Pros and Cons of Working with Regulated Vs Unregulated Brokers

Forex is a volatile market, so you need a partner that will provide you with maximum peace of mind.

Pros and Cons of Working with Regulated Vs Unregulated Brokers

The global forex market averages daily trading volumes of over $6 trillion.

It is the largest financial market in the world, with plenty of opportunities

around the clock, and it offers easy accessibility for any new or experienced

investor. To get exposed to this market, you need to sign up with an online forex

broker. Investing is generally a decision-making activity, and choosing a

broker is one decision you need to get right. Brokers provide you with access to the global financial markets. Some of

their offerings could include access to a trading platform (for buying and

selling global financial assets), charting tools, educational resources, and

practical trading tools. In essence, a broker is your partner as you seek to explore the markets.

Forex is a volatile market, so you need a partner that will provide you with

maximum peace of mind.Forex RegulationForex is a global decentralized market, and this inherently makes it

difficult for a single body to oversee the entire industry. Depending on your

jurisdiction, there is a relevant regulatory body that sets the standards and

guidelines that online brokers must comply with. In the financial world, the purpose of regulation is to protect

investors from fraud or any other undisclosed risk. But regulation varies from

jurisdiction to jurisdiction, with some bodies considered to be stricter on

their rules and guidelines, whereas others are very lax. Some of the major

regulatory bodies include the US's CFTC, Cyprus' CySEC, Australia's ASIC,

Israel's ISA, and Japan's FSA. Forex brokers, such as AvaTrade, are licensed and

authorized in multiple, strict jurisdictions. Generally, stricter jurisdictions

provide more client protection compared to the less strict ones. To earn the trust and credibility of both local and international

customers, reputable brokers pursue regulation in stricter jurisdictions where

failure to comply to set guidelines can be very costly.There are other offshore locations where regulatory bodies are

considered to be more lenient or rather very lax in implementing their rules. While such jurisdictions make it easy for newer brokerage firms to

emerge, they may also not provide the much-needed peace of mind that investors

require. Why Are Some Forex

Brokers Unregulated?There are also plenty of brokers that are not regulated. Regulation is

generally considered the first sign of a genuine broker. Not all unregulated brokers are frauds, but the lack of oversight and

accountability makes it easy for some of them to engage in unethical

activities. Some of the reasons some online brokers operate without any license

could include undercapitalization, high cost of compliance, and tax avoidance

measures. ProsSafety of FundsOne of the major conditions for regulation is protecting investors'

funds. Regulatory bodies typically require brokers to hold client funds in

segregated bank accounts, and never use the funds at any given time for their

own company operations. Furthermore, in some jurisdictions, investor funds must be insured so as

to guarantee reimbursement in case a company becomes insolvent. Transparent ServicesRegulated brokers tend to provide honest and transparent services

because there is a body that oversights their operations. Some of the biggest

forex scams include identity theft, platform manipulation, and dishonest

promotions. Regulatory agencies perform random checks on the operations of companies

under their jurisdiction to ensure that they remain honest and transparent in

all their operations and service offering at all times. Favourable Dispute ResolutionOne of the best reasons to trade with a regulated broker is that you

will be guaranteed fair resolution in the event that any dispute arises. Regulatory bodies are mandated to protect investors, which means that

you can expect just treatment in case you ever want to resolve any issue that

arises between you and the broker. ConsLimited ChoiceThere is practically no disadvantage to trading with a regulated broker.

Still, adding regulation as a filter can limit your choice of available

brokers, trading instruments, such as synthetic indices, as well as trading

conditions, such as much higher leverage. ProsPlenty of BonusesRegulatory compliance is a huge cost for brokers. Additionally, most

unregulated brokers tend to be new companies focused on attracting new clients.

These reasons can result in a huge budget for marketing, which will

translate to generous bonuses and promotions for both new and existing

customers.Easy AccessibilityUnregulated brokers typically place little restrictions on accessing

their services. No matter your location or circumstances, you can easily sign

up with them and start trading online. For instance, some countries do not permit online trading or have placed

strict laws on how it should be conducted within their jurisdictions. If you

reside in such locations, unregulated brokers can provide easy access to the

world of online financial assets trading. Attractive Trading ConditionsSome unregulated brokers are able to provide beneficial trading

conditions such as high leverage and diverse trading instruments such as

synthetic indices. Investors who need such conditions might prefer to trade

with an unregulated broker. ConsHigh RiskWhen you trade with an unregulated broker, you are basically dealing

with a company that is not accountable to anyone or any entity. They do not

operate according to any set of rules or guidelines, and there is no guarantee

that your funds are kept safe or that even your confidential information is

secure. Since no one is overseeing and regulating their operations, there is no

way to figure out whether the intentions of the company are genuine or shady. These types of brokers y can easily manipulate their platforms so that

investors easily lose their trade positions or they could even run dishonest

promotions that are merely designed to rip investors off rather than to be

redeemable. Unfair Dispute ResolutionWhen you have a dispute with a regulated broker, the relevant regulatory

agency will act as the mediator. In contrast, if you have a dispute with an

unregulated broker, the company will act as both the defendant and judge. The

lack of any just recourse means that you will not be guaranteed any fair judgment.

Regulation is an important consideration for any investor. A good broker

will ensure that you will have the best environment so that you can trade with

maximum peace of mind. The first sign of a potential bad broker is the lack of

regulation. Nevertheless, it is important to assess the type of regulation that your

preferred broker possesses. Achieving multiple regulations in top jurisdictions

such as Japan, the US, Israel, and Australia can be a good sign of a safe and

trustworthy online CFDs and forex broker. ADVERTISEMENT - CONTINUE READING BELOW Most Popular