Why FX Brokers Need to be Regulated?

Getting a regulated status is crucial for a forex broker, especially one serious about conducting legitimate business operations. However, many self-operated brokerage firms choose not to apply for such regulation from external institutions.

Any platform under an authority‘s supervision will be operating its business ethically and meticulously. A regulated broker ought to put the interests of their trading clients before their own. Although an authority body does not interfere or participate in a broker’s day-to-day business operations and internal management matters, the severe penalties are enough to keep them operating in an ethical manner. Should a regulated forex broker start operating recklessly or become part of any illegal activities, the regulatory body would implement punitive actions, such as a monetary fine, temporary license revocation, or a permanent ban from any forex-related businesses.

Being regulated requires the broker to be under a certain level of governance, including financial status, business structure, the trading platform provided, and other relevant aspects. Its operation will also be more standardized as they often have to undergo a series of periodic reviews, audits, evaluations and checks on a monthly/quarterly/annual basis. From customers point of view, they have gotten enough protection and a sense of security. In turn, they can also be loyal customers contributing to the firm's profits. This is a win-win situation for both parties.

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