Forex Regulator is a separate independent organization that monitors the relationships of financial market participants, issues licenses and controls compliance with laws and standards of jurisdiction. To obtain a license, a broker must disclose financial information, information about the origin of money, disclose data on TOP management, open a representative office (not required from offshore regulators), make a contribution. Some organizations form a compensation fund from annual contributions.
Tasks of Forex Regulators
The main tasks of Forex regulators include the following:
- Organization of financial security for all participants, anti-fraud. The regulator monitors the transparency of transactions, ensures that there is no use of insider information and artificially high prices;
- licensing all financial market participants;
- development of legal acts coordinating the interaction of market participants, including technical equipment;
- settlement of disputes, consideration of collective complaints;
- checking financial statements, periodically re-evaluating personnel;
- control over compliance with the rules for the circulation of securities and derivatives on stock exchanges, support for major mergers and acquisitions
- consolidation of information on all market participants.
Examples of Forex regulators:
- Central Bank (Russia). In Russia, after the entry into force of the law on Forex, there are no regulators in a separate structure. The so-called self-regulating organizations (KROUFR, TsROFR), who arbitrarily identify themselves in this category, are not. NAFD and AFD – only auxiliary organizations, the Central Bank deals with licensing;
- NFA, SEC, CFTC (USA). The most authoritative regulators of the world who are responsible for the stock, foreign exchange markets, derivatives market. Regulate the relationship between exchanges, investors and traders, investment, insurance funds, clearing companies, etc. They are government agents (management is appointed directly by the Senate), working closely with the FBI. Everything falls under the check, starting with the origin of the brokers’ money and transactions, ending with the professionalism of the staff. Losing a license means losing access to the entire US financial market. True, they did not prevent the bankruptcy of MF Global;
- FCA, BaFIN (UK, Germany). Almost every country in Europe has its own regulator, but these two are considered the most authoritative. Strict requirements for obtaining a license, large entrance fees, strict control – all this is a guarantee for the trader. True, they do not consider individual complaints, referring to the Ombudsman. And not always their license is a guarantee;
- CySEC (Cyprus). Offshore Forex regulator operating in the European legal field. It is often chosen for several reasons: the regulator does not ask unnecessary questions about the financial statements, jurisdiction is pleasant from the point of view of taxation, small contributions. Read about the shortcomings of this license here;
- other offshore regulators (Belize, Marshall Islands, New Zealand regulators). There are many, but they are more likely for visibility. Their sites often do not even have a complaint form.
Basically, that’s all you need to know about Forex regulators. Their license is good, but it does not play a special role for the trader. You can see which broker has which license, by setting the appropriate filter in the catalog.