How is Forex regulated in Australia?

Discussion in 'Forex' started by FP Markets, Nov 18, 2019.

  1. With over $5 billion traded daily, the forex market is by far the largest and most liquid market in the world. With these high trading volumes comes the need to maintain fairness and ethical practices. So who polices this 24-hour market? Read on to find out how the Australian forex market is regulated.

    WHO REGULATES FOREX IN AUSTRALIA?
    The Australian forex market is under the regulation of the Australian Securities and Investments Commission (ASIC). The involvement of this regulatory authority in the Australian financial markets dates back to the early 1990s. All ASIC regulated forex brokers must adhere to strict regulatory guidelines aimed at providing fair trading standards and preventing financial malpractices.

    WHY IS REGULATION IMPORTANT?
    The biggest risk of non-regulation is illegal activity and fraud. With an increase in investment scams, regulation by a reputable authority minimises the risk of currency-related swindles and fosters a sound financial market.

    ASIC REQUIREMENTS
    The following are some of the top requirements for ASIC regulated brokers.

    • The broker must hold a valid Australian Financial Services License (AFSL) which allows them to offer their products and services to clients.
    • ASIC stipulates that Australian brokers have a representative office in Australia to improve accountability and trader confidence.
    • ASIC regulated brokers have to submit periodic audit reports and be completely transparent about their finances to avoid fraudulent practices.
    • Brokers are required to keep their funds in segregated accounts in leading banks.
    • All ASIC regulated brokers should provide seamless trading on fast and efficient trading platforms. They should also aim to resolve all consumer complaints efficiently.
    These requirements reduce market risk and protect trader interests.

    IDENTIFICATION OF ASIC REGULATED BROKERS
    A regulated Australian broker with a valid AFSL license has a unique AFSL number which is verifiable through the ASIC website. The number is typically found in the “About Us” section and at the bottom of the homepage.

    ASIC provides a brief history of its regulated members on its site. This allows traders to learn more about a company before trading with them.

    HOW DOES ASIC REGULATION HELP TRADERS?
    ASIC consistently monitors all regulated members and is quick to launch investigations on any companies that deviate from the regulatory guidelines.

    ENHANCING TRADER TRUST
    ASIC has several systems in place to improve trader confidence including:

    • A compensation scheme that protects client funds in the event of broker insolvency.
    • Several educational programs such as the MoneySmart program, whose aim is to educate traders and help them maximise their returns.
    • Services that help with reclaiming lost money in dormant accounts.
    • Codes of practice that people must familiarise with before investing in the markets.
    • A support system that handles any complaints against member firms or ASIC staff. People can file complaints straight to the ASIC consumer helpline which deals with many issues such as financial malpractice, fraud and tip-offs.
    PROTECTING YOUR TRADES WITH A REGULATED BROKER
    A flashy or professional looking website doesn’t guarantee a broker’s regulation. It’s your responsibility as a trader to determine the reliability and authenticity of a broker before trading with them.

    With a regulated broker, you don’t have to spend time worrying about the safety of your funds. You can focus your efforts on analysing the market and developing your trading strategy. Choosing the right broker can give you an edge in the competitive forex market.
     
    MrKJoe likes this.
  2. billv

    billv

    Hello FP Markets
    Do you know the reason why OZ forex brokers don't accept US clients?
     
    MrKJoe likes this.
  3. icallgod

    icallgod

    Because they are not ready to meet the demands of U.S regulations.
     
    billv likes this.
  4. TRS

    TRS

    OZ Spot FX providers will very likely meet the main demand of US regs with a probable reduction in margin to 50:1.
     
    billv likes this.
  5. traderjo

    traderjo

    As per Australian regulations that apply to OTC brokers like FX / CFD providers client money is supposed to be ring fenced etc but few times due to fraud it was found that that was not done and client money was used illegally... and client money was lost and THERE IS NO PROTECTION
    SONRAY/ HALIFAX, MF GLOBAL AUSS ETC
    and irrespective of these failures the Watchdog has not improved things for client
    Unlike UK there is no protection.
    Most of the broker's wont won't even tell you that and even if you ask they will say yes but We keep your money separate and with a Big Bank govt protected.
    Dont be fooled by that
    That is what a broker told me when he left the fraudulent Sonray capital Markets and went to MFG before it went burst! LOL

    The only protection AFG is for equity brokers and your ASX share holdings .. but even then it has not been tested many times BBY broker failure is a case as work in progress

    New Zeland.. perhaps have even worst client protection
    Stick to UK or some US brokers who have SIPC
     
    billv likes this.
  6. Hi guys, do you know which Australian Forex broker is good for trading?
     
  7. traderjo

    traderjo

    from what point of view? Type of broker? MM or ECn? comms? size? being in business?
    purely from client money protection point of view UK is better than AUS