Who is a Forex dealer and why is he needed + differences from a broker

Individuals cannot trade on the interbank market on their own. An intermediary is required to carry out transactions. They can be forex dealers, brokers or dealing centers. Choosing the right company is important for trading security.

1. Who is a Forex dealer in simple words
2. Top 5 Forex Brokers 2022
3. Basic requirements for a dealer in the foreign exchange market
4. Dealing centers
5. Dealer Danger
6. Tips for choosing a reliable dealer
7. List of best dealers
8. conclusions
9. FAQ

Who is a Forex dealer in simple words

A Forex dealer is a legal entity that provides intermediary services on Forex, enters into an agreement with a trader and represents his interests. For the work he takes a commission in the form of spreads.

A spread is the difference between the purchase and sale prices of an asset.

Why is it needed?

The laws of the Russian Federation prohibit citizens from independently making transactions with currency on the interbank market. This is only available to professional market participants. Individuals have to enter into contracts with intermediaries. They are required to open a Forex account. Dealers provide asset quotes and a trading terminal, conduct training courses, and share analytics of the situation on international markets.

The essence of the work

The organization purchases currency at its own expense and then resells it to traders. For this purpose, asset quotes and spreads are established. If the counterparties are satisfied with the price and conditions, a transaction occurs.

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Difference from a broker

Brokers are also intermediaries for entering the market. Unlike forex dealers, they cannot have a license to operate in Russia. Their activities are not described in any way by law. In practice the difference is as follows:

The main difference is that a broker represents the interests of clients in the market. It allows you to open positions, broadcasts quotes, provides special software and earns a commission from all transactions.

Distribution of functions on the stock market.

Trading on the finance stock market is permitted only for participants who have completed the registration process and this condition is clearly stated in the relevant documentation. Thus, in order to have the right to trade on the platform, you must have a special license. This license allows you to conduct the corresponding type of activity. Participants on the stock market are full participants of the stock platform who are licensed at the official level. What activities do they carry out? Both brokers and dealers facilitate transactions on the stock platform for their users.

Basic requirements for a dealer in the foreign exchange market

Not every company can become an intermediary on Forex. The legislation of the Russian Federation puts forward the following requirements:

• Be a member of a self-regulatory organization (Forex Traders Association).
• Own 100,000,000 rubles or more.
• Increase the amount of equity capital upon receipt of client funds.
• Provide leverage no higher than 1:50.
• Money transfers must be made through the Russian banking system.
• Explain to traders the risks of trading in the foreign exchange market.

The government regulates the activities of licensed dealers and requires full transparency in working with counterparties. The company must keep records of all transactions and is obliged to respond to complaints and requests.

Dealing centers

Another type of intermediary in Forex. Dealing centers give traders the opportunity to open transactions in the foreign exchange market. These are non-banking organizations for customers with a small deposit. You can start trading with such an intermediary with any amount. Cent accounts and huge leverage allow you to open trades even with $1.

It is dealing centers that are called “kitchens” in traders’ slang. Their positions are not listed on the interbank market. Transactions between clients are carried out inside the center. In this case, the intermediary can change quotes and sees all orders. Unscrupulous companies manipulate this information for their own benefit.

After the tightening of Forex legislation, many dealers were unable to obtain a license, so they continued to operate as dealing centers. They are registered on the territory of foreign countries. Legally, a trader is poorly protected when collaborating with such a service provider.

Trading Features

It is important to remember the fact that working with dealing centers can remain profitable for years and does not entail any problems. However, you should be careful when choosing dealers and take into account the following points:

• cooperate exclusively with proven professional financial market participants who have been working for many years and have a good reputation;
• Before you begin cooperation, you should carefully read its terms and conditions;
• It is imperative to familiarize yourself with the existing reviews of traders who have already worked with these Forex market intermediaries.

Based on these facts, you can make the most correct decision.

Dealer Danger

There are many ways to lose a deposit on Forex: leverage, weak strategy, psychological factors. A poor choice of a forex dealer can greatly increase the size of your losses.

What tricks do unscrupulous companies use:

• Quote manipulation. Even a small price fluctuation can deprive a trader of profits.
• Trading against the client. The intermediary sees all positions, including pending orders, take profits, stop losses.
• Software tricks. The terminal may freeze at the moment when a person is trying to urgently take a profit or close a losing position.
• Fraud during withdrawal of funds. The dealer is able to accuse the client of violating the terms of the contract and refuse to give the money.

Such problems suit small or new companies. To attract traders, they offer very low commissions and large bonuses.

