Five Fascinating Facts about Foreign Exchange Brokers
Foreign exchange brokers are a necessary evil in the world of finance. They help people who want to trade currencies by providing them with an opportunity to do so and usually charge a commission fee for their service. It turns out that there is more to these companies than meets the eye, however. Here are five fascinating facts about foreign exchange brokers.
Fact # one: Foreign Exchange Brokers are not Banks
The foreign exchange brokers that people are most likely to use in the United States and elsewhere work with banks, not as banks. The difference is that they serve a different function than those traditional banking institutions do. When someone enters into an agreement for currency trading with a bank, it usually means that they want to purchase something or invest money in some other way. A broker facilitates these transactions by providing them with opportunities to trade currencies at any given time (though there can be limitations on certain days).
Fact # Two: Foreign Exchange Brokers Have No Obligation to Protect You
Anyone who is thinking about using the services of a foreign exchange broker must understand what their obligations and responsibilities are in this regard. First, unlike traditional banks, which must protect you against losses on your account through FDIC insurance, brokers don’t typically offer any protection at all. That means if something goes wrong during one of these transactions – like the value of a currency drops significantly or even plummets overnight – there may not be anything done to compensate customers who end up taking losses as a result.
Fact # Three: Foreign Exchange Brokers Have Different Requirements than Banks
Banks traditionally require a certain level of assets for someone to qualify as an account holder with them. Therefore, when you open up a bank account and deposit money into it, they may also ask that you set aside some amount of cash or other resources before allowing your application to go through.
Fact # Four: Trading Currencies is Illegal in Some Countries
It’s important to know that trading currencies can be illegal in some countries. That means anyone who wants to trade one currency for another may need a special license or other permission before they are allowed to do so. Their broker will have different requirements as well (though this also varies depending on what country they live in and where it is located.)
Fact # Five: Foreign Exchange Brokers Can’t Guarantee the Rate
A lot of people are surprised to find out that many foreign exchange brokers can’t guarantee a rate for anyone currency at any given point in time – and they often don’t offer this as part of their service, which is why it’s important not to rely on them exclusively when trading currencies (or other products). The rates change constantly depending on supply and demand, so there will always be some degree of risk involved with trades no matter what you do; however, exness monitors all these factors closely to rest assured that they won’t get caught off guard something changes unexpectedly.