Regulation plays an important role in the forex industry, as it keeps traders informed of market risks and helps protects them against bogus forex brokers. In fact, forex regulation in its simplest form is a system of checks that were put in place to ensure that the forex marketplace is safe to be in. Such checks include the setting up of legal and financial standards in order to be compliant with a large number of standards. Whilst there is no “central” regulator of the forex market, there are a number of regulatory bodies that all contribute together to make sure it is a safe place.
There are a number of different regulatory bodies around the world, with one of the most famous being the CySEC (Cyprus Securities and Exchange Commission), which is based in Cyprus. Other regulatory bodies include the Australian Securities and Investment Commission, or ASIC for short. The Securities and Exchange Board of India (SEBI), the US Securities and Exchange Commission (SEC), the Financial Services Authority (FSA) and the Autorite des Marches Financiers (AMF).
The job of these regulators is to provide stability, structure and safety in markets by taking on the responsibility of conducting audits, reviews and inspections of the financial, legal and customer-related activities of the forex market. The rules and guidelines that the regulators enforce are there to ensure that brokers abide by the rules, and when these rules are not met, a regulator has the power to punish the broker.
Regulation in the forex market is enforced using compliance using the laws of each jurisdiction. The laws map out a plethora of important requirements for a forex broker to become compliant, and these rules and regulations can vary from one jurisdiction to another. Furthermore, there are some fundamental rules that span the entire forex market, which all brokers must abide by.
Final Thoughts
Regulation plays an essential role in the forex market. It protects investors from fraudulent brokers, and it helps investors better understand how risky trading can be. As such, before you open an account, you should consider whether the broker you want to trade with is regulated, and if you only want to trade with regulated broker.
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