A Quick Guide to Trading and the Best UK Forex Brokers
Trading on the Forex market can be quite an adventure and the number of people, from all walks of life, jumping in and enjoying the experience is growing daily. There are very few limitations with this form of investment as it is a largely unregulated market with a daily trading volume of more than $5 trillion. It is also one of the largest markets that offers 24 hour trading, 5 days a week along with an appealing liquidity depth and size. There is no central exchange or clearing house where transactions take place and this lack of transparency has left it wide open to several instances of manipulation and malpractice. There are, however, a number of regulatory bodies that have been tasked with overseeing the various nuances of the industry and in the UK this falls on the shoulders of the FCA (Financial Conduct Authority).
Previously known as the FSA (Financial Services Authority) it acts as a watchdog to make sure that Forex brokers operate fairly and ethically. This is done by imposing certain industry standards. One of the most important being the need to keep client funds separate from company funds. The segregated funds are not allowed to be used as company assets, should the broker become insolvent.
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The FCA and Forex trading
The FCA is the regulatory body that replaced the Financial Services Authority and is the regulator for the activities not just of Forex brokers who operate in the UK, but also a number of other financial services providers. This includes banks, insurance companies, forex brokerage firms and other associated institutions. It is responsible for more than 50,000 firms and intervenes on behalf of consumers when they feel they are being treated unfairly or the firm behaves in such a way as to risk the integrity of the market. Its powers include regulation, investigating complaints and enforcing the relevant rules regarding infractions. There are two components that have been designed to increase consumer protection. These include the rule that requires brokers to place client funds into an account which is completely separate from the company accounts used for operational purposes. The other important provision was the introduction of the Financial Services Compensation Scheme (FSCS). This scheme provides a full refund of trading capital up to £30,000 and protection for account capital up to £20,000, should a broker be declared bankrupt.
The FCA also uses certain guidelines to ensure brokers only use the best industry practices. A ‘best execution policy’ calls for a broker to shop around for the best possible deal when it acts as the counterparty on behalf of clients. Should a broker fail to comply it will be liable to pay a substantial fine. Brokers regulated by the FCA are also required to submit regular reports that include capitalization and value of segregated funds. Should a broker be found to be withholding information or failing to be transparent there will be heavy penalties imposed
If you want to know whether a particular UK Forex broker is licensed to provide Forex services you can check with the Financial Services Register. But you can rest assured that any brokers we review will be checked out by us. The register will provide you with a range of different information relating to an individual firm. There will also be a number of different terms applied that it will be useful for you to understand.
Authorized – The FCA has authorized this firm to carry out regulated activities, and it will specify what they are
Appointed representative – This firm may be acting on behalf of an authorized firm, that is held accountable for the representatives activities
Appointed representative former – This firm is no longer permitted to carry out any regulated business
Authorized applied to cancel – This firm will have been authorized but made an application to cancel said authorization
Authorized in liquidation – This firm will be in liquidation and intending to stop doing business now or in the future
Authorized in suspension – This firm is still authorized but all permissions will have been suspended for a time
No longer authorized – As you might think this firm is no longer authorized to carry out certain types of FCA regulated business
There will also be a warning, in certain cases, against certain firms. This is a good feature because it gives you information relating to clone firms. A clone firm is one that uses the name, registration number and address of firms or individuals already authorised by the FCA, in order to suggest to possible new clients they are genuine. It is possible these clone firms then give their own phone number, address and website details in order to hoodwink new customers into thinking they are dealing with the genuine article.
In order to be 100% certain you are dealing with a genuine UK regulated firm ask for their registration number and contact details and check against the register. Never call them back using the number they gave, but instead call the firm’s switchboard using the telephone number given in the register. You can also check the details on the company website, use directory enquiries or contact Companies House.
