Why Does Regulation Matter in Online Trading?

Perspectives on financial markets regulation and how it helps brokers maintain a high level of service and earn traders’ trust

Due to the flexibility and lower-cost access to exclusive asset classes, contracts for difference or “CFDs”, for short, are without a doubt, among the most popular financial instruments. 

Seeing significant growth in recent years, the CFD trading market is projected to continue to expand at a 4.3% compound annual growth rate by 2028, according to data compiled by Global Market Estimates (GME).

Emerging in the early 1990s, as a hedging investment vehicle, CFDs rapidly conquered the retail sector, becoming a widespread option amongst traders, thanks to the fairly low margin requirements, fees, and diversification they provide, across key sectors, such as energies, commodities, foreign exchange (Forex), and more. 

Perceived as a more cost-effective way to access the financial markets, CFDs allow anyone to join the excitement of buying and selling securities, without granting them ownership over the underlying assets.

This accounts for the fairly low-cost access to opportunities and the highly speculative nature of CFD trading in equal measure. By setting the legal framework that online brokers providing CFD trading services must follow, regulation sets a standard of quality, transparency, and security.

Regulation plays a vital role in ensuring the legitimacy of online trading, while safeguarding traders by establishing best practices and the mechanisms for dispute resolution.

Understanding the role of regulation

Strengthening confidence in financial services, platforms, and products, trading regulations help establish an environment which fosters economic development and wealth creation. Therefore, understanding trading regulations is crucial for every trader’s success. 

Primarily consumer-focused, trading regulations help reduce the risk associated with market shifts, giving traders reassurance to trade and invest. Additionally, the role of trading regulations is to curb financial crime by airtightening the financial system against unruly practices.

To maintain integrity, brokers such as HFM Group must adhere to the standards set forth by regulators. HFM Group has multiple entities authorised and regulated by top tier regulatory authorities, including the UK’s Financial Conduct Authority (FCA), the Dubai Financial Services Authority (DFSA), the Financial Sector Conduct Authority (FSCA) in South Africa, the Financial Services Authority (FSA) of the Seychelles and the Capital Markets Authority (CMA) in Kenya.

With these powerful regulations under its belt, HFM Group prioritizes transparency, security, and traders’ education, as the main drivers of traders’ informed decision-making.

To support traders on their journey and foster an environment where anyone can thrive, the multi-asset broker offers a vast range of educational materials, including trading courses, eBooks, webinars, in-depth market analyses, and news that equip traders with the nuggets of information they need to navigate the financial markets.

Delivered in an easy-to-follow video format, HFM Group’s trading courses cover a wide spectrum of topics, ranging from trading basics to order types and economics. This not only facilitates the learning process but also allows traders to revisit any of these materials with ease - even while trading. 

This broad knowledge base is matched by high-performance, decision-support trading tools, such as Autochartist, Live Sentiment & Correlation Tracking, and Sophisticated Alarms, which allow traders to develop lucrative strategies and adjust them with precision.

Committed to secure trading

While traders’ education and empowerment through technology enablement are instrumental to HFM Group’s compliant, knowledge-driven approach to trading, it is only one element of its value proposition to traders. 

The other pivotal element is trading regulation. HFM Group places major emphasis on client fund safety, adhering to high levels of security. The multi-asset broker implements solid risk management protocols and data privacy measures to safeguard its clients’ funds and sensitive data. 

In accordance with its international regulations, the broker keeps all traders’ funds safe in segregated accounts maintained with top-tier banks worldwide. In this way, HFM Group ensures that its clients have full access to their funds at all times, by clearly separating traders’ capital from its corporate reserves. You can learn more about secure trading with HFM. 

Another best practice that has earned HFM Group the reputation of a transparent and secure broker is the market-leading Civil Liability Insurance for up to €5,000,000, which provides coverage in cases of omissions, negligence, errors, fraud and other instances that could lead to financial loss. This coverage is offered indiscriminately to all traders at no additional cost. 

Speaking of the broker’s commitment to traders’ security, a spokesperson said: "At HFM Group, trust and security are our foundation. By adhering to top regulatory standards, we ensure a safer, more confident trading experience for every client."

In parallel, HFM Group provides negative balance protection, which works as a buffer against potential losses during times of high market volatility or downturn. For optimal results, traders can use the Stop Loss and Take Profit functionalities of HFM’s platform. Such behavior also promotes responsible trading and helps limit risk exposure.

Committed to transparency and fairness, the financial firm takes a firm stance regarding the risks involved in trading by clearly displaying risk warnings on its website. “Traders must be aware of the potential risks just as much as they need to acknowledge emerging opportunities. By being transparent, we present both the opportunities and risks associated with trading in a balanced way,” the HFM spokesperson added.

Data privacy, the next level of protection

HFM Group takes traders’ security seriously. Having rigorous data protection policies in place, HFM handles all clients’ data in the strictest confidence and employs advanced encryption and data security protocols to prevent fraud and data theft. 

By fostering education, implementing robust safety measures, and adhering to strict compliance standards, regulation empowers traders and brokers to thrive in a dynamic financial landscape. 

Discover more about HFM, a trusted broker offering secure trading solutions.