The term “forex broker” covers a wide spread of business models, legal obligations, and execution standards. If you already know your way around spreads and swaps, this guide goes the extra step: how brokers really earn money, which rules protect your balance, what execution quality looks like in data not marketing, and which documents to read before wiring a cent. It’s long on detail, short on fluff, and assumes you trade or plan to.
Regulation: who watches the shop and why that matters
A broker can look slick, yet the single most useful filter is the license it holds and the supervisor standing behind it. Strong regulators force capital buffers, client money segregation, disclosure, and dispute processes. Weaker ones outsource the risk to you. When checking a firm, locate the exact legal entity name on the broker’s footer and verify it on the regulator’s register, not a look-alike page.
For the UK, use the Financial Conduct Authority register, which lists permissions, status, and warnings. In the United States, forex dealer members must register with the CFTC and be NFA members; the NFA BASIC system lets you search enforcement history and capital figures. Australia’s ASIC maintains an Australian Financial Services Licence register with conditions and any enforceable undertakings. The EU has a patchwork of national authorities plus ESMA coordination; read the product intervention measures on CFDs and leverage caps that apply across member states. Canada splits by province with IIROC oversight for investment dealers. Singapore’s MAS has an easy, searchable directory and circulars on retail leverage and margin. At the global level, IOSCO sets standards while the Bank for International Settlements publishes the triennial FX turnover study that shows where liquidity sits and why your EUR/USD fill at 3am isn’t the same as 9am London.
Useful official sources to keep handy while you evaluate firms:
FCA Financial Services Register (UK)
CFTC — Check Registration & Backgrounds
NFA BASIC (U.S.)
ASIC Professional Registers (Australia)
ESMA measures on CFDs & leverage (EU)
CIRO Advisor Report (Canada)
CSA National Registration Search (Canada — provincial regulators)
MAS Financial Institutions Directory (Singapore)
BIS Triennial Central Bank Survey (FX & OTC derivatives, 2025 edition)
IOSCO — Key Regulatory Standards
IOSCO — Public Reports
What “client money segregation” does—and doesn’t—do
Segregation means customer funds are held in designated trust accounts, separate from the broker’s operating money. That reduces commingling risk if the broker fails. It does not cover trading losses, nor does it guarantee speed of payout during administration. Some regions add negative balance protection, which caps your loss at the deposit even in a gap. Others don’t. Read the client agreement for trust wording, the jurisdiction of the safeguarding bank, whether interest is paid to you, and whether the broker can pledge client assets. If the firm mentions “segregation” but skips the bank names or jurisdiction, ask.
Business models: market maker, STP, ECN—what changes for you
Labels get tossed around. The mechanics matter more:
Market maker (dealing desk): the broker internalizes flow and can take the other side. This allows tighter all-in pricing at small sizes and stable spreads during quiet hours, but introduces clear conflicts. Quality dealers manage risk with aggregation and inventory limits; weaker ones widen quotes or reject.
STP/ECN: orders are routed to external liquidity providers or matched on a venue. You’ll often see raw spreads plus a commission per side. Depth of book and the venue list determine fill quality; a bad aggregator can still slip you.
Hybrid: most retail shops are hybrids. They internalize when flow is small and well-balanced, then externalize into the street when risk spikes.
Your concern isn’t the label; it’s the statistics: fill rate, median and tail slippage, percent of price improvement, cancel-reject rate at news, and the stability of spreads around known events. If the broker publishes a “quality of execution” report with time-stamped stats by symbol, that’s a green flag. If the site only says “lightning fast fills,” that’s noise.
Pricing: spreads, commissions, swaps, and the “all-in” number you actually pay
Spreads get the billboard treatment, commissions hide in footers, and swaps quietly eat the overnight P&L. To compare:
Build an all-in cost per 100k traded:
Commission (both sides) + average spread × tick value + expected slippage in pips × tick value.
For a EUR/USD example: if the account charges $7 per round turn, averages 0.2 pips spread in liquid hours, and you assume 0.1 pips of slippage, your all-in is roughly $7 + (0.2 + 0.1) × $10 = $10 per 100k. Then check swaps: positive or negative carry varies by pair and broker’s pricing of the underlying rates minus their markup. If you hold positions, swap dominates. If you scalp, slippage and commissions dominate. Read the swap table for long and short separately; they’re not symmetric.
Watch for “extras”: inactivity fees, deposit or withdrawal charges, currency conversion spreads when your account base and instrument differ, and market data add-ons for certain platforms.
Execution quality: how to test, not guess
Run a month on demo to check platform plumbing, then place small-size live orders during different sessions to measure fills. Log the time between click and fill, note slippage by direction and news windows, and compare your broker’s top-of-book to an independent reference at the same second. Look for stable behavior more than headline speed. If stops slip worse than limits improve, and it’s persistent across quiet periods, that’s a tell. Real venues show both negative and positive slippage. Purely negative slippage with zero price improvement on limits is not how real liquidity behaves.
Platform, tools, and APIs
MT4/MT5 stay popular for charting and EAs. cTrader offers solid depth-of-market, better order types, and a modern API. Some brokers expose FIX or REST for algos; read the rate limits, session caps, and whether they throttle around news. Mobile apps are fine for monitoring; be cautious using them to execute fast strategies where fat-finger risk is real and your 4G connection is the weak link. Copy trading and signals can be useful for idea discovery, but treat them like any other strategy—verify drawdowns, live track record length, slippage sensitivity, and survivorship bias in the leader list.
