As a forex affiliate or trading affiliate, you want to choose the best affiliate program that will offer you high commissions, flexible commission plans, transparent reporting tools, and marketing support. However, before considering all these important factors and before choosing which brokerage you would like to partner with, you must first and foremost ask yourself: Are you affiliating with a regulated broker?
Most affiliate marketers do not take this important point into consideration and then, unfortunately, end up with either a bad reputation that’s reflected by the bad rap the brokerage has or dissatisfied with the partnership for many reasons including commissions discrepancies. A way to avoid common issues like these is to choose from the very start a broker that is highly regulated.
Remember that whether you’re an introducing broker referring your own clients to the brokerage or an affiliate marketer who refers traffic or followers to the brokerage you are basically referring people that are either traders or investors that will be entrusting their hard-earned money with the brokerage you recommended/referred. These same people will be placing actual trades online with this brokerage, meaning if they aren’t happy with the brokerage, it will reflect on your business and reputation.
Therefore, to make the right decision about which broker you would like to partner with, one of the fundamental aspects is to check whether it is a regulated broker and under which regulatory bodies it is.
Now let’s start off by looking at this from a traders and investors point of view, because in the end if they aren’t happy with the brokerage you are referring them to, then you will probably not experience much success! Simply put – Your referrals won’t convert, and commissions will be limited, and if your clients are dissatisfied with the brokerage, it will lead them to find another one fast.
Investors and Traders View
When one is starting to invest in the stock market, one of the most important decisions is to choose a suitable online broker. An online broker is an intermediary company that will oversee the execution of the purchase and sale operations that we request and in which we will have to deposit the money for trading.
This industry has changed!
Not many years ago, the world of the stock market was limited to far fewer participants, and practically only wholesale clients and large financial institutions were involved. With the advancement of new technologies, many more participants, retail investors have been able to access this market. With these circumstances, the number of brokers that offered their services has grown exponentially in recent years, and tough competition emerged, fighting over every investor. A war of bonuses and welcome promotions has been opened in order to attract investors’ money, and in the midst of it all, it was increasingly difficult to differentiate the offers of reliable brokers from scam ones.
Is the broker regulated and under which regulatory bodies?
Not all brokers need to be regulated in order to offer their services. Everything will depend on in which country the broker’s headquarters are located and in which countries it may or may not operate. In this sense, for example, the investor protection directives of the United States or Europe are much more rigorous and restrictive than those of other countries with softer or more tolerant regulations.
The main functions of regulatory bodies are to ensure investor protection and that their money is insured. The most restrictive directives oblige any broker to keep their clients’ deposits in segregated accounts, totally independent from those of the company itself. Therefore, investors’ money is considered client capital and cannot be affected by the financial situation of the broker or seized in the event of bankruptcy by any of its creditors. Additionally, they also require brokers to have a certain degree of liquidity to cover their operations.
In the case of an unregulated broker, it is not necessarily a scam, but we must be especially cautious since we are going to place our trust and our money with this broker. We need to be aware that their activity, in many cases, will not be supervised; we do not have a possible way of arbitration in case of conflicts. Even the broker’s work policies can become much less transparent.
This does not mean that because a broker is automatically regulated it is trustworthy and that people’s money is absolutely insured, but at least it has taken the trouble to comply with certain regulations (which will be more or less rigorous according to each regulatory body) and that in case of any incident we or our referrals, and clients we referred, can go to the arbitration channel of the regulatory body.
Regardless of the regulation, it is always necessary to assess the trust that the broker gives us. We can use the information it provides us about its location, make sure its policies are transparent, if it has good customer service or not, and finally, hear what other users are thinking.
What are the main broker regulatory bodies?
To identify if a broker is authorized and regulated by a specific body, we can go to the public registers that we will generally find on the website of each body. The main regulatory bodies worldwide are the following:
1. The Central Bank of Ireland (CBI)
The Central Bank of Ireland’s Registers contains individual registers for all financial service providers and collective investment schemes (CIS) regulated by the Central Bank of Ireland.
2. The Financial Sector Conduct Authority (FSCA)
The FSCA is responsible for market conduct regulation and supervision. FSCA aims to enhance and support the efficiency and integrity of financial markets and to protect financial customers by promoting their fair treatment by financial institutions, as well as providing customers with financial education. The FSCA will further assist in maintaining financial stability.
3. Financial Conduct Authority (FCA)
It is the most important regulatory authority in the United Kingdom and one of the most demanding in the world. It was created in 2013 as the successor to the activity of the Financial Services Authority (FSA) and currently supervises more than 50,000 companies. Regulates all aspects related to the commercialization of financial products and ensures transparency and investor protection. It has the authority to temporarily or permanently ban any financial product that it deems abusive or misleading.
4. German Federal Financial Supervisory Authority (BaFIN)
It is the German institution that is in charge of supervising financial institutions and ensuring the protection of investors and the stability of the German financial system. It was founded in 2002 as a result of the merger of 3 supervisory agencies and today it is the body that regulates some 2,700 banks, 800 financial institutions and more than 700 companies.
5. Cyprus Securities and Exchange Commission (CySEC)
Despite Cyprus being a small state, there are many online brokers and financial entities that have their headquarters in this country. Cyprus is considered a tax haven due to the important tax advantages that its legislation offers, but the great advantage it represents for brokers compared to other tax havens is that Cyprus has been a member of the European Union since 2004 and therefore is integrated into the European regulation MiFID (Directive on Markets in Financial Instruments) that gives access to operate in European markets to companies established in that country.
Why partner with AvaTrade?
AvaTrade has regulatory licenses across five continents and offices worldwide. It is compliant with the rules of regulatory bodies in Canada, Ireland, Japan, Australia, Abu Dhabi, and the British Virgin Islands.
Moreover, AvaTrade is accredited by the FCSA in the UK – which operates a best practice Codes of Compliance designed to ensure that its Accredited Members provide services, advice and employment to the highest level of professional and ethical standards in the UK.