As the founder of online FX company, I have encountered such fears by traders which I believe are largely unfounded. However, it is this regulation that missed every contemporary problem in the banking and financing industry.
Here is why.
It’s a fact that most brokers—even the largest ones—offer the same products and services. In an industry with little differentiation among brokers, the biggest players tend to consistently mention and advertise their regulation.
But it is this regulation that missed every contemporary problem in the banking and financing industry.
Making the assumption that other EU member states’ regulation is a loophole, does not seriously provide information that readers need to make an informed decision. EU regulation guarantees traders a certain amount of losses back, but again, we have experienced what guarantees truly mean during this EU crisis.
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Acquiring regulation in UK or Cyprus, comes down to what the broker is willing to spend and money that must be on deposit and never used.
Concerning bonuses offered, this is a matter concerning the expense of acquiring a customer in a highly competitive industry. From what many consider minor regulation to full regulation in the USA, the cost to operate a Forex company is very high.
Banks will not loan Forex start-ups money to launch a company and it requires capital. In the online world, Forex is one of the most expensive and has helped provide significant revenue from Google to leading business news sites. Offering a bonus increases opportunity and gives traders incentive to open an account and trade.
Remember, bonuses are good for a first investment and are typically cancelled upon initial withdrawal.
Another misunderstood fact is the volume of Forex being traded in the UK. The statistic provided is what banks do—not retail clients that IG markets and its competitors provide for. As mentioned in your article, most brokers offer the same services, yet banks offering liquidity are limited and a good percentage is passed through the UK. Spread betting and binary options are market-making operations where the broker, not banks, take on risk most likely not being reported in official statistics.
What growing competition in the Forex industry reflects is a demand for a high level of service and attractive offers. Using words like “lured”, “reputation at stake” creates an atmosphere where traders and potential traders may not explore or fully utilize the great benefits that forex brokers can offer. Just because a trader can lose all of his money, does not mean that he will.