Brokers are in business to make money from their clients. How they do this is important to you, their potential client. At DailyForex, we review, assess, and compare brokers with the aim of letting you, our readers, know the truth about the brokers we review, and whether they are likely to do right by you and act in your best interests as well as their own.

We determined that the best way of doing this was by giving every broker a rating. We give both an overall rating, and ratings for important sub-categories, which we explain on Our Methodology page.

By far, the most important factors in how we rate brokers are the criteria of security and regulation. Most brokers are regulated by some kind of government agency, but not all regulators are equal, as we explain below.

Why Regulatory Tiers Matter

The number one factor determining the overall rating is our Regulation & Security sub-category rating, which is based upon our assessment of the quality of the regulatory environment in which a broker operates. We do this by assigning regulators to tiers based upon their repute. This is not controversial, there is a wide consensus among industry analysts regarding the quality of regulation.

At DailyForex, our golden rule is to never, ever promote an unregulated broker, which can be dangerous to the client.

Our broker reviews transparently list the details and tiers of all the regulatory agencies overseeing each broker. Below, we will explain each tier of regulation and list the major regulators we assign to each tier and explain why.

Understanding Regulatory Tiers

Tier 1 Regulators

Tier 1 regulators are the highest quality regulators. They impose stringent regulatory requirements on brokers holding their licenses, typically including capital maintenance requirements, audits, and client deposit protections such as negative balance protection.

Brokers regulated by tier 1 regulators can safely be presumed to be trustworthy.

Tier 1 regulators include:

Tier 2 Regulators

Tier 2 regulators can usually be seen as safe and trustworthy, but these regulators are not as strict as tier 1 regulators. The overall level of client security and safety will likely be a little lower, but still relatively high.

Tier 2 regulators include:

Tier 3 Regulators

Many industry analysts will see this tier of regulators as a minimum decent standard, with fewer and less onerous regulatory requirements on the broker. Many of these brokers can still be seen as relatively safe but should be assessed critically on an individual basis.

Tier 3 regulators include:

Tier 4 Regulators

This group of regulators must be approached with a great deal of caution, but in some cases, brokers reguated under this tier can still provide a barely adequate level of customer protection. Oversight can be patchy and regulatory requirements extremely light.

Tier 4 regulators include:

Tier 5 Regulators

This group of regulators are frankly nameplate regulators, offering very little in the way of customer protection, and imposing little more than paper requirements on the brokers they regulate. DailyForex will not promote brokers solely regulated by a tier 5 regulator under any circumstances.

Tier 5 regulators include:

DailyForex’s Regulation & Security Scores

We give a sub-rating on regulation and security to every broker we review based on the following factors:

  • The highest tier of its regulation.
  • Its regulatory record.
  • Its corporate structure and reputation.
  • The expert opinion of our team of analysts.

Our scores are ranked from 0 to 5 in increments of 0.5.

Conclusion

Knowing the regulatory position of any broker you might make a deposit with is vital to trading or investing responsibly and profitably.

At DailyForex, we are determined to provide you with accurate and actionable information about a broker’s trust level, to arm you with actionable information in choosing the right broker for you.

There is nothing worse for a trader than being unable to access their funds. Steering clear of unregulated or very poorly regulated brokers can help you avoid that scenario.

For more information about brokers, their trust levels, and other factors, visit our broker reviews and broker comparisons section.

For more information, or if you have any questions, please contact us at info@dailyforex.com.