CFD Trading Regulation and The Difference Between Regulated and Unregulated Platforms
CFD trading is a form of financial derivative where the value of the contract reflects the price or value of underlying security. The regulatory environment in Europe developed the CFD trading industry in response to the. Today, this industry is mainly domestic, with European-based trading platforms dominating. These trading platforms offer flexibility and convenience for both traders and broker-dealers. However, there are differences between the regulated and non-regulated markets.
One significant difference is the minimum requirement for registration with a CFD trading platform. Non-regulated trading platforms may offer higher commission rates to traders, though this may not always be the case. Some CFD trading brokers in the UK may have specific minimum trading account requirements that may include an account balance of a certain amount of money. It is essential to check these regulations before opening an account and trading.
Another difference between the regulated and non-regulated market is minimum deposit amounts. CFD trading accounts may require traders to open with a higher initial margin. These are fees that are usually attributed to traders unless a CFD trading insurance policy covers them. If you consider opening a CFD trading account, it is essential to note this significant difference between regulated and non-regulated platforms.
Another difference is that most CFD trading platforms will allow you to trade in several different markets, including indices, commodities, and even equities that are not locally available. This goes against the trading practice in the United States, limiting foreign trade exchange (forex) based on your knowledge or speculation. In the US market, you must trade via a regulated trading platform. CFDs allow for more flexible trading while also providing increased liquidity and risk management features.
The absolute difference between the regulated and non-regulated market is margin requirements. In the regulated market, CFD trading companies are regulated by the US Department of Commodity Futures Trading and the CFD Trading Regulations Act of July 27th, 2021, which outlines the minimum margin requirements CFD trading accounts. The FCA drew these requirements to protect traders and minimize risks. CFDs are an attractive trading option for many traders because of the low commissions and trading charges. The bottom line is that you need to do your research and consider all of the differences between the two types of trading before choosing which platform to trade CFDs.
You can find a list of FCA regulated CFD brokers at http://live4trading.co.uk/uk_cfd_brokers/.
One thing that is consistent between the regulated and the non-regulated market is the ability of a broker to offer multiple account levels. This option gives the trader a lot of flexibility when choosing the trading platform that best suits their needs.
Many CFD brokers can even offer traders a discount on the commission. The bottom line is that whether you decide to trade CFDs through a regulated or non-regulated trading platform, you are making a significant investment in your trading career.