Financial speculation is an economic activity aimed at making a profit from the expected changes in prices of goods, assets or currencies. In the world of instability, most transactions can be interpreted as speculative, but the term “speculation” is usually used for those transactions in which the expected increase in the market value of capital is the main motive for their implementation. Speculators can buy goods and assets that they don’t need, but whose prices, according to their expectations, will rise, or buy a call option for such assets. They may enter into asset purchase contracts without funds to pay for the purchase. Financial speculation has become rampant in the Forex industry as well.
In this article, we will talk about 3 laws that protect customers during financial speculation
Negative Balance Protection
This means that if the broker cannot close the position in time so that the client does not lose more than his account, the broker covers your losses and gives you a guarantee that you will not have to pay extra money to pay your fees. A broker without such protection will also do everything to ensure that you do not fall into a negative balance, but if it fails, you just have to pay an extra expense.
Therefore, if you invest in a broker without protection from debits, the price gradually depletes your account, there is practically no chance of getting into a negative balance because the broker will calmly cope with closing the position on Stop Out.
The situation in which you take your position over the weekend can be problematic, and on Monday, the market will open with a price gap that is at your disadvantage. Then the broker will not have a chance to close the position so that you do not fall into a negative balance, and you just need to pay extra money. Looking into reputable prime broker accounts is always welcomed because they offer a level of safety when dealing with risk and settling transactions.
We should also point out that NBP shares some similarities with FSCA regulation which is very famous in South Africa and is important in protecting clients’ rights.
Forex dealer agrees not to allow unfair behaviour practices, including unjustified expansion of the spread without changing the market situation; misleading the financial services recipient regarding the financial services provided; implementation by the Forex dealer of actions aimed at the conclusion by the recipient of financial services of contracts for the provision of financial services with foreign organizations.
Audio recording, photo and video shooting in the offices of the Forex dealer, as well as recording his telephone conversations with the recipient of financial services, is carried out only subject to prior notification of the recipient of financial services.
The basic standard contains the minimum standards for servicing financial services recipients with regard to the availability and material support of offices, as well as the availability of Forex dealer sites. The document also spells out the rules for advertising Forex dealer services. An advertisement for the financial services of a Forex dealer must be designed in such a way as not to abuse the trust of the recipient of financial services and (or) not to use the lack of experience and knowledge of the recipient of financial services. Advertising information should convey to the consumer an idea of the nature and risks of financial services provided by the Forex dealer.
The basic standard also establishes requirements for employees of the Forex dealer that interact with recipients of financial services and to verify the compliance of these employees with the specified requirements. Forex dealer must ensure a high level of professionalism of employees, including regularly training them.
In general, the Basic Standard defines the basic principles in the field of protecting the rights and interests of financial service recipients and establishes the requirements by which a Forex dealer should be guided in the process of carrying out its activities and symbolizes a new milestone in protecting the rights of consumers of forex dealer services. Separately, it is stipulated that prioritizing the dealer’s interests over the interests of the recipient of financial services is unacceptable.
Trader’s Bill of Rights
Another law that protects consumers from financial speculations is called Trader’s Bill of Rights. While the Forex industry has evolved significantly the threats and risks also increased alongside it. More traders participate in online trading and speculators are also present, hoping to gain some money. Trader’s Bill of Rights recommends specific actions traders can take to reject long-standing abuses and inefficiencies and make this market better. It is considered to be one of the primary laws for clients’ protection.