If you are a retail or small institutional forex trader, most of us needto trade via a forex brokerage firm. The larger you're the closeryou proceed to the main market participants - banks, mutual funds,hedge funds, large investment firms. They use up about 75% of theforex market capitalization. Some banks might be brokers themselves.The residual 25% are individual traders as if you and me, and smalltrading firms.
Picking out a right fx broker is not an static activity. It's a dynamicone depending on one or more of the following factors:
Regulated or non-regulated foreign exchange brokers.
What stage of the trading career you have. You trade for yourown money or manage other people's money too.
Quantity of your trading capital.
Services of the particular fx broker that address yourrequirements for trading.
Tax implications in the event you open trading account with a brokerdomiciled in U.S. or U.K. or Switzerland or tax haven countrieslike Hong Kong, Singapore, British Virgin Island, Bermuda,Cyprus, so on.
Changes of the industry regulations. For instance, a newleverage of 50:1 (the existing one was 100:1) imposed on U.S. basedforex brokers effective on October 18, 2010 has alreadyimpacted on traders having accounts with them.
Unlike the stock and commodity markets, forex is looselyregulated. Regulation is voluntary rather compulsory. Brokers thatchoose to be regulated hopefully luring in more clients openingaccounts using them. Getting your fund deposited inside a regulated forexbroker certainly increases the chance of your fund safety. Details ofthis issue are discussed inside the section 'Safety of Your Funds'.
In case you have just started off or are exploring a forex currency trading career, thereare many choices of brokerage firms available for you today. Yourobjective on this stage is most likely to try the water. You can deposita handful of hundred or thousand dollars. It is a relatively smallamount of trading capital. However, whenever you progress with yourtrading career, tens of thousands or even thousands and thousands ormillions dollars are huge amounts of money, your most concern wouldbe the security of the fund.
On the other half front, some individual traders and trading firms areconcerned about minimizing tax expenses, they might elect to openaccounts with a particular country domiciled broker for the taxpurposes. At this time over time, U.K and Switzerland based brokers areprobably popluar choices because these countries are tax havens aswell as having well-established regulatory bodies for that currency markets.Other Caribbean tax haven countries like Anguilla, Bahamas,Barbados, Bermuda, British Virgin Islands, Cyprus, etc; Panama, theRussian Federation, Panama and nicaragua ,, might lack such well estabishedregulatory bodies. Currently of writing, some fx brokers settingup offices in Hong Kong and Singapore are on an upswing to provideclients with better regulatory reputation and tax advantage.
Because of the recent collapses of enormous and well established financialgiants like Lehman Brothers (U.S.), Northern Rock (U.K), Kaupthing,Glitnir, Landsbanki (Iceland), as well as other smaller banking institutions allover the planet, have experienced implications on other financial marketsincluding forex. Among the evidences is the fact that, in October 2010, theNational Futures Association (NFA) in U.S. imposed new leverage ratesof 50:1 for major currency pairs and 20:1 towards the cross ones from thestandard 100:1 to retail clients from all of foreign exchange brokers domiciled inU.S., while brokers outside U.S. haven't any impact in the changes. Bysaying that, that doesn't mean whether good or bad news, itdepends on who examines it! For a minority of winning traders it doesn'tmatter a lot of as there are always better opportunities arising fromthe changes, as the majority of losers keeps complaining about thechanges.