Best Execution requirement
European regulators require that brokers follow the best execution policy when executing clients’ transactions. A regulated European broker must execute a client’s transaction at the best price available, taking into account the speed and likelihood of its execution.
Capital adequacy control
A regulated European broker must maintain a capital adequacy ratio set by the regulators, so it can meet its obligations to the clients, factoring in the risk level.
Independent audit and regulator control
A regulated European brokers must pass an annual internal and independent third-party audit. The regulator also requests reports from the brokers and inspects the broker’s business for compliance with the regulatory norms.
European brokers must assess the knowledge and qualifications of their clients, to avoid providing services at excessively high-risk level. (This is why, when opening an account with a regulated European broker, the client has to complete a very detailed online questionnaire).
Segregated client accounts
In the EU, a broker must keep clients’ funds and its own capital in separate accounts.
European regulation means that brokers are bound by strict rules, and their activities are regularly monitored and independently audited. Of course, nobody is fully protected from force majeure. But efficient control and regulation give a great boost to a broker’s reliability, resulting in better chance of successful trading for the client.
By comparing the regulation principles across different jurisdictions, it is easy to see that the best choice is a broker working in accordance with the European norms in the European Union legal environment, where oversight of financial services providers is very efficient.