When it comes to ranking Forex brokers, broker review sites make their rating selections for the top spots using a variety of different criteria. Investors use these reviews to help them decide which broker offers the features they need before opening a trading account and these reviews can save traders hours of untold stress as well as research time. With the start of each new year, listings of the top brokers are selected and posted online and the first round of recommended brokers for 2016/2017 have now been published. Due to the issues below the top brokers can change throughout the year, so it’s a good idea to do your research carefully close to the time you expect to start trading.
There have been some important changes in relation to Forex regulation in 2016 and many more regulatory updates that will come into effect into 2017. One place in which regulatory crackdowns have hit especially hard is the binary options arena. Many brokers have been investigated in 2016 and many have closed, with more closures expected in the coming months. More countries are banning the promotion of binary options and life is going to get harder for binary options brokers. This is hopefully going to be good news for traders though, if scammers are driven out of business and increased regulation keeps the field honest.
In the UK, the FCA has proposed capping the maximum leverage which may be offered in trading Contracts for Differences (CFDs) to 50 to 1, or 25 to 1 in cases where the trader is a retail client with less than 12-months experience in trading such instruments.
Belgium has banned all trading in CFDs, Binary Options and Forex, in the most draconian regulatory move made in modern times by any OECD member state. It remains unclear how this can be enforced fully against brokers located outside Belgium that decide to ignore Belgian regulations. This came shortly after France banned all advertising by spot Forex, CFD and Binary Options brokers.
Finally, the offering of bonuses to traders is becoming increasingly frowned upon. The FCA is banning all such incentivization in the U.K. and in Cyprus bonuses have already been banned, or at least new schemes may not be introduced and existing ones must be allowed to lapse after a reasonable period. However, there is some speculation that the ban in Cyprus is just intended as a “cosmetic” ban and brokers there may be able to find a way to work around it, at least for some considerable time to come.
To be quite frank, we think that action against bonuses is long overdue. They act as a distraction from the real issue at hand and are an invasion from the online gambling world, looked upon with total contempt by real traders. Even worse, the conditions which brokers always attach to the bonuses are often not examined closely by depositors, and often make it impossible to withdraw winnings until a large number of trades are taken, unknown to the clients if they do not read the small print.
The two trends of the year that really stand out are the increasing popularity of ECN brokers and brokers offering social trading elements. ECN brokers are nothing new, but it seems that retail traders have an ever-increasing awareness of the inherent conflicts of interest present in market-making brokerage models. This might be, at least partly, a delayed effect of the spectacular losses suffered by some brokers due to the 2015 Swiss Franc crisis, which lead to a greater focus on the inner workings of Forex brokerages and the true nature of their exposures to the market.
As for social trading, it is a feature that more and more traders are looking to brokers to offer – it is really something that must be included within trading platforms to work fully. The features offered in the market are becoming more intelligent beyond the obvious incentives brokers must get their clients more trigger-happy. Notable winners in this field this year include eToro and Tradeo.
The typically dull issue of trading platforms became a hot potato this year as MetaQuotes, the makes of the phenomenally successful Metatrader 4 (MT4) platform which became the standard tool of millions of retail traders around the world, have again amazed the Forex community by casually announcing that MT4 would no longer be supported, implying that traders are going to be gradually forced into giving up this platform against their will.
What happened at MetaQuotes is a mystery, but it seems that after the runaway success of MT4 they decided to conquer the world by a new platform they called MT5. However, although MT5 has some similarities with MT4, it is very different and was overwhelmingly rejected by the trading community, with its various add-ons seeming to offer little advantage for traders but plenty of advantages to brokers and MetaQuotes. After this resounding failure, it seems MetaQuotes has simply given up and are going to try to force-feed their unpopular product to retail traders. If MT4 really does become unavailable, it is likely to open an opportunity for newer trading platforms, and we are already seeing an increase in the confidence with which brokers offer their own web-based trading platforms which probably is not a coincidence.