Doing Due Diligence on Your Forex Broker - Part One

01/05/2009 11:16 am EST

Focus: FOREX

John Jagerson

Co-Founder and Contributor, LearningMarkets.com

Recently, there have been changes made to the regulatory and capitalization requirements needed to be a forex dealer. The intent of these new regulations is 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 been 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.  

Click here to watch the video.

By John Jagerson, of PFXGlobal.com and LearningMarkets.com.

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