Factors to Consider When Choosing a Stock Broker
Trading Stocks Choose a Stocks Broker
Factors to look for and consider when choosing a stocks broker
Regulation is one of the guideline of choosing a broker. As a new trader your first challenge is to choose the right one. The best ones are those that are regulated. This should be the type of firm that you should choose: a regulated stock trading broker.
It isn't as easy as it sounds to select a good one & the whole searching process might leave you confused due to the huge competition between them, as they all offer different trading softwares, trading services, order execution & capabilities. Best criteria in choosing is to find a regulated one.
Regulated brokers have to submit all their transactions every year to the regulation authority for audit. This means that these companies can't participate in any illegal activity such as money laundering. This is why your stock broker asks for copy of identification document and proof of residence location from traders when they are signing up, so when you as a trader are opening an account and are asked for these documents when opening an account, you will know why they are being asked for.
Some of These Stocks Broker Regulatory Authorities are Listed Below:
National Futures Association ( NFA) - USA
The NFA regulates all US based financial firms, the official web site for NFA is https://www.nfa.futures.org/ where list of USA stocks brokers are listed. NFA doesn't issue license to other international ones, unlike other regulatory authorities, NFA will only license US based firms. NFA just like CFTC have very overbearing regulation rules which are not favorable to the traders themselves. After these two NFA & CFTC introduced these rules many international stocks brokers closed down their US based branches, Those that did not have US branches were forced to close & transfer the accounts of USA citizens because CFTC threatened to sue any stocks based firms that isn't from America if they open trading accounts for USA Citizens. This is why most stock brokers won't accept USA Clients.
Commodity Futures Trading Commission (CFTC) - USA
The CFTC regulates all US based financial firms, CFTC is Similar to NFA
Cyprus Securities and Exchange Commission ( CySEC) - Cyprus
The CySEC regulates all Cyprus financial firms, the official website is https://www.cysec.gov.cy where you can search for the registration and licenses number of those Stocks companies licensed by this regulator. The CySEC regulates brokers operating within the European Union Jurisdiction of Cyprus Member Country.
FCA - Financial Conduct Authority as of 2013 - UK
NOW FSA has changed name FCA, and regulation details can bound from either FSA or FCA.
The FSA regulates all financial firms in UK, the official site for FSA is https://www.fsa.gov.uk/ this web-site contains list of stocks companies licensed in the UK. FSA also registers other international firms and stocks based firms from other countries that have an operating office within the UK. To check whether the financial institution you're trading with is regulated in UK just go to FSA Register.
German Federal Labor Market Authority ( BaFin) - Germany
The BaFIN regulates all German financial institutions, the web-site for BaFin is https://www.bafin.de & BaFin is Federal Supervisory Authority in German For Investment firms and institutions operating within German.
Australia Securities and Investments Commission ( ASIC) - Australia
The ASIC regulates all firms in Australia
The Financial Futures Association of Japan (FFAJ ) - Japan
Regulates all Japan based firms
Swiss Federal Department of Finance (FDF ) - Switzerland
The FDF regulates all Swiss based firms
Canadian Investor Protection Fund (CIPF ) - Canada
The CIPF regulates all Canadian firms
MiFID, Markets in Financial Instruments Directive
MIFID is more of a Regulation Standard for European Union Brokers, than a Regulation Authority.
International Financial Services Centre (IFSC ) - Mauritius
The IFSC regulates all Mauritius firms
Above Regulatory authorities are the most trusted & the most famous regulatory authorities, it is best to open an account with a regulated broker that is licensed by one these regulatory authorities which are most popular regulators.
About USA Based Stocks Broker Regulations and America Regulatory Authorities
NB: One thing you should know about regulators is that you might not want to chose NFA or CFTC American Regulators, who have these very strict rules:
- Max Stocks Leverage 50:1
- First In First Out FIFO Trading (open trades in 123 order, must close then in 123 order, not 321, not 312, not 213 trading order)
- No Stop Loss Stocks Order Setting
It is for the above rule that most traders won't open an account with USA brokers, most traders who traded with USA stock trading brokers closed their accounts and transferred them overseas with the introduction of this rules, around sometime in year 2010.
In addition these regulators, will take to court any stocks financial firm which opens an account for America citizens, this is why no stock broker will open an account for an American, Only those trading brokers which are based in the America can open an Account For An USA Citizen. Only ones stocks brokers accepting US clients are only those brokers based in the USA.