Leverage and margin: the rulebook changes by region
Leverage caps are not uniform. ESMA pushed retail leverage to 30:1 on majors and lower on minors and exotics; the UK mirrors that, with additional protections like mandatory risk warnings. The US retail spot market often operates at 50:1 on majors and 20:1 on minors under CFTC/NFA rules, with stringent capital requirements on FDMs. Australia previously allowed higher leverage but reduced retail caps in recent years and tightened product intervention around CFDs. Singapore and several Asian hubs use tiered margining based on experience and product class. Professional or elective professional status can raise limits, but it usually removes some protections; read what you lose before you apply.
Quick reference: typical retail leverage caps by region (illustrative, check current rulebooks)
| Region | Major FX | Minor/Exotic | Notes |
|---|---|---|---|
| EU/UK | 30:1 | 20:1 or lower | Negative balance protection, standardized risk warnings |
| US | 50:1 | 20:1 | Only NFA/CFTC-regulated FDMs can offer retail forex |
| AU | 30:1 | 20:1 or lower | Product intervention powers, PDS disclosure focus |
| SG | Varies | Varies | Experience-based tiers under MAS guidance |
Policies change; verify on the regulator’s site before opening or switching accounts.
Risk controls that actually protect you
Negative balance protection caps downside in gaps. Guaranteed stop-loss orders do the same but charge a premium; useful on event risk if priced fairly. Margin close-out rules vary; some close at 50% of required margin, some at 100%. Hedging settings differ; check if the platform uses FIFO rules (US) or allows netting and multiple tickets. If you run multiple systems, ask about sub-accounts to separate margin and reduce cross-strategy contagion.
Funding, withdrawals, and banking relationships
A smooth funding page is nice; a smooth withdrawal page is non-negotiable. Prefer brokers that only return funds to the original source to reduce fraud risk. Note the base currency options, minimums, and transfer cut-off times. If a firm advertises same-day withdrawals but adds “subject to review” everywhere, treat it as next-day in practice. The better shops name their custodial banks and publish average withdrawal times.
Disclosures worth reading line by line
Client agreement, order execution policy, conflicts of interest policy, and financial statements. The execution policy should state how they choose venues, whether they internalize flow, and how they handle large orders and price improvement. Conflicts policy should discuss dealing-desk activity and any soft-dollar arrangements. Financials reveal capital headroom; thin buffers mean operational stress in volatile periods.
Country restrictions, KYC/AML, and data privacy
Regulated brokers will say no to residents of regions they’re not authorized to serve. That’s a feature not a bug. KYC/AML checks are standard—ID, address, source of funds. Read the privacy policy for data storage locations and third-party sharing, especially if you connect third-party tools or copy-trading networks.
Strategy fit: match the broker to how you trade
Scalpers: care about raw spreads, commission per side, stable latency, and positive slippage on limits. Ask about colocation or at least a low-latency data center close to your server.
Swing and carry traders: focus on swap rates, weekend rollover policy, and whether dividends on index/CFD hedges are passed fairly.
Systematic traders: prioritize API reliability, rate limits, historical data access, and corporate actions handling on CFDs.
Discretionary intraday: chart stability, order types (OCO, partial fills), and news-time behavior matter most.
Red flags that don’t need a second opinion
“Regulated by [island] with a mailbox address,” guaranteed profits in marketing, bonuses contingent on impossible turnover, withdrawal penalties unrelated to AML controls, or a license number that doesn’t match the entity name on the regulator’s database. If reviews mention sudden spread explosions at routine times without market stress, that’s not just bad luck.
Where to research and compare
Independent, long-running comparison sites help sanity-check fees and features. A practical starting point is the directory at ForexBrokersOnline which keeps profiles, fee breakdowns, and platform notes in one place so you don’t piece together a dozen PDFs on your own.
Education and market structure: helpful reads that age well
The BIS triennial survey is the cleanest look at how the market is organized, where volumes concentrate, and which session overlaps actually matter for liquidity. ESMA and FCA publish clear, short notices on retail product risks and leverage policy; those explain why some features you want are capped. The CFTC and NFA maintain enforcement actions and advisories that double as a checklist for what not to do. ASIC’s client-money guidance shows how segregation works under Australian law. IOSCO’s papers provide a map of supervisory trends that often show up in national rules a year later.
Putting it together: a working process to choose a broker
Start with licensing: confirm the entity on the official register and read any recent actions. Scan the execution policy and fee schedule, then build an all-in cost estimate for your pairs and trade sizes. Open demo to check the platform, then trade live with the minimum for a full month across sessions. Measure fills and slippage, test withdrawals twice, and ask support three technical questions you actually care about. If answers are precise and consistent with the documents, you likely found a grown-up shop. If they waffle, move on. You don’t need the perfect broker; you need one that is safe, transparent on costs, and consistent in execution.
Regulatory and research links mentioned above for verification and deeper reading:
FCA Register
CFTC Registration and NFA BASIC
ASIC Professional Registers
ESMA Measures and Q&A on CFDs
IIROC and Canadian provincial regulators
MAS Financial Institutions Directory
BIS Triennial FX Survey
IOSCO Standards and Reports
Nothing here is investment advice. It’s a checklist to avoid obvious pain and compare brokers on things that move your P&L, not marketing slogans.