Large licensed businesses do not resort to such tricks. The legislation prohibits artificially increasing the spread and misleading people. Payments are made through the banking system. A trader can go to court at any time. Companies with a license do not risk their reputation and work honestly.

And what is the result?

It’s unpleasant to realize that someone will make money on your money, but for small deposits there is no alternative to Forex dealers. It is clear that all beginners start with currency pairs, in which case dealing is more convenient, and you can start with $5. But if you expect to work with stocks, bonds, futures, then look for either direct access to the exchange, or a broker with exchange conditions. And prepare a deposit of at least $5000.

Choosing a licensed broker is a must. Be sure to check the reality of the documents on the resources of regulators - scanned copies posted on the websites of dealers/brokers should not be trusted. We strongly recommend that you regularly check your partner’s quotes on external online services or directly on the exchange platform.

International regulators (SEC, FCA, CySEC, etc.) have developed strict rules for monitoring exchange transactions, guarantee schemes and investment protection (Wikipedia will help here for the curious). There is practically no chance left for forex “kitchens” in the financial services market: all major participants work directly with liquidity providers and guarantee the transfer of all transactions to the interbank market. Those who still rely on customer deposits can only survive in countries with weak financial regulation.

Today the difference between a broker/dealer is minimal due to strong competition. Clients demand optimal and reliable conditions, so it becomes unprofitable for the dealer to cheat with prices, and brokers lower the threshold for entering the market. The conditions and “range” of services are approximately the same, so the main factor of choice is the correctness of prices and the costs of supporting transactions.

Tips for choosing a reliable dealer

On any forex portal there is a discussion of dealers. There are both good and bad reviews about each of them. Therefore, beginners are lost and often cannot choose an intermediary. To assess reliability, you should pay attention to:

• Available licenses.
• Country of registration of the company.
• Duration of work on the Russian market.
• Suggested software.
• Trading conditions (amounts of commissions and spreads, number of instruments traded).
• Methods for depositing and withdrawing funds.
• The company's activity in dialogue with traders.
• Reviews.
• Position in various ratings.

Well-known dealers offer approximately the same conditions in the fight for clients. Unusually attractive rates should raise red flags. Trading with a large, well-known company is safer.

Reviews

VTB:

FINAM:

ALPHA:

PROMSVYAZBANK:

Looking through the reviews of all official Forex dealers in the Russian Federation, I found both negative opinions and positive comments for each of them. Of the four, clients are more loyal to the VTB structure.

List of best dealers

For complete security, residents of the Russian Federation can choose licensed intermediaries. As of September 2022, there are only 3 of them in Russia.

List of the Central Bank of the Russian Federation

Licensed Forex Dealers:

• Finam-forex.
• Alpha Forex.
• VTB Forex.

All of the above are divisions of large financial organizations. This is an additional guarantee of reliability.

Only they are allowed to use the word “forex” in the name. Money, including client money, is stored in Russian bank accounts. A citizen of the Russian Federation over 18 years of age who does not have the status of an individual entrepreneur can enter into an agreement with a licensed company.

conclusions

A reliable dealer is an important condition for safe trading. Licensed organizations provide more guarantees for the trader, since they store money in Russian accounts, work in accordance with the laws and pay taxes for clients. At the same time, a limited list of instruments, small leverage and requirements for the size of the deposit are not suitable for everyone.

You can also trade with a dealer without a Russian license. The main thing is to choose a large and reliable one. Foreign companies offer attractive trading conditions, many assets and leverage of up to 1:1000.

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Three stock brokers who operate in Russia

On the territory of the Russian Federation, it makes sense to take a closer look at three positively proven companies:

1. Just2Trade Online Ltd.
2. United Traders (“United Traders”).
3. TraderNet (“TraderNet”).

Just2Trade is the first dealer on our list of the Russian stock exchange

International trading platform. The beneficiary of the brokerage service provider is represented by the FINAM Group of Companies with licensing (Cyprus Commission) and access to the most popular foreign platforms for trading through a single account Web interface. It features favorable commission fees and a special ROX trading terminal, as well as a total Lock-up duration of at least thirty days.

Advantages and disadvantages

The advantages are presented:

• “quick applications” technology;
• low commission fee – $0.0019/share;
• service for quick participation in IPO – at least $1,000;
• MT5-Global account without service fee;
• no tax residence (Russia);
• accessibility of the world's main exchanges;
• the ability to use virtual currency;
• insured accounts (20 thousand euros).

Such stock exchange dealers have obvious disadvantages such as:

• Cyprus licensing;
• additional commissions;
• self-payment of taxes.

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