Getting started in Forex trading can be daunting. Many novice Forex traders cannot differentiate between a trusted and well-backed brokerage firm and an ordinary brokerage firm. They are lured by firms that promise low brokerage and fees. Most firms that offer trading at unbelievable rates are fly-by-night companies that cannot be trusted with your hard-earned money. When trading in financial market, you must look for firms with positive history, excellent reputation, and strong financial background. Also, the firm must adhere to all international rules and regulations. Here is a detailed look at some of the factors you must consider when selecting a firm:
Financial and Regulatory Standards
Your broker must meet the standards set by the Commodity Futures Trading Commission (CFTC) including the requirements of capital adequacy. The broker must submit all their financial statements to the regulators. Ideally, the broker must also be a member of the National Futures Association (NFA) which has the power to terminate the status of Futures Commission Merchant (FCM) for any violation.
The NFA keeps a record of all proceeding against brokers who are registered with the association. Traders must check for problems with a firm before making a deposit with them.
Framework of Dispute Resolution
The regulatory framework of the United States is considered the best in the world. Traders who have a problem with their broker, they must be able to approach the NFA, FCM, or CFTC. If the broker is not registered with any of these associations, you may not be able to resolve the dispute.
The company you select must have offices in several countries so it can support you when you need help. It must also take financial transparency seriously and must meet strict financial standards. Also, it must be recognized by regulatory authority for its customer support and best business practices.
Forex trading can take place any time during the day, so your broker must have customer support available at all times. Also, your interaction with the live person must not be frustrating. If you are new to Forex trading, your broker must be able to provide all the material required to understand the market.
One company that meets all these requirements is FXCM. It is leading financial broker and provider of CFD trading, foreign exchange options, and spread betting. The company has inspired thousands of investors and traders to trade in the largest and the most liquid market of the world.
Background of the Company
FXCM was started in 1990s by a group of Forex traders who were eager to invest in the market. During 1990s, there were limited avenues of investment in this market. When the company was started in 1999, the promoters of the company convinced Forex traders that they could trade in this market for 24 hours a day if they had a computer and internet connection. When the traders understood the benefits of using FXCM, they started using their platform to trade in the market. This improved the reputation and turnover of the company. By the end of first year, the company had trading volume of over $250 million per month. When the company registered with NFA as a commission agent of the futures market, it confirmed its place as good and reputed broker. Being a member of NFA, the company diligently follows all its regulations and strict capital requirements.
In 2003, the company started DailyFX to help Forex traders and investors. The team of DailyFX conducts several educational webinars to train and educate Forex rookies. DailyFX also offers several on-demand videos and technical analyses to improve investor knowledge.
In 2008, when the financial crisis affected most brokerage firms, FXCM remained unaffected. It weathered the global crisis because of its strong balance sheet and excellent business model. The client base and revenues increased during this period.
As the market expanded, most clients of FXCM wanted to trade in other financial instruments. To fulfil the wishes of its clients, the company started offering trade in stocks and commodities.
To improve financial strength and transparency, the company went public in 2010. The shares of the company enlisted in the New York stock exchange.
To simplify trading, the company launched the FXCM Apps store in 2012. The app was free to traders at all levels. This made trading easier and helped the traders develop new strategies. When financial institutions approached FXCM for trading solutions, the company decided to move beyond retail. The company soon developed several platforms to meet the specific needs of their institutional clients.
In 2014, the company took No Dealing Desk (NDD) to next level by changing the business model of the company. The company launched the spreads-plus-commission model which improved the level of transparency of trades and reduced the commission payable by traders.
Another important factor to consider when selecting a Forex broker is its financial strength. Companies like FXCM believe in making its financial health transparent. These companies believe that their clients must know and understand the financial stability of their broker. The financial statements of FXCM are audited by Ernst & Young, which is one of the most reputed accounting and auditing firms of the world.
When you analyze the balance sheet and revenue statement of FXCM, you will find that it has operation cash of $273 million and customer equity of $863 million. It has over 180,000 active accounts and the revenues for second quarter of 2015 stand at $863 million. The adjusted EBITDA of the company is a decent $5.9 million.
Even thought the minimum regulatory capital requirement stands at just $71 million the regulatory capital of the company is $188 million. This means that FXCM has surplus regulatory capital of $117 million.
FXCM LLC which is the company that formed the FXCM is registered as Retail Foreign Exchange Dealer (RFED) and Futures Commission Merchant (FCM) with Commodity Futures Trading Commission (CFTC). It is also a member of National Futures Association (NFA). The company is a vocal advocate of Forex regulation and investor protection and it has taken several steps to ensure the same.
Awards and Recognitions
Transparency and impeccable customer service has helped FXCM build a reputation of being the top Forex broker in the world. The company has opened several international offices ensuring support to clients is widespread. FXCM has also won several awards and recognitions for its services. Some of them include:
- Stocks and Commodities Award
- Best Sell-side Analysis Contributor
- Winner, Best Retail Broker execution
- Best Forex Brokerage Service
The reputation of the company is mostly built through overall client satisfaction, online educational materials, and customer service. FXCM has taken many steps to ensure that both clients and potential investors are happy with their service. They also provide education material to help investors get all the information regarding a particular service. All these steps have helped in building trust and made it a global force in Forex brokerage.