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Monday, 9 July 2012

Retail Forex Brokers

The Truth About Retail Forex Brokers

In the industry of speculative trading there are only two types of brokers that are allowed to take part in forex trading. The first one is the market maker who has potentially more power to perform speculative trading compared to the other. The less powerful, and more often exposed to controversy that led to its early sunset, is the retail FX broker.

This is an individual person who is a small fraction of the whole trading market. He is only advised to join the trading when there are few slots that remain untaken. Part of the limitation that is given to a retail Forex broker is the fact that he can only participate indirectly through the intervention of the licensed broker or a bank.

The reason why rigidity is being imposed stems from the fact that with there is a greater tendency for a conflict of interest to arise. This is the reason why retail Forex brokers are largely being controlled by two of the widely known governing entities - the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA).

More often, the retail FX brokers are the subject of foreign exchange scams. It is for this reason that rigid control over this type of broker is widely implemented.

In order to pin down the sources of these scams and the scammers, the CFTC and the NFA have mandated the No Dealing Desk (NDD) and the Straight Through Processing (STP) schemes that are bound to resolve problems such as scamming.

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