Last Updated on: 22nd November 2023, 10:30 am
The forex market is the largest financial market in the world with a turnover of over a trillion dollars in a day. Therefore it is no surprise that traders choose to trade forex in the currency markets to meet their financial goals in life. It is also true that the financial market has no control by any central exchange and has no central clearing house.
This has also given rise to a specific lack of transparency in the functioning of these markets. The net result has been that some traders are vulnerable and exposed to those brokers that manipulate or indulge in malpractices.
As the first step towards prevention of frauds and scams in the forex markets, the Financial Conduct Authority or the FCA in UK is designated as the authority to regulate the business of forex brokers. If you are a newbie forex trader that wants to trade in the UK, an Internet search for forex brokers London will surely throw up a big list.
There are many UK forex brokers with offices in London and the only challenge for the trader will be in picking up those that are regulated by the FCA. This is important because FCA regulated brokers must comply with specified standards and rules to function in the UK forex market. One of the most important practices that an FCA regulated broker must adhere to is that the clients’ funds should be maintained in a separate account and not along with the company funds.
This helps to keep the traders’ funds safe if the broker becomes insolvent and forms a shield from frauds and malpractice. It is also important to choose a broker that is genuinely regulated by the FCA. Many brokers make claims to be regulated by the FCA and give fraudulent addresses based in London. In reality, they may not have any physical presence in the UK. Unauthorized Brokers and their Mode of Operation
Unauthorized brokers entice their clients by giving away bonuses in the beginning stages of the traders’ career. This gives the trader the impression that they are successful and are thus prompted to invest more money. Soon enough at some stage, all the communication from the broker to the trader stops altogether and their account stands suspended.
FCA also warns of many clone forex broker firms that exist in the UK. These firms use the “FRN” or firm registration number and addresses of other firms and individuals that are regulated by the FCA. The borrowed identities give a feeling to the new traders that they are genuine. However, the phone numbers and website details which they provide are their own.
In such cases they claim that the original FCA register has outdated details. This, however, is not true as it is important to know that the FCA updates its register every evening. Traders that have become victims of such unauthorized forex brokers in the UK are not covered by the Financial Ombudsman or the Compensation Schemes services.
Benefits of Choosing FCA Regulated Forex Brokers in the UK
The FCA in the UK is given superior powers with regard to regulating the financial market. As far as forex broker firms are concerned, they have the power to suspend licenses of brokers’ companies (for a limited period of time or indefinitely in case of detection of fraudulent practices), scrutinize marketing models and promotional material, audit the firm’s accounts regularly, and ensure that the traders are liable to get a fair deal for trades with the company. Brokers’ firms that are registered with the FCA thus ensure secure operations for their clients.
The FCA also ensures market integrity by constantly monitoring activities of the companies in the financial sector including forex brokers so that these firms do not trick their clients by using the loopholes that may exist in the system. Other benefits of FCA regulated brokers in the UK are as follows:
#1: They provide services that are helpful to the client/customer. They cater to the needs of the client than simply focusing on the company’s profits.
#2: The FCA also helps to spot unauthorized rogue brokers that set up operations in unregulated markets of other countries with a view to cheat the clients of their money. FCA has the authority to work with regulators of specific nations to bring the culprits to the book.
