Forex: Why you should only trade with an FCA regulated broker

For the purposes set forth in the Financial Service and Markets Act of 2000, the FCA serves as an independent governmental authority responsible for regulating the activities of both retail and wholesale financial services organisations.

By bolstering market integrity and encouraging competition, the FCA hopes to make financial markets more efficient, benefiting both traders and investors.

Here, experts Forex Suggest explain the most important reasons why traders in the Uk should only trade with a FCA-regulated Forex broker.

The FCA registers high level brokers

Before a broker is authorised to operate in the market, the Financial Conduct Authority (FCA) imposes a number of registration criteria, one of which is the collection of substantial fees in order to apply for an FCA license and engage in further regulated activities.

The broker’s scale of operations and other considerations determine the type of license, with STP licenses (research Straight Through Processing Forex Brokers) requiring EUR 125,000 in start-up capital and Market Maker licenses requiring EUR 730,000.

In addition, the company's market viability will be evaluated via a study of its business strategy, budget, resources, implemented systems, and controls upon application.

All directors and key employees will be subject to in-depth interviews to ensure they meet the requirements and have the requisite experience to run the brokerage.

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You will be protected from fraud

Brokers regulated by the FCA are obligated to keep client funds separate from the broker's operating funds to satisfy trader concerns about safety. This means that the broker keeps their business funds in a bank account that is completely distinct from the client's bank account.

In addition, traders using FCA brokers are afforded negative balance protection, ensuring that their losses never exceed the amount initially invested.

Finally, the Financial Services Compensation Scheme (FSCS) protects clients' cash up to a maximum of GBP 50,000 per client in the uncommon event that a broker becomes bankrupt or undergoes financial trouble.

Your FCA broker is heavily monitored

The FCA's routine oversight duties guarantee compliance with the most stringent requirements, necessitating daily and monthly reports, confirmations, and maintenance from every authorised organisation.

The Financial Conduct Authority (FCA) has made it clear that it will take swift and severe action against any broker who is found to have disregarded its standards, whether it be through the imposition of fines or the revocation of their license.

You will be able to report any broker misconduct

Despite the regulations in place, if a trader or investor feels they have been treated unfairly by their broker, they can submit a complaint with the Financial Conduct Authority.

As a first step, you can file a complaint with the Financial Ombudsman Service, sometimes known as a "claim handler," even though the regulated brokers in place are required to have a mechanism in place to settle disputes and reply within a certain time.

Final Thoughts

Trading with an FCA-regulated Forex broker has clear advantages because of the FCA's strict oversight of the broker's responses, monitoring of goods, and reimbursement in case of need.

The FCA's careful scrutiny of the company as a whole means that the broker remains operationally sounds, the market to continues to grow, and traders are treated fairly.