What is an Authorized Forex Dealer?
A licensed Forex dealer is a type of financial institution licensed by the relevant regulatory body to act as a dealer involved in foreign currency transactions.
- A licensed Forex dealer is a regulated financial institution that facilitates trading in the Forex market.
- The NFA, which is overseen by the CFTC, authorizes US Forex dealers.
- Authorized Forex dealers in the United States undergo rigorous screening at the time of registration and are strongly regulated at the time of approval.
Understand Authorized Forex Dealers
Trading with a licensed Forex Dealer ensures that Forex trading is carried out in accordance with the mandated guidelines set by national regulators. The National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC) authorize US forex dealers.
The NFA, supervised by the CFTC, ensures that authorized Forex dealers undergo rigorous screening at the time of registration and that the regulations are strongly enforced at the time of approval.
US investors considering trading in the Forex market are advised to trade through an authorized dealer. By doing so, investors will know that they are dealing with an experienced and qualified party, and if something goes wrong, they will get NFA support to investigate any possible problems. can do.
Forex dealers in countries other than the United States are approved by their own governing body. In some cases, the requirements are less stringent than those required in the United States.
Forex transactions include buying and selling currencies. A licensed Forex dealer facilitates the trading of currencies for individual customers and / or businesses.
Forex trading clients are usually not interested in owning the currency they bought or offering the currency they sold. Rather, they buy and sell currencies for speculative reasons and try to make a profit as the price of the currency changes. Receiving the actual currency delivery is called currency exchange and is provided by a currency exchange office or bank.It’s different from forex transaction Provided by a licensed Forex dealer. Forex trading does not require the client to deliver or receive the underlying currency.
Currencies are traded in pairs such as USD / CAD, which is a pair of US dollar (USD) and Canadian dollar (CAD). This is a direct quote and the rate associated with the pair is the amount of the second currency it will take to buy the first one unit. The rates are constantly changing, but if the current market price is 1.2667, it means that it costs $ 1.2667 to buy US $ 1.
Forex trading is often done with margin. This means that the trader only needs to invest some of the money needed to trade. For example, to buy 100,000 worth of currencies, a trader only needs to invest 5,000 own funds. This means that you are using 20: 1 leverage, a margin of 5%. This is another reason why Forex traders usually do not want to receive or offer deliveries of the currencies they buy or sell. Most retail clients utilize leverage and do not have the funds available to provide 100,000 worth of currencies, but a portion of that amount, 5,000 in this example, is used to estimate price fluctuations of 100,000. I can do it.
A process called rollover, which is performed automatically every night by an authorized Forex dealer, allows traders to infer without delivering or receiving the actual underlying quantity of the currency they are trading.
Example of an Authorized Forex Dealer (USA)
Dealer approvals are subject to change over time. There are several licensed Forex dealers in the United States, most of which have been around for years.
- TD Ameritrade’s thinkorswim offers access to stocks, options and futures, as well as trading in over 100 currency pairs.
- Interactive Brokers is a popular discount broker that offers forex trading capabilities and access to stocks, options, futures and many global markets.
- Forex.com is a dedicated Forex broker regulated in multiple countries.
- Oanda is regulated in several countries and offers easy spread-based pricing for currency transactions.