There are many factors to be considered when choosing Forex brokerage firms. This happens due to the availability of different Forex brokers in the market who are willing to accept your registration. In the market, you will find stand alone Forex brokers and those which are also licensed banks. In the beginning, it was the role of the commercial banks to provide the foreign exchange services in the market. However, series of developments have taken place in the Forex market resulting in emergence of several brokers which are not banks. It is a good idea to deal with licensed banks as your Forex broker. Having a Forex broker that is also a licensed bank has several benefits to the trader. A Forex trader benefits from the following.
Regulation
Every Forex broker needs to undergo certain kind of regulations as you know. Forex just like any other financial markets should be regulated to keep off fraudsters and illegal operators. You should not be surprised to find that there are several unregulated brokers in the market although this is primary requirement. This puts the trader at bigger risks of losing his investments. Besides, there is no protection of the traders goals and interests. Choosing a Forex broker that is also a licensed bank lets you benefits from outstanding regulation. This is because in the financial institutions banks are given the best regulation.
Low exposure to risk
The subsidiary benefit of using brokers which are regulated banks is low risk exposure due to intensive regulations given. When dealing with a well established licensed bank, there are minimal chances that your investment will be under greater risks. Although there are chances of involving in unethical, fraudulent and illegal activities, their chances are very minimal. This gives you the ultimate peace of mind needed whenever trading.
Transparency and accuracy
Forex brokers which are not licensed bank always partner with banks to provide the service to their clients. First, they keep funds with these banks. They also receive trading quotes from the banks which they relay to their clients. This creates allowance for broker to interfere with quotes. The Forex broker can thus decide to alter quotes to favour them. They can also hold the quotes until they get good grounds in the market. The trader thus suffers from low profitability.
Low commissions and Fees
Dealing with a Forex brokerage firm which is not a licensed bank often proves to be very expensive and less profitable. This is due to the high commissions and fees involved. Because you will be dealing with a third party, the fees and commission must be increased: you pay for the service of the broker and the bank that it uses. These brokers cannot operate without partnering with banks. On the other hand, there will be low fees and commission because you will be dealing directly with the bank, not an intermediary.
Conclusion
It is a good idea to choose Forex broker which is also a licensed bank. There are many other benefits that a Forex trader will enjoy. Apart from what is discussed above, you will enjoy trading in the Forex market. If you want to reduce the level of risks involved marginally, this is the right decision to make. Lastly, Forex which are also licensed banks are known to be very reliable and able to assist you meet your investment goals.
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