Is Forex Trading Legal?
Forex trading is an increasingly popular form of investment online, and many traders want to know whether it’s legal. While yes, certain regulations must be adhered to for full compliance with law; selecting a reputable broker and adhering to regulatory guidelines will protect your investment more effectively than anything else. Furthermore, this article will explore some of the common scams found within forex trading and how to avoid them.
Forex trading is plagued by inadequate regulation and oversight. This has lead to many fraudulent practices from brokers refusing to pay out winnings or overstating investment returns, leading to disreputable practices like brokers refusing to pay winnings out and overstating returns on investments. However, there are regulated brokers which offer safe trading environments; always choose one from your country that’s been licensed accordingly and choose wisely when selecting an agent.
Forex trading is subject to local laws as well as global regulation. For instance, in the US it is only legal to trade through brokers registered with National Futures Association (NFA), with stringent regulations regarding maximum leverage, negative balance protection and bonus schemes; furthermore there are anti-money laundering (AML) and counterterrorism financing (CTF) requirements to comply with in order to protect forex markets from being used for illegal activities.
Forex traders earn their living through currency trading by purchasing and selling currency pairs at market prices. Instead of taking physical delivery of assets such as stocks or bonds, their profits or losses are calculated based on fluctuations in currency values and thus profit or loss calculated accordingly. Two main forms of forex trading exist – spot market and futures market. Prices on both are determined by supply and demand while futures trading allows traders to buy/sell contracts that promise delivery at specified dates in the future.
Forex trading allows traders to hedge against international currency and interest rate risks as well as speculate on their direction. It’s important to keep in mind that forex trading is highly speculative activity; only invest money you can afford to lose and do your homework first before making decisions about trading decisions.
The Reserve Bank of India is working closely with banks and government to implement more stringent measures against misuse of banking channels for unauthorised forex transactions. Recently, Kolkata police arrested two businessmen suspected of running an unauthorised forex trading operation from Kolkata that involved 180 bank accounts managed by them; investigations revealed a seizure of Rs 120 crore due to this activity. Furthermore, this year the RBI has created an alert list containing 75 entities involved in illegal forex transactions, inviting suggestions as to how best tackle this problem and creating awareness via public outreach programs.
