FXCM recently received a $7 million penalty from the Commodities Futures Trading Commission (CFTC) for defrauding customers. This also led to FXCM being unable to register with the CFTC. As a result, FXCM has been banned from operating in the United States.
This will create a significant impact on the Forex market in the United States. FXCM had made it easy for people to invest in foreign currencies in recent years. However, because of the elimination of the threat of fraud, it may now be easier for people to get more out of the market in America.
Gain Capital will take over the database that FXCM holds. This should help with improving upon how transactions are held as Gain works with a similar brokerage solution. More importantly, Gain will help investors with more honest reports.
This leads to some new considerations for traders searching for a broker. The problems that FXCM was penalized for showcase there is a need to choose your broker carefully. Fortunately, there are many things that traders can do to find the most trustworthy and beneficial broker.
FXCM was found to possess conflicts of interest in terms of how its trading system was run.
Sensible training is needed when it comes to finding a good broker. That is, a training session may entail watching professional traders working during peak hours. This is done to help show how the trading environment works and how individual trades may be conducted. Trainers should not be telling people that a very specific standard of work is to be used. The monitoring should simply give people ideas of how professional traders think.
A Need For Transparency
A broker must also be transparent and list as much information on its financials and operating functions as possible. FXCM did not do this and instead chose to send false statements to the National Futures Association (NFA). This deception kept FXCM’s actions in influencing the market from being visible. A broker must be as open as possible if it is to be trusted.
Check the Managed Accounts
Managed accounts are often run by brokers who will work with some of the funds that clients have. A broker must have plenty of managers that work in different fields and can handle specific funds that involve a diverse array of currency pairs. A managed account must also be flexible enough to allow for many pairs to work at a given time.
Who Bears the Risk?
The risks that a broker has should be handled by proper banks and credit providers that offer liquidity. Information on these banks should be as specific as possible. This especially includes banks in which one does not have any vested interests.
Picking a broker can be a challenge at times. By watching for what can be handled, it may be easier for a trader to work with the Forex market without any risks, even after the exit of FXCM from the US market.