I opened an account with TradeQuo, a new broker on the scene. Their website claims they’re regulated by the Seychelles FSA, but one of their customer service reps informed me that the Seychelles regulations only apply to Seychelles, St Vincent & Grenadines and Cyrpus. All other countries follow the St Vincent & Grenadines (SVG) regulations.
I’m getting worried because the SVG clearly states on their website that they do not regulate CFD trading. Since I’m not from any of the countries mentioned above, is there anyone regulating my account?
It doesn’t matter, because from the perspective of customer protection it’s worthless anyway.
This isn’t real regulation, that can help customers.
Spot forex brokers choose where to be regulated. Most regulators are fake ones, paid for by the subscription-fees of the brokers they pretend to regulate; they never rule against their paymasters in the event of arguments.
Real regulators (FCA, ASIC, CFTC) are independent and funded by governments, were set up in response to public demand for customer protection, and can often help you if you need it.
It’s probably the most widely misunderstood subject in forex-trading, and especially in this forum.
These posts/threads will help you, if you read them carefully - click on the green links -
Several different regulatory schemes and registration schemes are very common in business of all sorts across the entire globe.
Firstly there is the enforcement bureau. This is like the SEC in the US or the FCA in the UK. They employ legal officers who look for breaches of their government’s regulations and get the company to comply with the regulations, via prosecution if necessary.
Then there is the self-regulatory model, by which the companies within an industry pay for a supervisory board to make sure all members abide by the code of conduct. The idea is that the companies get some reputational benefit from having a membership badge of the XYZ body, and the reputation of the industry is protected from cowboys (also new competitors can be discouraged).
Thirdly there is the registration plan. The company pays a small fee to get a registration in a given country. This is like the flag of convenience on a cargo ship - you might have wondered why so many cargo ships are registered in Panama or Liberia, when they were built somewhere else and never go near these places.
This set-up isn’t going to change any time soon for our benefit.
It doesn’t affect me personally because I trade mostly futures, and when not, I spreadbet (UK FCA-regulated) anyway. But the overall situation is bad, for customers. And made worse by people offering really harmful advice in forums on how to “trade overseas to avoid regulators”.
It’s not my way but there are people out there who are very active in finding the tiniest discount or special offer from trading with an unregulated company, not just in forex trading but in everything they do.
These are the people who bring in a building firm to extend their house - cheaply, with cardboard. They buy a second-hand car with a suspiciously low mileage for half what it should cost. They go on holiday and find some guy in the local market-place who promises to take them to some secret cultural ritual in a tiny village miles off the road, for 5 bucks and a beer.
I suspect most of the time they get away with such risks, we only hear about the unlucky few. So believe it or not I’m pretty relaxed about unregulated brokers.
I wouldn’t want to see retail spot forex CFD’s disappear and no longer be available to “small punters.”
I think that’s the inevitable outcome, though, eventually.
It’s what happens to industries, especially financial ones, that won’t/don’t regulate themselves effectively: they end up being overregulated by inappropriate regulators they never wanted (and even some of their customers didn’t), or gradually made illegal, just like “binary options” now are in so many countries, entirely understandably and predictably.
It’s a shame, but the anti-regulation brigade will never learn the lessons of history, probably mostly because (although they don’t look at it in these terms and would never admit this) they’d actually prefer to “be right and be victims” than to make any concessions that would actually improve their lot and the position for future generations of punters.
The offshore broker industry is fuelled by two common traits among new traders: The urge to get rich quick, and the obsession with being right, which often leads to Martingale trading. Such traders applaud offshore brokers that offer ridiculously huge leverages to sustain their Martingale positions. TradeQuo even offers 10 million to 1 leverage for forex, a disastrous reciple for overtrading and an early margin stop out. With conservative postion sizing, I can’t think why anyone would need more than 100:1 leverage.
