How is Forex Regulated?

Trading currencies calls for tight scrutiny and regulation in order to prevent from massive losses and infringement in trade. Therefore, when foreign currencies are traded they are regulated by bodies such as the Commodity Futures Trading Commission (CFTC). Such kind of regulation has been taking place in the recent years since previously it wasn’t much encouraged. Now, as traders, we all want a disciplinary regulation while we trade currencies in forex. Therefore let us know how.

Forex being the most liquid market on the globe, the market faces various challenges regarding it’s regulation. How do you regulate a market that is trading 24 hours a day, all over the globe? There is no specific body governing the regulation but several governmental and independent bodies supervise forex trading. Since you will be dealing with different sets of currency pairs, you should also know how these currencies are regulated in their respective states. Below mentioned are the list of few governing bodies that regulates forex in their respective states.

1: Japan: The Financial Services Agency (FSA)

2: Canada: The Investment Industry Regulatory Organization of Canada (IIROC)

3: United States: The National Futures Association (NFA) Commodities Futures Trading Commission (CFTC)

4: United Kingdom: Financial Conduct Authority (FCA)

5: Australia: The Australian Securities and Investments Commission (ASIC)

6: Cayman Islands: Cayman Islands Monetary Authority (CIMA)

7: Hong Kong: The Securities and Futures Commission (SFC)

8: Singapore: The Monetary Authority of Singapore (MAS)

All the brokers are advised to comply with the regulations of these governing bodies. The foreign exchange market is regulated in seven jurisdictions worldwide, that also supports over 200,000 traders in over 180 countries. GAIN Capital Holdings is forex’s parent publicly traded company that follows the highest standards of corporate governance, financial reporting and disclosures related to trading.

Why it’s important to regulate forex exchange?

The world’s biggest financial market, forex is very significant for an average consumer and the rate at which our domestic currency can be exchanged in the global forex market becomes important to regulate forex exchange. While we trade currencies, these currencies actually decides the fortune of the traders and because it shouldn’t remain an unregulated business, regulation is significant. Forex trading volume has increased even more than threefold since the earlier years; therefore it is driven largely by speculation. There are many financial institutions that includes smaller banks, institutional investors, insurance companies, central banks and retail investors. All these bodies require regulation and it be best explained to you by RedStarForex brokers. Despite its huge size, regulation in the Forex market is scarce because of that of illegal activity or outright fraud as well as runaway losses in a market. RedForex comes best to your rescue to understand these problems even better.

On the other hand, on the institutional level, banks, which are responsible for 95 percent of daily foreign exchange trading, are heavily regulated. Also, under current regulatory contracts of forex trading market, all foreign exchange brokers, investment banks and signal sellers are required and asked to operate in strict compliance with the rules and standards laid down by the Forex regulators or their activities can be deemed unlawful for them. A key note about regulation also says that forex regulators operate within their own jurisdictions but also often work together. In fact, in the European Union a license from one member state covers the whole continent.


Leave a Reply

Your email address will not be published. Required fields are marked *