The fascinating world of finance, stock investments, commodities and more, offers you a way to invest through brokers that have a Forex license issued by some recognized entity capable of monitoring these companies.
Although you will see that most of the companies and brokers have a Forex license, you can also find unregulated Forex brokers that are fully active and working. This indicates that not everything in this sector is black or white, and we would like to talk to you today about these nuances.
This topic can be confusing, especially if you want to start on the right foot in the world of trading and don’t have much of an idea of how to invest or how to set up your broker. Learn what a Forex license is all about, what you need to do to get one, and how to get a good start.
What is a Forex License and how do I get one?
The FX license is a permit granted to an applicant company or broker to trade in certain markets and with some regulations that must be complied with depending on the location from where the permit is issued.
These licenses can require from the applicant sums of up to 6 figures, which implies high amounts that, in the beginning, are difficult to afford and require a lot of time as well.
A very common alternative used by broker startups, when they do not meet these requirements, is to implement white label licenses which are different from Forex licenses.
These licenses consist of acquiring the Metaquotes MT4 or MT5 to be able to trade.
Through a consolidated company like Smart Broker Solutions, an official Metaqotes provider, you will have the opportunity to start trading in record time and with everything you need.
Returning to the subject of FX licenses, we can tell you that the regulatory bodies that issue them are not responsible for the protection of clients or traders since the criminal nature of any action is handled through the judicial authorities of the country of location.
If your goal is to obtain a Forex license, you must meet all the requirements to prove that your financials and identification documentation are accurate. In addition to the outlay for the regulatory service and the endorsement that this entails, you must comply with, among others, the annual license fees, payment deadlines, and taxes.
If you are just starting, you can consult expert companies, like us. If you need licenses to become a Forex broker, we at smartbrokersolutions.com can help you. It will be easier for you to opt for the regulation you require, if it is really necessary, and to have the solution that best suits your needs, time, and budget.
As you can see, you have options for accessing these regulations, and you can also review the features of each of them.
What are the regulatory authorities that issue Forex licenses?
Several entities issue and control Forex licenses for each broker that wishes to be regulated. It is a question of tranquility to invest what justifies its acquisition since in counterpart to this tranquility the conditions that they impose are very restrictive and unfavorable for those who want to invest less conservatively.
For this reason, there are companies in charge of these regulations that will make periodic and random audits to any broker to verify the good operation and transparency of the transactions in the market.
The differences between these entities, which issue Forex licenses, are based on the level and place of issuance, as well as the number of regulations and control protocols they work with.
Among the most prestigious ones, we have CySEC (Cyprus Securities and Exchange Commission) which is a regulatory corporation that, with very high standards and strict rules, has made its mark a prestigious endorsement for Forex trading transactions in the stock market.
The MiFID (Markets in Financial Instruments Directive) has focused on introducing a system of standard regulations in the European market. Especially about financial products in the EU member states, to provide investor protection.
Other regulatory bodies we can name are the UK’s FCA, the US CFTC, Malta’s MFSA, Italy’s CONSOB, Australia’s ASIC, and others.
Why do unregulated brokers exist in the stock market?
Some brokers work in the Forex market without any regulatory entity to guide or audit them, and yet they are successful in their transactions without incurring fraud or scams. The fact of being regulated is not what determines the good or bad practice of the Broker.
There can be brokers that have all the existing regulations and have bad practices. Or, on the contrary, there may be brokers without any regulation and with the most accurate and legal practices in the world.
The reason for the existence of these brokers is most likely because the world currency market does not have a global coverage regulator.
Just as there are territories where an entity is in charge of regulating and auditing financial transactions, there are also those that do not have such organisms, which means that some brokers start their investments legally in these areas, but without the supervision of the regulatory entity.
This reality makes investment more attractive, especially for new traders who benefit from lower taxes and less demanding rules, which allows them to invest more actively.
If you find yourself in the situation of wanting to start investing or you prefer to trade and you do not have enough leverage, you could opt for an unregulated broker while you consolidate in the market. It is also important to know why each money manager should create its broker, which, although it is a subject with other considerations, is very important to take into account.
In the stock market, it is a risk to trade with both regulated and unregulated entities, however, many of these unregulated brokers can provide you with better-structured programs and services than those that are regulated.
It all depends on the meticulous study and research you do on the broker you choose, keep in mind that unregulated brokers are not malicious, nor do they lack professionalism, their working method allows them to finance better services, as well as to offer bonuses to their clients.
On the other hand, if you are starting, it is advisable to study the possibilities offered by Smart Broker Solutions Forex Startup. They have more than 10 years of experience and can accompany you in your beginnings as a new investor.
We have structured a complete package of solutions for Startups that go beyond the Forex license, consult us for free, and move forward in the Forex market without any restriction.