The world of Forex trading is a multi-billion dollar industry comprising various complexities of the financial market. Historically the Forex industry started off in the late 1970s, although in those days and throughout the 1980’s it was an incredibly exclusive world, a boys club if you will, dominated by traders and investment bankers in expensive suits. The yuppie culture dominated this world in the excess-ridden decade of the 1980s and it wasn’t until the mid-1990s that things began to change as the internet entered its first phase of commercialization. It was during this time that industries, either previously land-based or confined to certain groups started migrating into the world of cyberspace where access to all would become a reality. Forex trading went online for the first time in 1994 and today offers retail trading via desktop, smartphone, and tablet devices. It’s a long way from where it all began. However, the almost ubiquitous nature of the industry has also meant that along with the good and regulated have also come the chancers and the scammers. In essence, it’s important to know the laws surrounding the provision of Forex broker services and the regulatory bodies that govern the rules of their operations.
Forex Regulatory & Governing Bodies
The Commodity Futures Trading Commission (CTFC)
Established in 1974, the CTFC independently governs the American Forex industry with regards to option markets and commodity futures for retail traders. This governing body was established to protect traders against any kind of malpractice such as fraudulent activities and illegal manipulation while also ensuring a competitive and efficient futures market. The CFTC updates resources around Forex trading and stays abreast of developing financial technologies such as Bitcoin futures contracts to help maintain the integrity of this complex industry.
The National Futures Association (NFA)
In the US all operating Forex brokers must take up membership with the NFA so that they may work on behalf of US retail traders. The NFA is a self-regulatory body whose goal is to protect the integrity of the Forex market and instil new governing rules when required.
The Financial Conduct Authority (FCA)
Applicable to our friends across the pond, the FCA is a British Independent regulatory body bestowed with statutory powers by the Financial Services and Markets Act (2000). This governing body serves within a protective capacity by rooting out rogue forex trading and brokerage firms and thus protecting retail traders from such harmful entities. The FCA keeps an up-to-date list of all UK firms that are authorised to conduct forex trading or offer trading platforms that facilitate retail traders with the services required to buy and sell forex, CFD’s (contracts for difference), commodities and binary options.
Universal Laws And Regulations
- All forex brokers and platforms operating in your country must have a license to do so; if not you could risk trading illegally.
- All licensed forex dealers and brokers must submit to periodic auditing to ensure adherence to both national and industry standards and regulations.
- According to law forex brokers are compelled to honour all contracts held with their trading clients and failure to do so can result in revoked licenses.
- All forex brokers must retain enough funds to cover the investments of their clients.
- All forex platforms and brokers must disclose the potential risks associated wit forex trading. Those that guarantee profits are best avoided.