Forex Regulation plays a critical role for Retail Forex Brokers. It protects the interests of the Retail Forex Clients and maintains Industry standards for Forex Brokers. One issue that is now facing both Forex Brokers and Forex Regulators are do these regulators cover those that are outside of its designated jurisdiction. In the past, Forex Regulators have been pretty clear that when they receive complaints from outside jurisdictions these are mostly not pursued.
Lax Oversight From CySEC in the Past on Binary Option Broker
One exception to this has been with EU regulators that have allowed pass porting of jurisdictions. Those brokers that are regulated by CYSEC the Cyprus-based regulator may also cover clients in other EU countries through a system called MiFID. The Markets in Financial Instruments Directive covers 31 EU countries. This system hasn’t always worked best as critics of CYSEC have cited lax oversight especially when it comes to Binary Options Brokers. Recently the French Financial Regulators states that close to 90% of its complaints originate from CYSEC based brokers. This situation has gotten so bad that CYSEC felt it necessary to overhaul its rules governing Binary Options and Binary Options Brokers.
Most Regulation is Local
The NFA or National Futures Association and ASIC the Australian Securities Investment Commission both have taken the position that their regulation and oversight are designated only for their own citizens and residents. The reality is that Forex Brokers that are in these jurisdictions have clients from many different countries. In actuality, most of the clients had probably selected these brokers because of their regulatory status and may or may not be aware that they are not protected. Forex Regulators are now making an effort to educated those clients from outside jurisdictions. ASIC regulated Forex Brokers are now required to include a disclaimer that states regulations are intended for Australian citizens only.
Forex Regulators have made a concerted effort in coordinating with each other. The United States, Japan, and Canadian regulators have made it clear that its citizens are off limits when it comes offering Forex Trading. Questions remain as to how many more countries will request the same of their citizens and how quickly this list may grow.
Trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary.