Forex Regulators

The idea behind writing this article is to shed some light on the forex regulators that exists in the forex world. There is no single institution or an individual that handles and is responsible for activities taking place in the forex markets. Each country across the globe is responsible for the activities of forex. For regulations some countries has taken the hands-off but some countries like US, Europe, England etc have jumped in to handle the markets. These regulators are discussed as follows:

The Swiss Federal Banking Commission is responsible for supervising the financial sectors in Switzerland.

One of forex regulators online is European Commission Decision of June 2001 created CESR. It is an independent Committee that brought together senior representatives from national public authorities competent for purpose of securities. An Annual Report is submitted by CESR to the Commission of Europe, and to the European Parliament and the Council.

Another recognized forex regulators online is the Investment Dealers Association of Canada it is a self regulatory organization on national levels.

It is the Securities and Futures Commission of Hong Kong having jurisdiction over leveraged foreign exchange trading in its city.

It is an independent Financial Service Authority of the UK, a nongovernmental body which is regulating the industry of financial services in UK since 2000. It got its present-day authority by the Financial Services and Markets Act of 2000.

This is the Australian Securities and Investment Commission.

The CFTC (Commodity Futures Trading Commission) has some authority over exchange foreign markets. The Commodity Exchange Act allows the selling of OTC forex futures and options to merchandise customers if, and only if, the counterparty (the person on the other side of the transaction) is a organized/standardized entity. In the U.S., the banking systems are monitored by the Federal Reserve Bank. The government agency CFTC also monitors the activities of National Futures association’s (NFA). The CFTC has bounded the regulatory authority over retail over-the-counter (OTC). But no single entity in the U.S. has direct regulatory oversight in the Forex market, the CFTC has effectively taken that role. The Commodity Exchange Act (CEA) gave the CFTC the authority to regulate the sale of OTC Forex futures and options to retail clients only if the counterparty is a regulated entity. Regulated entities include banks, financial institutions, broker dealers, and FCMs. By limiting the parties regulated entities can interact with, the CFTC has exerted some level of control. The CFTC has the authority to shut down unregulated Forex entities— specifically, FCMs. (Also, the CEA has a provision for any violation regarding antifraud and ant manipulation connected with OTC Forex transactions in the retail market.) Despite the reputation that markets dislike regulation, this has not been the case with Forex. Most Forex firms have embraced the new regulatory authority because it gives them legitimacy and helps weed out fraudulent players in the Forex markets.

NFA is also one of the online forex regulators. As the CFTC being a government agency, does not issue actual rules for transactions taking place in Forex. This right is with NFA to make the rules. The NFA is a industry-wide organization which is self regulated and is based in U.S. The NFA was formed keeping in mind to provide oversight and integrity to regulatory programs primarily to the futures market but now it has spread into Forex as well.

Basically the forex regulator online i.e. NFA makes the forex market governing rules and not laws. Today, the participants in the Forex markets are advised to deal with firms having a level of NFA designation. However the online forex regulators like NFA did an excellent job to register the industries with the organization and due to this there is countable number of members. The firms that are not registered are technically considered as unregulated ones so it is always better to avoid them. The regulators in forex tell the investors, and novice traders to confirm for NFA recognition of the firm as an essential part of your research.