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To safeguard your forex trading capital, pick the right broker

Is depositing my forex trading capital with you safe?

It is encouraging to see IG Asia post a page ‘Client Money Protection‘ on its trading portal informing and educating traders how they implement client money protection. I don’t know when this page was put up but now that it is occupying a space on the front page instead of the usual marketing messages, it is clear that IG sees now as a good time to emphasise the importance.

As a trader, this move certainly makes me feel more confident at a time when financial markets are jittery about Europe and the US.

IG is a regulated forex trading broker in Singapore with a Capital Markets Services License from the Monetary Authority of Singapore.

 

A sound financial system is not perfect

We protect our clients’ money, holding 100% of client money – including net unrealised profits/losses – in trust accounts with banks licensed by the Monetary Authority of Singapore (MAS). – IG Asia Pte Ltd

A sound financial system depends on all players to play their part and not to be complacent. Were there bank/broker failures in the past? Certainly. There were at least 2 broker failures in the past decade. In 2005, Refco Inc. failed affecting its local unit Refco Singapore. This was followed by failure of MF Global in 2010 and again affecting its local unit.

Despite these incidents, we do not need to worry that broker failures will become common. Regulated brokers as well as MAS certainly have practices in place to ensure we can trade safely.

 

  1. No co-mingling between client’s money and the broker’s operating funds
  2. Regular reporting and auditing
  3. Proper disclosure
  4. A system of enforcement and penalties
  5. Other measures required by regulator

However, individuals own ultimate responsibility to take care of their own forex trading capital. Here are a few ways to safeguard your money.

 

Simple tips to choose the right broker

1. Choose a broker that is regulated in a country that has sound financial system in place. Here in Singapore we are lucky to have that.

2. Having a regulated broker will almost eliminate all errant brokers that have unsound management (or even fraudulent in the first place)

3. If you choose to use a foreign broker, ask where they are regulated and where your trading capital is deposited (which are not necessarily the same).

4. If you intend to deposit substantial funds, make deeper checks and verifications with third parties such as the regulator. Do not rely on one source of information only. Never presume that a broker is regulated. Ask for the regulation number and verify with the regulatory authority. This can be done online in Singapore but with other countries, a call may be necessary.

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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