A brief definition of Forex It is the business where currencies are exchanged, such as the exchange between the Euro against the US dollar and the investment of their price movements in the market (increase or decrease) to earn money.
The Forex market is an Over the Country (OTC) market; investors and traders buy, sell, and exchange currencies (Add a link to what is forex article).
Forex trading regulations Organizations
Until the year 2008, there was no legislation for Forex traders, but this did not last much, as it changed with the Farm law in 2008.
This year, in response to the global financial crisis, the Dodd-Frank Act (Federal Law of the United States of America in 2008) Prevented Forex trading. However, the matter did not last long, in 2010 the law changed: the law allowed for trading in Forex when some conditions that we will mention below.
We will talk about the only two legal entities
– National Futures Association (NFA)
This is the first official Organization to grant licenses and permissions to Forex brokers and traders in the United States, and the first to set mandatory standards for Forex traders in the United States.
Its job is to protect investors and monitor the business of the future to defend it from fraudulent activities that threaten it. NFA keeps a high level of transparency for all investors in these locations.
– Commodity Futures Trading Commission (CFTC)
It is an independent US agency and this US agency aims to promote futures markets between investors and protect investors from any fraud or bad trade defects that may lead to the loss of one of the investors in this trade.
So, some countries have considered that trading in Forex sites and apps is illegal and have imposed a fine on those who violate these laws and some of the other countries have made available trading on these Forex, but required those who want to trade on such the following:-
- Obtaining a license that allows you to trade on such sites.
- The investor has a large capital (cash amount).
Details of conditions
Obtaining a license that allows you to trade on such sites: The broker may obtain several licenses, but some of them require one or more conditions (it is not that easy).
For example, if the mediator can obtain a license from one of the European specialized companies, the mediator can accept traders from any country of the European Union.
If a broker, who has a license from any country in Germany can accept any trader from all over the European Union, such as the Netherlands.
However, it is not so simple when it comes to traders in the United States so that the broker can accept traders from the United States, they must also obtain a license from the (NFA) and this is not easy. This is because the capital requirements are harder than obtaining a license in the European Union.
This is not easy, and this was a major reason why most traders turned away from it.
The investor has a large capital (cash amount): According to the Dodd-Frank Law, applied by (CFTC), brokers in the U.S. should have a capital of at least $ 20 million.
This can be compared to the requirements in every country, but the one who owns the Forex services license is the one who can trade on the Forex site with brokers and traders.
If we go to another country (France), you will find that it does not agree with the same decisions and laws.
France banned trading on Forex, considered it an illegal act, and punishes the violator of this decision.
France’s issuance of this decision, of course, arose from the existence of obstacles preventing the issuance of such a decision – this is of course in the interest and safety of the state – but we must know what these obstacles are…?
What are the obstacles that stand in the way of Forex companies ’transactions?
We see some countries banning Forex trading inside for the following reasons:
– Forex trading is considered a threat to the national security of the country.
– Some countries with bad economic conditions prevented entry into any Forex trade (because a subscription to Forex trading is in the hard currency) because it causes the hard currency to exit from the country, which exposes it to heavy losses.
– Governments want the money trend to be the same.
Risks of Forex
The country that allowed trade in Forex sometimes witnesses a risk to investors and brokers:
In some countries, Forex fraud companies have taken advantage of the state of tension that the country is going through and install their nets to hunt Forex investors.
They take advantage of the losses they have been exposed to due to the market downturn.
Currencies market experts stressed that the transactions that are taking place on Forex sites are extremely dangerous due to the fraud operations carried out by dummy companies, in addition to being a threat to the country’s progress.
Currencies market experts pointed out that most of these companies are fake, unlicensed, and operate without a document or legal legislation allowing them to do so as are not limited to receiving money from an unknown source or unidentified owners so they can be considered as a means of money laundering.
Therefore, any fictitious company involved in this trade must be punished for the following reasons:
- Exploiting fake company names.
- Fraud and fraudulent investor money.
- The lack of a license that allows them to do this work.
- The Financial Services Authority (FSA) which is an independent, non-governmental organization to ensure market confidence and financial stability, protect the consumer and reduce financial crime.
The rule of trade in Forex differs from one country to another due to the different economic conditions of the country and the plans that these countries follow in advancing their future.