FINANCE

How Choosing a Compliant Broker Benefits Traders

How Choosing a Compliant Broker Benefits Traders

Eliza Eliadou is the head of compliance at easyMarkets, one of the world’s most trusted financial brokers. We recently had the opportunity to connect with her on the importance of choosing a fully regulated and compliant financial broker.

“Regulatory compliance and finance go hand-in-hand,” Eliza, who has been with easyMarkets for ­­6 years, said. “The financial services industry is built on trust. Brokers who can demonstrate that trust over many years are best positioned to grow their business.”

Eliza certainly is right. The online financial trading industry has exploded over the past ten years, but very few firms have survived to tell about it. easyMarkets, which is based in Cyprus and regulated by the Cyprus Securities and Exchange Commission (CySEC), has been in business for 13 years. The company recently expanded its mandate to provide traders with access to over 300 markets around the world. This includes traditional financial instruments like forex pairs, commodities and indices, as well popular products such as Contracts for Difference (CFDs) and options.

In researching the online financial broker community, we were surprised – quite shocked, actually – to find so few brokers survive past just a few years. Eliza, who has witnessed many brokers go bust over the years, described this phenomenon as fairly common.

“In a high growth industry, naturally you have a lot of enthusiastic start-ups entering the market. Unfortunately, their enthusiasm doesn’t always translate into good service. I would say that most of these brokers fall out of favour with investors because they fail to earn their trust. Many of them aren’t even properly regulated by their local or regional financial services authority. If you’re a trader, that should be the first red flag.”

She added, “My experience at easyMarkets can be summed up with one common denominator: provide traders with exceptional services, period. Compliance plays a huge role in that. We are subject to very specific terms in the way we operate, process client funds and pay out earnings. We have very clearly established guidelines for what to do in the case of fraud. And we go through the painstaking process of keeping everything on record. That is what’s required of us.”

The CySEC regulatory framework has been described as one of the most robust in the European Union. Not only does it operate within the EU’s MiFID financial harmonization framework, it is one of the most active in adjusting its existing regulations in order to respond to changes in the market. For example, CySEC became the first regulator to regulate binary options – a growing but highly controversial market that has been classed as gambling in some European jurisdictions.[1]

Eliza is quick to remind traders that regulation is one of the most important factors to consider when selecting a financial broker.

“If you’re new to financial trading, be sure to look beyond the flashy adverts and ask whether or not the broker you’re considering is properly regulated and allowed to operate in your jurisdiction. Proper legislation ensures the broker is adequately capitalized and conforming to anti-money laundering legislation and other important provisions.”

However, being fully regulated isn’t the only litmus test Eliza recommends when selecting a broker.

“When it comes to choosing a broker, regulatory certainty is a necessary but insufficient,” Eliza adds. “The other side of the coin is the broker’s performance over time. How long as it been in operation? Does it have a solid track record of paying out clients? Is it globally represented or does it operate in shady jurisdictions without much oversight? These important questions must be asked from the get-go.”

It’s difficult to argue with that. After all, it would be unwise for a trader to deposit thousands of dollars at a broker with an unproven track record or has a bad history of paying out clients for winning trades. Luckily, ascertaining this information is relatively easy. If you are prepared to research broker regulation, you should be ready to go a step further and ensure the service provider has an established track record.

Based on our conversation with Eliza, brokers that are regulated and have a proven track record providing excellent services are the two most important criteria traders should consider in their selection process. These selection criteria weed out the vast majority of brokers. And the cream rises to the top as a result.

Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).

[1] Tony Robinson (March 9, 2015). “How Is Binary Options Regulation Changing in the UK?” Forex Magnates.

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