Doing Due Diligence on Your Forex Broker - Part One
Recently there have been changes made to the regulatory and capitalization requirements needed to be a forex dealer. The intent of these new regulations are to help reduce the prevalence of poorly run, over-the-counter forex dealers often called "bucket shops". Currently the net capitalization requirements have been increased to $5,000,000 minimum and many traders have reevaluating their dealer based on those new requirements.
Capitalization is only one of many ways that a forex dealer can be evaluated. Performing "due diligence" on a broker or dealer is important because the failure of one of these firms can be catastrophic to a trader's account. The mere mention of the firm "Refco" is enough to send shudders down the spine of most traders. What else can be done to increase your confidence about a particular broker or dealer?
This is the first part of a live webinar I gave today on the process of doing due diligence on a forex dealer although the same process could be applied to stock and option brokers as well. Besides capitalization, I will cover how to research a firm for complaints and compliance issues. I will also show you how to find information about the individuals that you speak with from your broker as well as other service providers such as IBs or system sellers.
