Almost all brokers are licensed by regulators, which in no way protects the trader from potential problems with the broker. In the event of its bankruptcy, the trader is faced with the need to solve the problem of returning money with a regulator from another country, who only redirects the trader to the ombudsman. But here it is not a fact that the trader will be able to succeed. To reassure the trader, brokers enter SROs (self-regulating organizations). Compensation fund in Forex is formed by broker contributions and averages up to 20 thousand dollars. USA for each trader. The only problem is that there is no information on the Internet about actual payments from such funds and it seems that this is a marketing ploy.
Forex compensation funds: should they be trusted?
A compensation fund is a fund created by a regulator or SRO, which serves to pay compensation to traders in case of problems with a broker caused by his fault. That is, the fund helps the trader to protect his rights and allows him to really expect compensation.
For a broker, participation in an SRO is an additional cost and more stringent regulation, because its membership is a matter of ensuring the company’s reliability for clients from a third independent party. But this is a theory. Regulators would also have to act as guarantor in the transaction between the broker and the trader, but in practice the trader is unprotected.
One of the most famous Forex compensation funds – the International Financial Commission (The Financial Commission). Its task is to resolve disputable situations that arise between the trader and the broker, although the regulator has similar functions. The organization was established in Hong Kong more than 5 years ago and brings together dozens of European and Asian companies (US brokers have no relation to it).
Forex Compensation Fund for most traders is a marketing move for several reasons:
- Each broker has thousands of clients and the KF cannot, in principle, consider complaints from all traders. The probability of compensation is possible only under the condition of the broker’s general consideration of the case and the decision to compensate all the victims. In other words, individual complaints are not considered.
- As with the regulators, the trader will have to try hard to get documents for reimbursement in accordance with the rules of the Forex Compensation Fund.
- Despite the fact that funds report thousands of compensation, there is no 100% confirmation of this information.
Conclusion. For a trader working with tens of thousands of dollars. The United States, membership in the Forex Compensation Fund is the insurance that at least partially the losses will be compensated. If you are a novice trader, then having a regulator license or membership in an SRO (KF) will not play any role for you. It is better to pay attention to the reviews (written by real traders!), Trading conditions and try to make money yourself, risking small amounts.