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Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation.
Each asset class has its own set of protocols put in place to combat their respective forms of abuse.
In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order.
Who are the Industry’s Leading Regulators?
Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.
In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers.
Regulators also serve as a countermeasure against market abuse and malpractice by brokers.
Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction.
By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.
Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.
In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities.
The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.
Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.
Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry.
With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.