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The following guest post is courtesy of Etana Custody.
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Being the larger financial market in the world and the ability to make a profit from positive and negative global events, makes the Forex Market a great and exciting place to be – high liquidity and proﬁt potential that surpass those of other market segments. But being a trader means also exposure to high risky in a volatile and unpredictable market.
Due to the relentless dynamics and increasing complexity of the market, your positions are constantly exposed to unexpected turns in sentiment. It has also become quite common for retail traders to be faced with uncertainty, when it comes to the security and integrity of their deposits.
And until recently, most of you may have not been aware of the benefits, generated by a potential collaboration with a financial custodian, as tool of insurance for your deposits, against theft or other unpredictable events not related to your market exposure.
By standard, Custodian is a financial institution that holds customers` financial assets (e.g. money) for safekeeping in order to minimize the risk of their theft or loss.
For brokers, fund managers and individuals seeking deposit protection against the risk of their broker becoming insolvent and only getting back cents on the dollar, we strongly recommend opening a custodial account (through a Tri-Party contract agreement). Essentially, a custodial account is a financial escrow account established in the client’s name and administered by a responsible person or entity, known as a custodian, who has a fiduciary obligation to the beneficiary.
The main benefits from this service are:
- Protection to the securities of the account holder in the unanticipated event that their broker becomes insolvent.
- Real segregation of customers` deposits from that of the broker
- Added service value and customer appreciation for brokerage business.
Historically, custodians are associated with wealthy individuals or institutional funds. This said there are some companies that provide Custodian services to the retail side of Foreign Exchange.
An example for such financial service provider can be a RegTech Company called Etana Custody.
Etana seeks to resolve pain points experienced by traders, such as:
- Lack of previous experience or knowledge of the new broker you are to trade with.
- The possibility of having your profits withheld.
- The possibility of a broker “going dark” on you.
- The possibility of a brokerage going bankrupt, leading to capital losses.
- Involvement of high risks when sending money overseas to unknown recipients.
By entering the retail Forex space, as a Custodian Etana delivers a new concept to market participants. Anticipating that long-established conflict of interest between traders and brokers will be eliminated by the solutions provided. As an active partner to both the broker and trader, Custodian providers afford traders the comfort of shopping for their broker with more confidence.
Custodian services allow all traders (investors) to benefit from:
- Risk protection over unpredictable events
- Actual funds segregation
- Maximum funds security
Traders (end-users) can enjoy the benefit of having their deposits protected by a custodian knowing that their funds are truly segregated. This engenders a level of trust between brokers and traders where there is more accountability and transparency reducing the anxiety that both parties exhibit when it comes to talking about transactions, disbursements and compliance procedures.