Online Forex Trading and Regulations in the UK

During the last few years, when the Forex market started to become increasingly accessible to everyday traders like you and me, there have been more than a few not-so-reputable brokerage firms out there trying to scam us traders out of their investments. Their methods? Use a trader’s money to invest against him, or simply take it and run.

To keep consumers safe, most major countries have created regulations to protect those of us who trade on the Forex market. In the UK, the company that controls these regulations is called the Financial Services Authority, or FSA. The FSA works to keep individuals from having their investments scammed out from under them. And while this is --of course!-- a really good thing, it can be a little limiting when it’s time to choose a broker because not all of them can follow FSA regulations.

The FSA and Forex Regulations

The Financial Services Authority is non-governmental, independent body, whose primary function is to make financial retail markets --that is, the markets that most of us use for trading-- work more efficiently. Their main goal is, essentially, to ensure that retail customers (that is, the little guys on the bottom of the financial dog-pile) get a fair deal.

Starting in 2004, the FSA has created a UK-wide strategy to build up the country’s financial capability (in all markets-- not just Forex), as well as raise confidence among consumers. In other words, they’ve put plenty of rules in place that make consumers more comfortable taking part in the market.

This affects UK brokers who work on behalf of residents in the UK in several ways. For one, according to FSA regulations, all legit Forex brokers must meet strict financial standards. These brokers are required to work with FSA financial regulators, submitting regular financial reports and proving that they follow regulations at all times. Brokerage firms who are found in violation are either fined or, in extreme cases, have their regulatory status terminated.

While strict rules may keep some good brokerage firms from operating in the UK, these harsh rules are generally pretty good for you. Since the FSA keeps records of any formal proceedings they’ve had to enter into against regulated firms, any information about rule breakers (that is, Forex brokers that you shouldn’t trust) are kept on record. Simply by visiting the FSA website, you can find out if the firm you’re considering using has had any serious problems or infractions. And that’s very useful information-- after all, you don’t always lose money on the Forex money because of a bad trade sometimes you lose it because of a bad broker.

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