Broker Risk

Prior to handing over your capital, you want to make sure you do your homework and find a reputable forex broker.  Broker risk, can impact you and your working capital in numerous ways.  Some forex brokers are not regulated and unfortunately some do not have you best interest in mind. 

Today, there are numerous forex brokers competing for your business and it is your responsibility to do the appropriate research and due diligence to find the most suitable forex broker for you.   While most of the big name forex brokers are regulated, some of the smaller forex brokers are based in offshore locations where regulatory bodies are non-existent.  

One reason some forex brokers choose to operate their businesses in an un-regulated territory is that by doing so the broker can significantly decreases their overall operating costs.  The costs of obtaining and maintaining a regulatory license can be expensive.   In addition, capital requirements which are created by regulatory bodies can create a barrier to entry for many brokers who are unable to raise the necessary capital. 

As a general rule, it is usually best to try to work with a forex broker who is regulated by a government body.  When working with a regulated forex broker, proper oversight can often protect you from bad business practices or downright fraudulent activity.   In addition, finding the right broker will also help you minimize credit risk.  There are several forex regulatory bodies throughout the world.  The list below represents those regulators by country;

AustraliaAustralian Securities and Investment
United StatesCommodity Futures Trading Commission, National Futures Association
Great BritainFinancial Services Agency
New ZealandFinancial Markets Authority
CanadaInvestment Industry Regulatory Association
Hong Kong                                    Hong Kong Securities Futures Commission
SingaporeMonetary Authority of Singapore
JapanFinancial Services Agency

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