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How the Forex Market Is Regulated


Forex market is where you can purchase and sell currencies. The basic principle mimics the regular trading method of buying low and selling high. Given that the forex market is a global arena with a vast number of buyers and sellers, it is imperative to regulate it. Imagine having no law and order in the world. The result will be utter chaos. Similarly, if there is no regulation or guidelines in the forex market; you will experience major difficulties and massive losses.

But how is this market regulated? The answer is quite complex but not that hard to comprehend. This article will look into some of the main regulatory bodies and policies that are in effect. Forex regulation is a set of guidelines that ensures the market to be a safe place to trade in. the regulators will set the guidelines that brokers are supposed to adhere to for the investor’s protection. Moreover, these rules help in maintaining the order of the trading platforms.

Who regulates the market?

The market is regulated by the Financial Conduct Authority (FCA). This institute is backed by diverse financial forex brokers and companies who are the main players in the market. The FCA also regulates brokers in the UK such as Exness brokers. This global brokerage firm enables a safe trading environment where investments are protected.

So how is the forex market regulated?

The regulator is given the responsibility of carrying out periodic reviews, audits, and examinations of the legal, financial, and consumer-related undertakings of the forex market players. Such regulations guarantee forex brokers will follow a set of ethical rules. When high leverage forex brokers or other forex institutions fail to follow the specified guidelines, a regulator has the power to punish the broker.

It is imperative to remember that each forex market regulation will be done in agreement with the prevalent laws in a particular jurisdiction. These laws will dictate several requirements for forex brokers to follow. Furthermore, these regulations can vary from one jurisdiction to another. However, there are a couple of standard elements that are the same for all the regions, including:

  •       Licensing and Registration

In the forex market, regulators are accountable for the licensing and registration of forex brokers. For people who are looking to invest with brokers, it is essential that opt for brokers who are regulated for the safety of your investments.

  •       Reviews and Audits

Another responsibility of regulators is to periodically go through the books and the general activities of the broker’s affairs to warrant that they are complying with all the ethical and financial standards. For instance, forex brokers are accountable to pass on a plethora of information to the investors. Regulators will observe whether or not these brokers do so. If the broker fails to pass the information, then they can be fined and punished.

Forex regulation is an important element for the safety of an investor’s funds. As an investor, you must research and inquire regarding the regulatory policies and whether or not the broker is adhering to them. If a broker is not regulated, try to avoid partnering with them.

George Rossi

Author Bio:  George Rossi is Chief Market and Broker Analyst at brokertested.com. Prior to being recruited by brokertested.com, he served SVS Securities as Chief Market Analyst for two years. Earlier, he joined Morgan Stanley in Nov 2013 as Research Analyst. 

George is a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.