ensure strong financial security. Reliable entities keep customer money in segregated accounts for client security. Any activity in the financial sector involves a certain degree of risk, which is why it is important to know how companies manage to mitigate it or reduce its impact.

3A broker regulated in multiple jurisdictions can satisfy a larger audience

Although there are thousands of brokerages currently operating, some manage to stand out. These are large companies operating across multiple jurisdictions, also holding licenses with various reputable regulators around the world. In this case, the services provided are diverse and can meet the demands of a larger audience.

When a broker has more clients, it can lower trading costs and provide multiple benefits. Ultimately, many people signing up for an account means there is a large audience trusting that broker by depositing funds.

The bottom line

The current period is marked by increased currency volatility, mainly because Europe is coping once again with a strong COVID-19 wave. All of the aspects discussed in the present article are important to consider before opening a live trading account. That way, traders can assure they work only with reputable brokers, where they can find professional and competitive trading services. No compromises should be made when choosing a brokerage because that can impact how a trader can progress in their career path.


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