Forex Regulation Spotty
The retail Forex market is relatively young a
nd has been open to the public since 1998. Many of the largest Forex traders did not enter the business until the early part of this century. Regulation has been spotty at best and until now there were no capital requirements for brokers.
New Capital Requirements For Forex Traders
This month the National Futures Association (NFA) will require all Forex Traders to have $5 million dollars in net excess capital to do business. For large firms and banks there should be no problem but almost 66% of Forex traders could be forced out of business under the new regulations. The new regulations will go into effect on December 21st and many Forex traders are scrambling to meet the new regulatory requirements.
Investors Need to Research Forex Traders
There are many ways for investors to find out if their current Forex trader meets the new requirements. The internet is a wonderful source of information and investors can go online and see how much net excess their current Forex trader has. While $5 million is the requirement the more net excess the better protected the Forex trader’
s accounts are.
Investors both current and potential should do careful research into a firm’
s size and reputation. There are literally thousands of websites with this information and forums are a good source for feedback on individual firs.
Regulation in Other Countries
If a Forex trader is regulated in other countries so much the better. The individual Forex trader also has to meet the capital requirements in other countries and many countries have more stringent capital requirements. The most stringent regulation is in the following countries, Canada, the U.K., Hong Kong and the U.S. The more regulators watching the Forex trader the better.
Researching A Firm
Investors should also look at how many employees a firm has and how many accounts they service. The Forex market operates 24 hours a day and 24 hour access is important to any Forex investor. Ideally an investor should look for a Forex trader with over 100 employees. The more employees they have the more 24 hour access the investor has.
Not All Forex Traders Meet the Requirements
Should the investor find that their current Forex trader does not meet these new requirements they should move their money to a Forex trader that does. If the investor’
s current broker goes out of business there could be long delays in obtaining invested funds and in a worse case scenario the investor could lose all funds invested.
Investors switching Forex traders should ask pertinent questions and find a well regulated and capitalized firm. Since Forex markets operate 24 hours a day 24 hour access to a Forex trader is important. Finding reputable Forex trader should be relatively easy if the investor knows what questions to ask.
