There are different regulatory bodies that control the financial markets. There are overall regulatory bodies and those specific to each and every country. In most countries, the regulation of financial market is being undertaken by the central bank, Regulatory Authority, or both. The latter can be subsidiary of the Central bank or an independent body. Forex market being one of the financial sectors is not left out of this regulation. Similarly, there are different bodies that are designed to regulate Forex market. These bodies may vary significantly depending on the country. The primary role of the Forex regulatory body is to strengthen the regulation and monitoring of the Forex market within a given jurisdiction. The overall roles of these regulatory bodies are many as listed below:
1. Regulations Safeguard Traders
Forex traders need to be safeguarded and regulation is the best way out. Strict regulations required by the Forex regulatory bodies often ensure a sound level of protection to traders. Just like any other financial market, the trader can be exposed to high level of risks if the brokers they are using are not regulated. The regulation ensure safeguard of their funds or the trading deposits. They ensure that the client's monies are not used inappropriately e.g. for operational purposes.
2. Protection against manipulative and fraudulent activities
In the current financial market, there are so many uncertainties that affect your dealing with the Forex brokers. To limit these uncertainties, it is pretty wise tow work with regulated Forex brokers. The regulatory body are designed to ensure that you are protected from the manipulative and fraudulent activities form the brokerage company. This helps safeguard your funds.
3. Protection Of Trader's Interests
The interests of the Forex trader must be protected. There comes a situation when the Forex broker is not protecting the interest of its clients. This is when Forex regulatory body becomes very helpful. The regulatory bodies ensure that the brokerage company you have trusted with your funds stick to the ethical principles of the business and lay down their policies well and open. All the regulatory bodies irrespective of the country are designed to ensure maximum protection of the interest of the financial investors.
4. Integrity Of Forex Trading
The regulatory bodies ensure that the integrity of the Forex trading is maintained at all times. This is not only by the Forex brokerage company but also by traders. The Forex broker is subjected to several rules from regulatory body that help maintain integrity of the Forex market. This helps maintain conducive trading environment and better relationship between the broker and the trader.
5. Protection Against Scammers
It is no secret, there are several scammers using the internet to con your monies. And given the setting of the Forex trading market, it can prove harder to physically meet your broker especially if you are not from the same country. The role of the Forex regulatory body is to fish out these scammers thereby safeguarding your investments.
Conclusion
In the world of Forex market, money changes hands frequently and in big sums. To provide some level of protection and control, there must be a form of regulation applied to the parties involved. Strict regulations ensure that things don't get out of hands. Just like any other financial market, currency trading requires proper regulation.
There is no common standard of regulatory body for Forex. Every country has its own independent body that regulate the Forex market. It is the role of the government to provide this regulation. Despite the need to protect the interest of the investor, not all Forex brokers are regulated. It is wise to first check the regulation status if the Forex brokerage before you commit yourself.
