Pros and Cons of Working with Regulated Vs Unregulated Brokers

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<p class=“MsoNormal“>The global forex market averages daily trading volumes of over $6 trillion.
It is the largest financial market in the world, with plenty of opportunities
around the clock, and it offers easy accessibility for any new or experienced
investor. </p><p class=“MsoNormal“>To get exposed to this market, you need to sign up with an online forex
broker. Investing is generally a decision-making activity, and choosing a
broker is one decision you need to get right. </p><p class=“MsoNormal“>Brokers provide you with access to the global financial markets. Some of
their offerings could include access to a trading platform (for buying and
selling global financial assets), charting tools, educational resources, and
practical trading tools. </p><p class=“MsoNormal“>In essence, a broker is your partner as you seek to explore the markets.
Forex is a volatile market, so you need a partner that will provide you with
maximum peace of mind.</p><p class=“MsoNormal“>Forex Regulation</p><p class=“MsoNormal“>Forex is a global decentralized market, and this inherently makes it
difficult for a single body to oversee the entire industry. Depending on your
jurisdiction, there is a relevant regulatory body that sets the standards and
guidelines that online brokers must comply with. </p><p class=“MsoNormal“>In the financial world, the purpose of regulation is to protect
investors from fraud or any other undisclosed risk. But regulation varies from
jurisdiction to jurisdiction, with some bodies considered to be stricter on
their rules and guidelines, whereas others are very lax. Some of the major
regulatory bodies include the US’s CFTC, Cyprus’ CySEC, Australia’s ASIC,
Israel’s ISA, and Japan’s FSA. </p><p class=“MsoNormal“><a target=“_blank“ href=“https://www.avatrade.com/“ target=“_blank“ rel=“follow“>Forex brokers, such as AvaTrade</a>, are licensed and
authorized in multiple, strict jurisdictions. Generally, stricter jurisdictions
provide more client protection compared to the less strict ones. </p><p class=“MsoNormal“>To earn the trust and credibility of both local and international
customers, reputable brokers pursue regulation in stricter jurisdictions where
failure to comply to set guidelines can be very costly.</p><p class=“MsoNormal“>There are other offshore locations where regulatory bodies are
considered to be more lenient or rather very lax in implementing their rules. </p><p class=“MsoNormal“>While such jurisdictions make it easy for newer brokerage firms to
emerge, they may also not provide the much-needed peace of mind that investors
require. </p><p class=“MsoNormal“>Why Are Some Forex
Brokers Unregulated?</p><p class=“MsoNormal“>There are also plenty of brokers that are not regulated. Regulation is
generally considered the first sign of a genuine broker. </p><p class=“MsoNormal“>Not all unregulated brokers are frauds, but the lack of oversight and
accountability makes it easy for some of them to engage in unethical
activities. Some of the reasons some online brokers operate without any license
could include undercapitalization, high cost of compliance, and tax avoidance
measures. </p><p class=“MsoNormal“>Pros and Cons of
Regulated Brokers </p><p class=“MsoNormal“>Pros</p><p class=“MsoNormal“>Safety of Funds</p><p class=“MsoNormal“>One of the major conditions for regulation is protecting investors’
funds. Regulatory bodies typically require brokers to hold client funds in
segregated bank accounts, and never use the funds at any given time for their
own company operations. </p><p class=“MsoNormal“>Furthermore, in some jurisdictions, investor funds must be insured so as
to guarantee reimbursement in case a company becomes insolvent. </p><p>Transparent Services</p><p class=“MsoNormal“>Regulated brokers tend to provide honest and transparent services
because there is a body that oversights their operations. Some of the biggest
forex scams include identity theft, platform manipulation, and dishonest
promotions. </p><p class=“MsoNormal“>Regulatory agencies perform random checks on the operations of companies
under their jurisdiction to ensure that they remain honest and transparent in
all their operations and service offering at all times. </p><p class=“MsoNormal“>Favourable Dispute Resolution</p><p class=“MsoNormal“>One of the best reasons to trade with a regulated broker is that you
will be guaranteed fair resolution in the event that any dispute arises. </p><p class=“MsoNormal“>Regulatory bodies are mandated to protect investors, which means that
you can expect just treatment in case you ever want to resolve any issue that
arises between you and the broker. </p><p class=“MsoNormal“>Cons</p><p class=“MsoNormal“>Limited Choice</p><p class=“MsoNormal“>There is practically no disadvantage to trading with a regulated broker.
Still, adding regulation as a filter can limit your choice of available
brokers, trading instruments, such as synthetic indices, as well as trading
conditions, such as much higher leverage. </p><p class=“MsoNormal“>Pros and Cons of
Unregulated Brokers </p><p class=“MsoNormal“>Pros</p><p class=“MsoNormal“>Plenty of Bonuses</p><p class=“MsoNormal“>Regulatory compliance is a huge cost for brokers. Additionally, most
unregulated brokers tend to be new companies focused on attracting new clients.
</p><p class=“MsoNormal“>These reasons can result in a huge budget for marketing, which will
translate to generous bonuses and promotions for both new and existing
customers.</p><p class=“MsoNormal“>Easy Accessibility</p><p class=“MsoNormal“>Unregulated brokers typically place little restrictions on accessing
their services. No matter your location or circumstances, you can easily sign
up with them and start trading online. </p><p class=“MsoNormal“>For instance, some countries do not permit online trading or have placed
strict laws on how it should be conducted within their jurisdictions. If you
reside in such locations, unregulated brokers can provide easy access to the
world of online financial assets trading. </p><p class=“MsoNormal“>Attractive Trading Conditions</p><p class=“MsoNormal“>Some unregulated brokers are able to provide beneficial trading
conditions such as high leverage and diverse trading instruments such as
synthetic indices. Investors who need such conditions might prefer to trade
with an unregulated broker. </p><p class=“MsoNormal“>Cons</p><p class=“MsoNormal“>High Risk</p><p class=“MsoNormal“>When you trade with an unregulated broker, you are basically dealing
with a company that is not accountable to anyone or any entity. They do not
operate according to any set of rules or guidelines, and there is no guarantee
that your funds are kept safe or that even your confidential information is
secure. </p><p class=“MsoNormal“>Since no one is overseeing and regulating their operations, there is no
way to figure out whether the intentions of the company are genuine or shady. </p><p class=“MsoNormal“>These types of brokers y can easily manipulate their platforms so that
investors easily lose their trade positions or they could even run dishonest
promotions that are merely designed to rip investors off rather than to be
redeemable. </p><p class=“MsoNormal“>Unfair Dispute Resolution</p><p class=“MsoNormal“>When you have a dispute with a regulated broker, the relevant regulatory
agency will act as the mediator. In contrast, if you have a dispute with an
unregulated broker, the company will act as both the defendant and judge. The
lack of any just recourse means that you will not be guaranteed any fair judgment.
</p><p class=“MsoNormal“>Regulation is an important consideration for any investor. A good broker
will ensure that you will have the best environment so that you can trade with
maximum peace of mind. The first sign of a potential bad broker is the lack of
regulation. </p><p class=“MsoNormal“>Nevertheless, it is important to assess the type of regulation that your
preferred broker possesses. Achieving multiple regulations in top jurisdictions
such as Japan, the US, Israel, and Australia can be a good sign of a safe and
trustworthy online CFDs and forex broker. </p>

This article was written by ForexLive at www.forexlive.com.

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