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Sudhanshu Agarwal, Executive Director, Tickmill
Industry View from
It’s widely known that, as the evolution of the forex market progresses, so do the regulatory standards that govern it. But how does that continually changing climate affect the overall trading experience among regulated and unregulated brokers?
Traders seem to be given one of two choices: use the more restricted trading conditions set by detailed regulatory standards, or take the riskier route and work with a broker that offers more flexibility but far less protection. And that’s where the hesitation may occur.
It’s relatively easy to generalise and say that the two types of brokers are distinctly different. However, it’s not that black and white, and it also comes down to your intention as a trader. To get a complete picture of what to expect you need to understand what a regulated or unregulated broker has to offer, and whether that appeals to your needs as a trader.
Some enter the forex market looking to sculpt a career from trading: making significant investments with a structured action plan or strategy. Others approach the market with more of a lax attitude, where the potentially higher rewards are accompanied by higher risks. But how can you ascertain a broker’s intent, and its impact on your trading?
Where an unregulated firm has minimal operation costs, limited tax burdens and access to unregulated markets, it also has limitations regarding liquidity, payment processing and banking partners. The intent to provide a great service will always be there, whether the broker is regulated or not. It’s the commitment however, to providing the best possible conditions for a client that can be a huge indicator of the broker’s intent.
There’s a shift in our industry towards credibility and responsibility in response to increasingly informed clients. Traders are becoming increasingly aware of the risks associated with trading, preferring to use a broker that offers a safe trading environment that can guarantee longevity.
Despite the common assumption that regulated brokers are more constrained, they actually have a lot more flexibility in tailoring their product offering to satisfy their clients, thanks to their investments in their partnerships. They’re able to enhance client success by providing the appropriate tools and trading conditions through their partners.
As an example, Tickmill invests a significant amount of time and effort to enhance the relationships that we have with our liquidity and bridge providers. By cultivating these relationships, we’re able to continually broaden our product offering while maintaining lower spreads and trading costs for our clients. The benefits are then enhanced by the fact that our clients can trade with guaranteed negative balance protection with access to adequate fund protection from the Investor Compensation Fund (ICF) or the Financial Services Compensation Scheme (FSCS).
Tickmill’s competitive pricing is the result of using a plethora of different liquidity providers. Our industry-leading bridge providers have enabled us to create a customised liquidity pool, taking prices from Tier 1 banks, financial institutions, high-frequency trading shops, electronic communication networks (ECNs), prime of primes and other market makers. Using advanced market data software, we’re then able to cultivate a price feed of exceptionally low spreads, across several different asset classes.
As we can probably assume by now, regulatory guidelines tend to greatly contribute to enhancing any online brokerage solution. Licensed entities are committed to take all sufficient steps to obtain the best possible execution for traders. Their commitment entails exercising consistent standards and operating the same processes across all markets and financial instruments in and with which a broker operates.
In reality, it’s about having that real dedication to providing a great service. So, when we’re asked if a compromise must be made in the name of regulatory protection, the simple answer is no. Why compromise on protection when you’re able to get the best of both worlds?
We’ve gone that extra mile to ensure a competitive service while maintaining investor protection. Not many brokers are able or willing to make that extra commitment.
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