Forex 101Lesson 3

Forex Regulators

Understanding the role of financial regulators in Forex

The forex markets, as we know are unregulated markets, traded mostly over-the-counter

(OTC) unlike the stocks, which are traded via an exchange. Despite this fact, the brokerages

that offer or facilitate the trading services related for Forex, including CFD’s do come

under the purview of the financial regulators. Commonly referred to as Forex Regulators

these institutions are actually authorized to oversee the financial markets activity.

Almost every developed economy has a dedicated team or institution, whose sole purpose is

to ensure fairness and transparency in the field of finance which usually comes with hard

to understand jargon to the layman. The role of the financial regulatory authorities or

institutions is to oversee a large section of businesses that engage in financial services, dealing with the retail customer, with the purpose of protecting the customers. For

example, an insurance company (be it automobile or home or life insurance) usually falls

under the jurisdiction of the financial regulator, just as an online forex brokerage would.

Role of Regulators in Forex

The role of the financial regulator is to ensure that the businesses that have a financial license adhere to the general framework which includes transparency in reporting the day- to-day activities, maintaining enough

liquidity to ensure that the transactions are filled as well as sending frequent accounting reports to the financial regulator.

While it might seem an expensive and an arduous task of obtaining a legitimate financial license, it does offer higher level of credibility for

the businesses that obtain the license, including the online forex

brokerages. Besides regulating forex brokers, the financial regulators

also oversee any and all other subsidiary services such as Binary Options brokerages. introducing broker businesses, forex signal services providers

and managed account services.

Main Regulatory Organizations

ASIC – Australia Securities and Investment Commission (Australia)

CySec – Cyprus Securities and Exchange Commission (Cyprus)

NFA – National Futures Association (United States)

CFTC – Commodity and Futures Trading Commission (United States)

FCA – Financial Conduct Authority (United Kingdom)

FSP – Financial Service Providers (New Zealand)