Understanding the role of financial regulators in Forex
The forex markets, as we know are unregulated markets, traded mostly over-the-counter (OTC) unlike the stocks, which are traded via an exchange. Despite this fact, the brokerages that offer or facilitate the trading services related for Forex, including CFD’s do come under the purview of the financial regulators. Commonly referred to as Forex Regulators these institutions are actually authorized to oversee the financial markets activity.
Almost every developed economy has a dedicated team or institution, whose sole purpose is to ensure fairness and transparency in the field of finance which usually comes with hard to understand jargon to the layman. The role of the financial regulatory authorities or institutions is to oversee a large section of businesses that engage in financial services, dealing with the retail customer, with the purpose of protecting the customers. For example, an insurance company (be it automobile or home or life insurance) usually falls under the jurisdiction of the financial regulator, just as an online forex brokerage would.
Role of Financial Regulators in Forex
The role of the financial regulator is to ensure that the businesses that have a financial license adhere to the general framework which includes transparency in reporting the day-to-day activities, maintaining enough liquidity to ensure that the transactions are filled as well as sending frequent accounting reports to the financial regulator.
While it might seem an expensive and an arduous task of obtaining a legitimate financial license, it does offer higher level of credibility for the businesses that obtain the license, including the online forex brokerages. Besides regulating forex brokers, the financial regulators also oversee any and all other subsidiary services such as Binary Options brokerages. introducing broker businesses, forex signal services providers and managed account services.
Main Regulatory Organizations:
ASIC (Review of ASIC) – Australia Securities and Investment Commission (Australia)
CySec (Review of CySec) – Cyprus Securities and Exchange Commission (Cyprus)
NFA (Review of NFA) – National Futures Association (United States)
CFTC (Review of CFTC) – Commodity and Futures Trading Commission (United States)
FCA (Review of FCA) – Financial Conduct Authority (United Kingdom)
FSP (Review of FSP) – Financial Service Providers (New Zealand)
Regional Financial Regulators
Depending on where a business is registered and operating from, the forex broker or a financial business is mandated to obtain a license from the financial regulator. Besides having a business operating license financial services providers also need to obtain a financial license as well.
Below is a list of some financial regulators:
ASIC – Australia Securities and Investment Commission
BVIFSC – British Virgin Islands Financial Services Commision
BCSC – British Columbia Securities Commission
OSC – Ontario Securities Commission
IIROC – Investment Industry Regulatory Organization of Canada
CySec- Cyprus Stock Exchange Commission
MiFID – Markets in Financial Instruments Directive
BaFin – Bundesanstalt fur Finanzdienstleistungsaufsicht
HCMC – Hellenic Capital Markets Commission
SFC – Securities and Futures Commission
BAPPETI – Badan Pengawas Perdagangan Berjangka Komoditi
CONSOB – Commissione Nazionale per le Società e la Borsa
FSA Japan – Financial Services Agency
FFAJ – The Financial Futures Association of Japan
JSDA – Japan Securities Dealers Association
FCS – Financial Services Commission
AFM – The Netherlands Authority for the Financial Markets
АВК – Financial Dispute Resolution
FSP – Financial Service Providers Register
KROUFR – The Commission on Regulation of Financial Markets Participants Relationships
CRFIN – Centre for Regulation in OTC Financial Instruments and Technologies
SGX – Licensed clearing member of the Singapore Exchange
MAS – Monetary Authority of Singapore
FSB – Financial Services Board
CNMV – Comisión Nacional del Mercado de Valores
Swedish Financial Supervisory Authority (Finansinspektionen)
GSCGI – Groupement Suisse des Conseils en Gestion Indépendants
ARIF – Association Romande des intermediares financiers
Swiss Federal Department of Finance
Organisme d’autorégulation fondé par le GSCGI
FINMA – Swiss Financial Market Supervisory Authority
DMCC – Dubai Multi Commodities Centre
FCA – Financial Conduct Authority
FINRA – Financial Industry Regulatory Authority, Inc.
NYSE – New York Stock Exchange
Office of the Comptroller of the Currency
Securities and Exchanges Commission
CFTC- Commodities and Futures Trading Commission
NFA – National Futures Association
