Whether you are a retail or small institutional forex trader, we all need to trade through a forex brokerage firm. The bigger you are the closer you move to the major market participants – banks, mutual funds, hedge funds, large investment firms. They take up about 75% of the forex market capitalization. Some banks could be brokers themselves. The remaining 25% are individual traders like you and me, and small trading firms. Unlike the stock and commodity markets, the forex market is loosely regulated. Regulation is voluntary rather compulsory. Brokers that choose to be regulated hopefully luring in more clients opening accounts with them. Having your fund deposited in a regulated forex broker certainly enhances the chance of your fund safety. Details of this issue are discussed in the section ‘safety of your funds’. If you have just started out or are exploring a forex trading career, there are many choices of brokerage firms out there for you today.
Your objective in this stage is probably to test the water. You could deposit a couple of hundred or thousand dollars. This is a relatively small amount of trading capital. However, when you progress with your trading career, tens of thousands or even hundreds of thousands or millions dollars are large amounts of money; your most concern would be the safety of your fund. On the other front, some individual traders and trading firms are concerned about minimizing tax expenses, they may choose to open accounts with a particular country domiciled broker for the tax purposes. At this point in time, o.k. and Switzerland based ecn forex broker are probably popular choices because these countries are tax havens as well as having well established regulatory bodies for the forex market. Other Caribbean tax haven countries like Anguilla, Bahamas, Barbados, Bermuda, British virgin islands, Cyprus, etc; panama, the Russian federation, Costa Rica, might lack such well established regulatory bodies. At this time of writing, some forex brokers setting up offices in Hong Kong and Singapore are on the rise to provide clients with better regulatory reputation and tax advantage.
Due to the recent collapses of large and well established financial giants like Lehman brothers us. northern rock, glitzier, Iceland, and other smaller financial institutions all over the world, have had implications on other financial markets including forex. One of the evidences is that, in October 2010, the national futures association nab in us. Imposed new leverage rates of 50:1 for major currency pairs and 20:1 to the cross ones from the standard 100:1 to retail clients from all forex brokers domiciled in us., while brokers outside us. Have no impact from the changes. By saying that, it does not mean either positive or negative news, it depends on who looks at it! For a minority of winning traders it does not matter too much as there is always better opportunities arising from the changes, while the majority of losers keep complaining about the changes.