How is forex regulated?
Forex is short for foreign exchange, this being the financial market where currencies are bought and sold. It works according to many of the same principles as the traditional stocks and shares market, although there are important differences. Forex Traders aim to buy currencies when they are weak relative to other currencies and then sell them in markets where conditions are more favorable.
As you can imagine, the value of any given currency is reported to the nation that uses that currency. The forex market is affected by the value of currency, but it can also play a role in determining those values. For this reason, among many others, the Forex market is heavily regulated just as the stock market is.
But how exactly is the forex market regulated? The answer to that question is relatively complex but easy enough to understand.
There is no centralized body governing the currency trading market; instead, several governmental and independent bodies supervise forex trading around the world. Some of these include, but are not limited to:
The global supervisory bodies regulate forex by setting standards which all brokers under their jurisdiction must comply with. These standards include being registered and licensed with the regulatory body, undergoing regular audits, communicating certain changes of service to their clients, and more. This helps ensure that currency trading is ethical and fair for all involved.