When it comes to selecting a Forex broker there are many criteria on which you can base your decision. These might include the the brokers available trading platforms, spreads of currency pairs and available leverage on the account. With so many factors in play the decision on the broker to use can prove difficult. Arguably the prime factor in your decision should be to to ensure that the broker you choose is a regulated Forex broker.

What is different about a regulated Forex broker
Regulated Forex brokers have membership of a regulated financial authority. This puts the activity of the company under constant monitoring. The broker will have to follow a strict set of regulatory rules outlined by the authority in order to operate their business.

To become regulated a brokerage firm will be required to meet and maintain a minimum set of legal requirements on an ongoing basis. This will include keeping sufficient financial assets to ensure the continuous operation of the company in addition to maintaining operational procedures and standards.

Regulation guidelines require them to maintain transparency in their financial documentation and accounts. They will also be required to submit a regular set of financial reports to the regulator. Companys that do not can be fined or have their membership terminated if they fail to comply. Similarly if the broker does not follow the guidelines for this documentation the can also be penalised.

Why you should choose a regulated Forex broker
The idea behind regulation is provide a level of protection for clients.This means that brokers are accountable for their actions in dealing with clients to the authorities of which they are members.

A key point here is that client deposits are held in separate accounts from the company funds. As a result deposited client money is not able to used for the broker’s financial activities, helping to ensure the safety of deposited client funds. This also helps to protect the client in the event that the broker runs into financial trouble, as any money held in segregated client deposit accounts is not allowed to be used to pay off creditors.

Regulations also apply to other areas of the brokers operation. These include among other things maintaining quality standards, providing levels of customer support and identifying potential fraud.

Finding out if a broker is regulated
It is a simple exercise to discover if a broker is regulated. The majority of Forex brokers will provide details their regulatory status in both their literature and on their website. They will also list any applicable membership of other financial authorities.

The actual regulatory body of the broker will be dependant upon the region in which the regulated Forex broker operates. Countries with specific regulatory authorities include the USA, UK, Euro Zone, Switzerland, Australia and Japan.

Examples of regulatory bodies include the National Futures Association (NFA) and Commodity Futures Trading Commission or (CFTC) in the US and MiFID and CySEC for Euro zone brokers. The full regulatory standards and guidelines to which they work can be viewed on their websites.

A broker only needs to have registered membership of one of these authorities for the client to be protected.

When choosing your Forex Broker it pays to make sure that you choose a regulated Forex broker. This will not only help to  ensure that you receive a level of service based on a set of regulated standards but also if the worst happens and your broker goes bust, your deposited funds will be protected.