Unregulated vs Regulated brokers

Discussion in 'Forex Brokers' started by nealvan, Jan 4, 2008.

Is it better for a broker to be regulated?

  1. Yes, it protects the trader and allows for investigations by a legal board.

    21 vote(s)
  2. No.. Regulations are not a failsafe. Reputation and service are more important than being officiall

    9 vote(s)
  1. nealvan


    I see a lot of complaints from people of Forex brokers that are regulated. Would anyone like to share any experiences with their past brokers? I would like to stay out of the conversation but would appreciate some stories for the record.
  2. nealvan


    One more twist I'd like to add aside from just experiences but view of the regulatory bodies. Does it really protect the trader? Even with codes it's still going to be the brokers word against the trader. If the trader really experiences an issue with the broker but can't prove it the regulations are worthless because they can just dance within the guidelines and use the shadow of doubt.

    They'll always have the benefit of doubt because a losing trader is going to be a disgruntled one. When you have something wrong done to you your going to be p.o.ed so in the process of complaining they might not take your complaint serious anyway and the complainer will give up. I usually lose most arguments not because I was wrong but because of my temper. There's also the posibility of corruption. I honestly don't know I'm just throwing out possible factors. Regulation vs actual reputation. If a broker is regulated and they are hard to deal with it would not be worth the hassle of dealing with on a 1-1 level.
    What do you think? They could always say we are regulated and even use that as a weapon. Well under regulation xxxx we followed the code.

    Any ideas, impressions, bad dealings. I bet some of you have had more than one bad dealings being in the business.
    I'm sure even regulated brokers have some bad reputations.
  3. nealvan


    I haven't had a lot of bad experiences because I have traded forex much myself but would like to get back into it. I traded with gain capital. At the time I didn't know much about trading so I can't say too much about them because I was in and out. I will however point out that I had to request the last of my money out of the account with them.

    If this was a lot of money I would be pulling my hair out and burning hot but it wasn't. I surely will not go back to them for that and other reasons. I can't really rip them up because I haven't been in the business long. The best treatment I got from them is when I opened my account. Not much of a story but that's my only real experience with forex brokers. Back then I didn't know there were any regulations because I just stumbled apon it. Another trader suggest forex to me because of my trading style so I jumped in head first without knowing anything. Years later and a lot more experience I feel ready but right now I'm seeing how critical it is to have a good broker.
  4. Steve_IB

    Steve_IB Interactive Brokers

    More of an issue, is that with an unregulated broker there is no regulatory organisation monitoring them, and no registered persons. They can close up shop take your money and disappear. Then good luck getting your money back or finding anyone interested to help you. A few years back in HK there were 100+ FX brokers, and this routinely happened - as soon the SFC started to regulate and imposed capital requirements, the number of brokers was cut too last than 30.

    Without regulations and capital requirements its too easy... you set-up a company, build a nice website, take clients money. You take the other side of customers trades, offer as much leverage as you can, say 100:1 as this is a level where most retail will blow out - thus, client money gradually gets transferred to the broker. If your business grows you do okay - if all your clients get lucky and get on the right side of the trade then you can shut up shop, take the money, and re-open another company.

    The business of moving quotes, widening spreads, etc, just makes the process of transferring the funds from customer to broker all the more quicker.

    So, more the question is - why bother taking the risk of an unlicensed company - there's plenty of decent companies out there.
  5. nealvan


    Very well stated. Thanks for the comment.

    So in comparison to stocks it might be similar to otcbb vs nasdaq. Otcbb are loosely regulated but often go out of business. They are often under-capitalized.
  6. da-net


    Hey Steve,

    Your company seems to get its fair share of bad press for its behavior, software, etc here on ET and perhaps you could enlighten everyone as to how regulation protected these people.

    From the NFA website @ http://www.nfa.futures.org/BasicNet/Arbitration.aspx?entityid=0283253&case=04ARB39

    The following issues were presented to the undersigned arbitrator: fraud, breach of fiduciary duty, failure to supervise, unauthorized liquidation, and the Respondents' Motion to Dismiss based on the one year time limit in the account agreement.

    All claims against Marlene Dobrowolski, Orion Futures Group, Inc., and Vision Limited Partnership are hereby dismissed.

    No where did it say the customer was wrong in his claims, just that he was over the time limit....

    or how about this one?


    or how about all of Refco's victims

    IMO..Regulation MAY help the customer but more times than not it gives the broker a way out.

    The only protection is "Caveat Emptor".
  7. Steve_IB

    Steve_IB Interactive Brokers

    Not in this to argue. Just pointed out some things which the OP hadn't considered - and that I have seen happen. Of course there's risk to regulated firms to.... as you said "caveat emptor"
  8. Does anyone even know a FX firm with reputation that is not regulated? I pesonally have a hard time thinking more than a few of firms with reputation under any premise.. (retail anyways).
  9. nealvan


    4 people voted reputation is more important than being regulated.
    Again this is just done for comparison. I'm asking from a learning standpoint of view.
    At this point I want a regulated forex broker with a good reputation. There are a lot of loosely/unregulated non-US forex brokers that have tempting services. In the US I want them to be regulated by the NFA and CFTC. It seems however that a lot of Forex Brokers fail at providing all the necessary equipment to the retail trader. It make me wonder if this is done intentionally and where regulations do little good without functional tools. I've met quite a few crooks in the business world and regulations are not a failsafe especially in a monopoly and where big money is concerned. I know I'll get a lot of course ugly remarks for that.
  10. I would prefer going with a broker which is foremost reputed, people liking that broker, and then will check regulation.
    Though regualted broker is important, no matter which country. But main thing is who is that company, there partners, and all. Checking there background and then i will put up money and trade.

    Tell me whats the use of NFA and CFTC, when they cant help from the retail clients getting burned, meaning to say trading is risky, its a trader how he/she trades and all.

    BUT, whats the damn reason of NFA, CFTC when a broker is Bankrupt, or a Broker aint fullfilling the tasks of such regulatory bodies and they send out emails saying : Sorry we are temporarly closed, So where is Retail clients money?? they are blocked by the regulators.. So this is the job of regulators?

    Check our REFCO, check out many other forex brokers who are having problems..

    Its SIMPLY a JOKE, when a broker puts in the website, we are regulated with CFTC< NFA and all..

    Its like having a License to Drive a Car, but they dont know when they can bang in to any other CAR (bang in to any clients money)
    #10     Feb 2, 2008