The following is a guest post courtesy of GBO International Financial Services. GBO helps clients all over the world establish their businesses online, providing services such as incorporation, licensing, assistance in opening bank accounts internationally, clearing and payment solutions, nominee services and more. GBO is a world leader in providing financial services to online companies. Visit us at www.gbo-intl.com.
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The FX industry has seen tremendous changes regarding regulation and the way in which Forex companies handle their businesses. New markets becoming regulated while existing regulated markets becoming stricter. A development which has dramatically affect the way in which FX companies attract customers, handle traders’ funds, manage bank accounts, etc. These changes in the industry are causing confusion and misunderstanding amongst both brokerages and traders.
Both regulated and unregulated companies have been affected by the changes in the FX industry. A few years ago, companies without regulation used to operate without limitations or impositions from governments, banks or tech providers. Setting up a Forex or Binary Options’ company was done quickly and easily. Without supervision of a regulatory entity, the market of unregulated companies soon became oversaturated and the industry turned into a jungle. Unregulated companies had an aggressive MO that unfavored customers. Traders began to express concerns about investing with unregulated companies and it became more and more difficult to establish a brokerage, including opening business bank accounts.
There is a parallel that can be made between the FX industry and the gaming industry. Up to about a decade ago, the gaming industry had little to no supervision and no licenses were required to start operating. The growth was slow and the sector had a bad reputation. In the recent past, gaming has undergone major changes, including the tightening of regulation and supervision of companies and sites, both big and small. Today’s gaming industry is highly regulated and that has proven to be beneficial for everyone. The market has increased both in number of players and money played, resulting in an exponential growth of the sector in both traditional and online sectors. The same development is expected of the FX industry. The direction in which the market is going is clear whereby companies without regulation will fade away. Restrictions placed by regulatory entities, banks, platform providers and the greater awareness from customers will cause unregulated companies to eventually go out of business and we will eventually see a much cleaner and profitable market.
Unregulated companies face challenges in various aspects of their operation:
- With customers/traders: they don’t have a “mother and father” or alternative complaints body in the cases where there is dissatisfaction with the site
- With banks: extreme difficulty in opening of bank accounts
- With payment providers: who prefer to work with regulated companies
- With financial services providers: who prefer to work with regulated companies
There are service providers who still make their solutions available to unregulated companies, however, they are becoming increasingly difficult for unregulated companies to conduct their businesses and when they do, the owners and directors expose themselves to personal liability.
With time, we will see an FX industry that is clean and booming because traders will feel comfortable investing their funds and those brokers who remain in the industry will continue to conduct their businesses in a proven professional manner.