Trading Regulations

What are Trading Regulations and How do They Impact Customers

FindItMore | Investments and the process of trading are usually regulated at the country level throughout the globe. Most of the products that provide a return are handled, including stocks, indices, commodities, forex, and cryptocurrency. In some countries, the regulatory duties are broken out by product. For example, in the United States, which has one of the strictest regulatory environments, forex and cryptocurrencies are regulated by the Department of Treasury and the Federal Reserve. The trading of stocks and commodities is regulated in the United States by the Securities and Exchange Commission. The regulation protects consumers. Brokers and market makers who offer securities to consumers have to show that they are on the up and up. If you find a broker offering assets that are not regulated and the broker is also not a regulated entity, this is a red flag.

What is Regulation of Securities?

Securities regulation covers transactions and other dealings with securities. The term is usually understood to include country and local codes by governmental regulatory agencies. Still, it sometimes may also encompass listing requirements of exchanges l and rules of self-regulatory organizations. Generally, a government oversight agency will regulate stocks at the consumer level, but in some countries, a central bank is an authority that handles regulation.

Generally, individual exchanges also have sophisticated regulatory oversight functions within their operations. For example, in the United States, the NASDAQ has an Investigations and Enforcement Team investigating misconduct and enforces the exchange’s rules. The NASDAQ has also contracted other regulatory agencies like FINRA to undertake specific functions and activities for the exchange while leaving the responsibility and control with NASDAQ.

Why is Regulation Important?

The regulatory process is important because it helps provide the public with laws that allow them to feel comfortable investing. By protecting information, regulators enhance efficiency and liquidity in financial markets. Additionally, by protecting consumers, securities regulation represents the highest form of market integrity by ensuring accurate pricing and superior liquidity to all investors. If there is a problem with a trade or a reported price, consumers need an oversight body to make a complaint. Can you imagine the difficulty of complaining to a broker about a fee or a trade and having not other entity to complain to if you are not satisfied? Issues could come up where you feel like you have been taken advantage of, and if you do not have a regulatory agency to discuss the matter with, you will receive no satisfaction. Regulatory bodies also keep brokers on the up and up. They understand that if there is an issue, there could be an investigation by a regulator that would potentially generate a problem for their business. Regulation is also essential because it provides market stability. Any foul play that might occur will be picked up by regulators who will investigate if an issue rises to unfair practices.

The Bottom Line

The upshot is that regulation is essential for the customer. It provides an oversight that keeps the financial securities industry in line and makes sure that markets are liquid and secure. Without regulatory oversight, consumers would not be able to complain if there is an issue. Regulation will cover specific assets, like forex, cryptocurrency, stocks, and commodities. It will also cover exchanges and brokers. If your broker is not regulated, this is a red flag. If the products they are trading are not regulated, this is also a red flag. Before you start trading with a broker, you should check the regulatory framework and determine if it’s the right fit for you.


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