Forex is the largest market in the world where mind-blowing amounts of money are operated every day and where profits are enormous. And so are the losses as well.
If you are looking for a broker to join the turbulent circus, you should find a broker company that takes its client seriously and offers them the best conditions in the vivid but hazy business.
When a broker fulfills all of the criteria you find convenient (like smooth trading platforms, optimal leverage and spreads, sufficient currency pairs, simple payout methods, etc.), there is one more thing you should take into consideration: the power behind the broker.
If a broker company is really honest and does not look to scam you but to establish a business relationship with you, they certainly will let you know who regulates their business conduct.
As an innocent trader, you did your homework regarding the research on broker companies, but another task lies ahead of you. You also have to check out the situation behind the curtains. As soon as you are interested in a broker, make inquiries on who runs the operations behind the scene.
What does it mean?
It means that every licensed broker has a strong business regulation policy and even hires companies or broker regulators to supervise their businesses. Some countries have governments or banks that regulate the Forex market, but the United States include privately run agencies and organizational bodies that will do the job, moreover – an excellent job.
These companies set out rules and limits within the law to the broker companies and ensure prevention of fraud and illegal actions by imposing a transparent financial system.
There are certain well-reputed agencies that earned their trust among U.S. citizens through their work and operation policy. One of these is the NFA.
What is the NFA and what does it do?
NFA stands for National Futures Associations and is a self-regulatory independent body based in the USA. Their main goal is to develop regulatory programs for futures regulation, protection of traders, and assist the Forex brokers in meeting criteria that include all the above. They are responsible to the Commodity Futures Trading Commission in charge of the U.S. futures industry regulation.
NFA the Top Regulator of the Forex Empire
The member companies of the NFA ensure a transparent environment of financial operations which is very important to establish trust between the broker company and its traders. The NFA impose very strict regulations and procedures for the broker companies with the goal to create safe conditions for traders’ investments.
The NFA makes sure that traders’ funds are separated from the company’s finances ensuring that operation activities are funded solely from the company’s budget.
The broker companies backed up by NFA are steady and liquid businesses and have sufficient assets to back up the clients’ positions with their own financial means. Moreover, to register with the NFA, broker companies have to have a minimum net capital of $15,000,000 as proof of their capability to back up clients’ positions.
The companies are bound to issue weekly reports on their account balances to the NFA, and they are subdued to overall annual audits. The companies’ staff and employees attend specific NFA training and get certified.
The NFA, together with the CFTC, warns about fraudulent firms and actions and issues detailed lists of their member broker companies that are reliable and safe for clients.
The History of the Commodity Futures Trading Commission (CFTC)
The Commodity Futures Trading Commission (CFTC) was established in the 1970s by the decision of the Congress. From then on, this Commission has been responsible for futures trading and investments. Under the same legislation, the establishment of certified futures associations was granted. During the 1980s, the NFA was established as an independent association to monitor Forex trading and to advice, brokers to register with CFTC and become members of the NFA.
Amendment acts were passed during the years that granted more authority and power to these organizations, and they can impose stricter measures on the market.
All information regarding the NFA and CFTC are available at the BASIC website (Background Affiliation Status Information Center). There, you can find all broker companies registered with these regulatory bodies that are officially certified and represent a safe choice for you as a trader.
Conditions Provided by the Top NFA Forex Brokers
Let us shortly reflect on the top Forex brokers and the conditions they have to fulfill to satisfy customers.
Attractive and sophisticated platforms that are highly functional are one of the key factors for broker companies. In that way, they ensure a high-quality working environment for their clients. The platforms are usually powered by strong software that accounts for uninterrupted operations for millions of customers.
Since the Forex market is extremely competitive, all broker companies seek to have the best variety of choice to attract clients just like in any other competitive business. In the case of Forex trading, that means offering optimal spreads and a clear leverage policy.
Due to high influx of newcomers, the broker companies have to make sure that they always offer narrow spreads since they are favored not only by newcomers but also by experienced traders. It is a well-known fact that the currency pairs with the narrowest spreads are the most popular.
For passionate risk lovers and speculators, the ideal broker provides currencies with wider spreads, since this group of people account for a significant share in the customer base.
Best Forex Brokers
Other Forex Brokers We Recommend
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How it Works?
In order to be able to offer various spread differences, the broker has to provide a vast number of currency pairs. Most of the brokers have a variety of currency pairs, but a small minority keeps their currency pairs limited.
Different brokers offer different leverage policies as well. Some stick to a restricted leverage policy not exceeding the 1:100 ratio, while other set the limit at 1:500. The lower the leverage is, the lower the risk of loss. Some brokers try to protect their clients form themselves in that way. It is up to you to decide what leverage policy fits you the best and if you are willing to reach out to leverage money.
Payout methods vary from broker to broker. You know best what payment methods are acceptable to you, and that is your decision, even if most of the traders are fans of fast (e.g. 24-hour) payouts.
Always look for broker companies that work in your favor, care for your rights and justify their trust by transparent actions. The very best NFA regulated brokers will offer all of these and more, making sure you get all the services you pay for and are entitled to.