10 Questions to Ask Your Broker
If you don't know the answers to most of these questions before opening an account with an FX market maker, chances are that you are not making the right choice. There simply aren't very many brokers out there with good answers to these questions; therefore, unless you are lucky enough to have arrived at one of the better ones, you are probably paying too much for something below average.
1. Are you regulated?
If so, by whom and in what jurisdictions?
What is your NFA number or other regulator ID number?
Do you have any regulatory citations? If so, explain them.
2. How large is your company?
What amount of capital does your firm have above its obligations?
How many client accounts do you have currently trading?
How many client accounts have you serviced?
How long has your company existed?
How many languages do you offer service in?
How many office locations do you have worldwide?
How many employees do you have?
3. What is the legal name of the counterparty to my trades?
Is this the same as the name I am depositing funds under?
Is this the same as the name of the regulated entity?
If your platform links me to various banks or liquidity providers (i.e. "no dealing desk") how do you control the quality of execution?
Do you allow investigations of disputed trades? If so, how do you handle them?
4. What exactly is protecting my funds?
Are they held in the broker's name, or in my name, at the bank?
Are they segregated, or only separated, from other client funds and from company funds?
Is there any specific insurance protecting my funds?
What happens to my funds if your company becomes insolvent (bankrupt)?
5. How are my trades executed?
Do you have a dealing desk?
Are all trades executed automatically, or does a dealer monitor execution at times?
If you do not have a dealing desk, who are the liquidity providers and how many are there?
Are you opposed to certain styles of trading such as scalping (ultra-short term), picking (attempting to improve your entry price based on multiple price feeds)?
6. How does your level of support and service compare?
Can I trade over the phone if necessary? At what cost, and are there any restrictions to doing so?
How fast is your response time to phone calls, emails, and instant messages (ask, then test this yourself)?
What are your service hours? Can I contact you quickly and easily during market hours? On the weekend? (test this)
How qualified are your service and sales representatives to answer my questions (test this)?
How fast do you process paperwork, account changes, deposits, withdrawals?
What types of changes to my account can I process or request online, what which require signed paperwork?
7. What are your spreads on spot pairs , forwards, options, and swap rates?
Are your spreads variable or fixed?
Do you provide historical data showing your spreads?
How do spreads differ based on trade size? What changes when I execute 1K, 10K, 100K, 1mio, 10mio, 50mio?
What are your spreads on overnight swaps (i.e. positions rolled over to the next trading day, positions held open long-term)?
How is interest on positions held overnight calculated?
8. Fees, etc.: List all your fees.
Do you pay interest on unused funds, or unused margin?
At what rate, and how can I keep track of it?
What is the cost of withdrawing funds?
Do you offer any free methods of withdrawal? Any restrictions on them?
What other fees do you charge? For opening, closing, maintaining the account?
Are there any other requirements to avoid additional charges (i.e. minimum trading volume per month)
9. Does your firm have Introducing Brokers (IBs)?
10. What features or benefits does the company provide?
What is special about this broker?
Contests, charts, relevant news, trading advice, education, technology, trading platform, analysis, and anything providing a better trading experience do affect the quality of your experience trading.