Factors to Consider When Choosing a Online Broker

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Factors to look for & consider when selecting a trading broker

Regulation is one of the guideline of choosing a broker. As a new trader your first challenge is to select the right one. The best ones are those which are regulated. This should be the type of firm that you should choose: a regulated trading broker.

It is not as easy as it sounds to select a good one & the whole searching process might leave you confused due to the huge competition between them, as they all offer different softwares, trading services, order execution and capabilities. The best criteria in selecting is to find a regulated one.

Regulated brokers have to submit all of their transactions each year to the regulatory authority for audit. This means that these companies cannot take part in any illegal activities such as money laundering. This is why your broker asks for Identity documents and proof of residence from traders when they are registering, so when as a trader you're registering and are asked for these documents when opening a trading account, you'll know why they're being asked for.

Some of These Online Broker Regulatory Authorities are Listed Below:

National Futures Association (NFA ) - US

The NFA regulates all US based broker companies, official website for NFA is https://www.nfa.futures.org/ where list of USA online brokers are shown. NFA does-not issue licenses to other international, unlike other regulatory authorities, NFA only will license America based brokers. NFA just like CFTC have very overbearing regulation rules that are not favorable to the traders themselves. After these 2 NFA & CFTC introduced these rules many international brokers closed their America based branches, Those that did not have US branches were forced to close and transfer the accounts of USA citizens because CFTC threatened to sue any stock indices based firms that is not from America if they open trading accounts for US Citizens. This is why most brokers will not accept USA Clients.

Commodity Futures Trading Commission (CFTC) - America

CFTC regulates all USA based broker companies, CFTC is Similar to NFA

Cyprus Securities and Exchange Commission (CySEC ) - Cyprus

CySEC regulates all Cypriot brokers, the official site is https://www.cysec.gov.cy where you can search for the registration and licenses number of those brokers licensed by this regulator. The CySEC regulates online brokers operating within the EU European Union Jurisdiction of Cyprus Country.

FCA - Financial Conduct Authority as of 2013 - United Kingdom

NOW FSA has changed name FCA, & regulation details can bound from either FSA or FCA.

FSA regulates all online brokers in United Kingdom, the official web site for FSA is https://www.fsa.gov.uk/ this website contains a list of brokers licensed in UK. FSA also registers other international firms & indices based firms from other countries that have an operating office within UK. To check whether the financial institution you're trading with is regulated in United Kingdom just go to FSA Register.

German Federal Labor Market Authority (BaFin ) - Germany

BaFIN regulates all German brokers, the website for BaFin is https://www.bafin.de & BaFin is the German Federal Supervisory Authority for Investment brokers and institutions operating within German.

Australian Securities and Investments Commission ( ASIC) - Australia

The ASIC regulates all financial companies in Australia

The Financial Futures Association of Japan ( FFAJ) - Japan

Regulates all Japan based financial corporations

Swiss Federal Department of Finance ( FDF) - Switzerland

FDF regulates all Swiss based financial corporations

Canadian Investor Protection Fund ( CIPF) - Canada

CIPF regulates all Canadian brokers

MiFID, Markets in Financial Instruments Directive

MIFID is more of a Regulation Standard for EU European Union Brokers, than a Regulation Organization.

International Financial Services Centre ( IFSC) - Mauritius

IFSC regulates all Mauritius brokers

Above Regulatory authorities are the most trusted and the most famous regulatory authorities, it is best to open a trading account with a regulated broker that's licensed by one these regulatory authorities that are most popular regulators.

About USA Based Broker Regulations & US Regulatory Authorities

NB: One thing you should know about regulators is that you may not want to chose NFA or CFTC America Regulators, who have these very strict rules:

Max Leverage 50:1
First In First Out FIFO Trading Execution (open transactions in 123 order, must close them in 123 order, not 321, not 312, not 213 order)
No StopLoss Order Setting

It is for the above rule that most traders will not open a account with USA brokers, most traders who traded with America brokers closed their accounts & transferred them overseas with the coming of these rules, this is around year 2010.

In addition these regulators, will sue any stock indices financial broker that opens a trading account for US citizens, this is why no broker will open a trading account for an American Citizen, Only those in USA can open an Trading Account for An US Citizen. The only online brokers accepting USA clients are only those brokers based in USA.

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