Due to the above-mentioned regulations and their exceptions, investors in the Forex uk sector are faced with the problem that not every broker on the German market experiences the same regulation. This may affect the following:
- The regulations of the respective regulatory authority may not be as strict as in Germany.
- The control of the rules may not be as strict.
This in turn could have negative consequences for investors. A lack of regulation can lead to the following problems:
Inadequate deposit insurance:
The deposit protection for the money deposits on the deposit account is now regulated in the same way across the EU. In other countries, however, this can be very different. If a broker has to file for bankruptcy, part of the money deposited there may be lost. This is sometimes also due to the fact that poorly regulated brokers do not separate customer funds and their own liquidity or do not monitor this accordingly. However, this is mandatory in the event of regulation by BaFin or the FCA.
Bad insolvency protection:
A rather lax regulation is not so strict about the regulations on the capital held by brokers. However, this can significantly increase the risk of bankruptcy for a broker and thus also affects investors.
Exploitation of conflicts of interest:
If brokers act as online trading, they set buy and sell prices for the currency pairs themselves . These can deviate from the market and thus be interpreted to the detriment of the trader. The trader does not act against the market, only against the broker. Thus, the broker has a certain self-interest in that the trader loses, because this increases his own profit.
Adverse trading conditions:
A poorly regulated broker also has it much easier to reduce traders’ profits through order delays and fictitious system failures. A well-known pattern here is represented by numerous profits at the beginning of trading, which are replaced after a few days or weeks by creeping steady losses.
Problematic withdrawal practice:
Brokers that are not adequately regulated can also trick easily when it comes to payment practices. For example, high fees are charged for a payout or the minimum payout is set very high. Long delays in payouts are also a sign of dubious practices that tend to occur with poorly regulated brokers.