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Regulated Forex Brokers

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  • 11 January, 2011 GMT

By: Charley Warady

Since the CFTC (Commodities Futures Trading Commission) passed its legislation involving regulated Forex brokers in October of last year, there has been much discussion amongst the Forex trading community. Is this a good thing? Is this a bad thing? Does it make any difference at all?

The answer is obviously yes to all three. It is a good thing to have regulated Forex brokers. It is also a bad thing. And to many it makes no difference at all.

The good thing

Historically, Forex has had a bad reputation regarding futures trading and speculation. It was really the black sheep of the speculating markets. People called Forex trading gambling and because of the way brokers handled trades, many labeled it a series of scams.

But the market grew and the need for regulated Forex brokers became apparent. When you're dealing in a multi-trillion dollar industry, it doesn't matter what kinds of labels are attached to it; it is a force to be dealt with.

There were, and are, scams and dishonest brokers out there. The CFTC saw this and decided to take action. They instituted guidelines for companies to become regulated Forex brokers and many took this as a welcomed sight. Keep in mind that this is still a voluntary procedure, which makes it that much more interesting.

When a trader is choosing a Forex broker, he may want to choose one that is a regulated Forex broker, then knowing that he is protected by the watchful of the government agency. It tends to keep things above board. It doesn't cost the broker anything more, but it does give a sense of security that might otherwise not be there.

The bad thing

There are always libertarians amongst Forex traders that are against government intervention no matter what it is. A regulated Forex broker becomes restrictive to them and they don't want to deal with that kind of situation. They trust their own judgment as far as a choice of broker and they don't need to decide because of a government agency. These are legitimate issues.

Then there are the brokers. They may not want to become a regulated Forex broker because for one reason or another, they don't want the CFTC breathing down their neck or feel like they're in a stranglehold from a federal commission. It's not saying that the particular broker is shady or any less legitimate than any other. They just want to remain independent.

It may not matter

With any venture involving the amount of money thrown around daily in the Forex market, it is going to attract scams and scammers. Particularly because everything happens online, the initial investment does not have to be that great, and there is no test for entrance.

So, at the end of the day, the phrase “buyer beware” holds true in this case as well. However, because of the government's intervention and the advent of regulated Forex brokers, those scammers have become less in number and sunken to the bottom of the sludge where they belong.

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