The importance of choosing regulated top Forex brokers in the UK
In order to show the importance of choosing a regulated UK Forex broker there is a recent event we can use as an example of how quickly things can go wrong. In January 2015, the Swiss National Bank made a surprising decision to abandon the country’s peg against the Euro. This seemly insignificant event threw the world of Forex trading into turmoil, and caused Alpari UK to apply for insolvency. This type of event is also known as a black swan event and has the potential to cause chaos. A number of brokers ended up going bankrupt as a result of severe losses. For clients who were trading with an unregulated broker this would be disastrous. Choosing a regulated broker, however, meant that clients funds were safe as they were protected from the bankruptcy in segregated accounts. While the FCA may be the regulatory body for a number of UK based Forex brokers, there are a number of UK Forex brokers that are actually based abroad. For many this means obtaining licenses and being regulated by other bodies. In the USA it can be the National Futures Association (NFA). In Cyprus it can be CySEC, BaFIN in Germany, or the Bank of Ireland in Ireland.
Now you appreciate the importance of choosing a regulated broker let’s consider some of the other important factors to consider.
Features to consider when looking for the best Forex brokers in the UK
Forex traders based in the UK find themselves in a great position, being able to register and trade with almost any broker they choose. However, while the UK is still a member of the European Union we would advise you only to trade with an EU licensed and regulated broker. Simply because it will provide much more reassurance and security and leave you sleeping peacefully at night. Apart from security of your funds, there are a number of other factors to consider when looking for the best UK Forex broker.
Banking options – Being able to make payments in your own country’s currency is an important consideration. The aim of Forex trading is to make a profit from the various movements of different currencies. This isn’t going to be helped by fluctuations in the value of the British pound (GBP), which over recent months, since the advent of Brexit, have been quite significant. Therefore, you should be looking for a top Forex broker in the UK which allows you to make both deposits and withdrawals in Pounds Sterling.
A choice of trading platforms – We have to mention the option of using MetaTrader 4 as the most important, but it may also enhance your trading experience if a number of other platforms are available. There are plenty of other alternatives including web based trading platforms, downloadable and mobile trading apps, depending on your preference for trading. A great way to test out any new or unheard of platforms is with the help of a demo account and you’ll find that most top UK Forex brokers offer this type of account.
Speedy withdrawals – If you’ve had a particularly profitable few days you are going to want to withdraw your profits as quickly as possible. Therefore, it makes sense to be looking for the best UK Forex brokers offering speedy withdrawals. There are now a good variety offering payouts that can be processed in just 24 hours.
Licensed UK Forex brokers – We’ve already mentioned the importance of choosing a UK licensed Forex broker, and it’s pertinent to mention there are a number of forex brokers that aren’t licensed to offer their services to UK based traders. You can check this by reading our Forex broker reviews, featuring ECN brokers and a range of other types of broker.
Available bonuses – For beginners and more experienced traders it will also pay to look for UK Forex brokers who offer bonuses, as these can be a great way to boost your trading funds. Don’t forget to read those all important terms and conditions in order to reduce the likelihood of problems.
Excellent reputation – A solid reputation with no hint of suspicion is a good sign you’ve picked one of the UK’s top Forex brokers. A good place to get some insider information is by reading posts in one of the many Forex trading forums and social media sites. You can also get a good feel for a broker’s experience and level of service by reading a selection of reviews, and searching for relevant and up to date customer testimonials.
Is there a top Forex broker in the UK?
Well, there’s a million dollar question, and one we really can’t answer. Ask any number of traders and you’ll be given a different answer and it’s no difference for us. Finding the best UK Forex broker is a very personal thing. Every trader will have different priorities, preferences, and needs. We can help, however, by stressing some important criteria to be used when comparing brokers and qualities the best Forex broker in the UK should possess. Let’s go over them once more before we finish.
- Reliability – Which includes a licence issued by the FCA
- Good leverage and tight spreads
- Bonuses, special offers and promotions that are attractive
- Easy to use and intuitive trading platform
- Excellent customer service and support
If you can find a UK Forex broker that ticks all these boxes then you’re on to a sure fire winner.