Why Is FCA Regulation Important When Choosing A Spread Betting Broker?

Choosing a spread betting broker is fundamentally difficult, particularly for new traders who are yet to understand the importance of each aspect of the broker's service. The market is buzzing with competition, all coming in from different angles - those that compete on price, for example, differ from those that compete on service or market selection, and settling on a practically effective and sensible choice for your broker involves an often necessarily drawn-out decision making process. But whatever you're looking for in your spread betting broker, one constant remains - it is essential that you choose a broker that is regulated by the FCA.

What is FCA Regulation?

The FCA, or the Financial Conduct Authority, is the body responsible for governing financial services in the UK, including trading and the markets. They are an organisation independent of the financial services industry, and have the power to enforce fair play and penalise those that fall foul of its guidelines. As a starting point, every UK broker is required by law to be regulated by the FCA, and those who choose otherwise are operating illegitimately. The one notable exception is brokers that are based offshore who offer spread betting services to UK customers, in which instance it is worthwhile checking the level of oversight their respective authority has, and the rigidity of its rules and regulations.

The FCA set rules for fair play in financial services that are aimed at ensuring vulnerable parties, i.e. you and me, get a good, fair deal from those offering financial services. For spread betting companies, this goes towards ensuring that they are giving a fair an accurate reflection of the markets, and that there is no foul play - essential in ensuring peace of mind and protecting the interests of traders.

Why is it Important?

FCA regulation is more than just important to the industry - it is absolutely vital. While there are some vocal quarters opposed to the way in which the FCA conducts itself, in essence its mission and objectives fulfil a vital requirement. Time and time again, the financial services industry has proven itself to be rife with fraudsters and illegitimate, underhanded tactics, due in no small part to the massive profits that the markets can deliver. Even with FCA oversight, the number of brokers, and indeed individual traders that are caught out manipulating the markets to their own end is enough to convince anyone of the need for strong, independent third-party regulation.

In terms of choosing a regulated spread betting broker, FCA regulation guarantees that there is some cross-check against the broker's business practices, which is designed to ensure fairness for you. In this sense, it is vital that the FCA are in place to ensure your broker is operating within the law, and is delivering a fair service. Without its input, the temptation to stray into dishonest and illegitimate practices would be ever-present in the industry, and would make spread betting, as with all trading forms, a much different beast altogether.

While FCA regulation doesn't guarantee you've chosen the right broker for you, it does provide an important seal of approval that you're dealing with a reputable provider - absolutely essential whenever you're thinking about entrusting a third party with your hard earned capital.