Back in 2000 when forex trading first boomed, People used to expect only quick returns just by investing 100$ or more. There were hundreds of scam brokerages popping up with the thin fx regulation in place setting up forex trading companies was very easy. And there were fishing traps laid everywhere, all it took was an eye-catching ad for an innocent investor to invest in the Forex trading scam. Then there were these types of brokers that never passed the trades to liquidity providers and hence when suddenly a group of traders profited these brokers denied the profits saying that these customers have used system manipulation to earn such type of gains.
As years passed by the Regulators like ASIC (The Australian Securities and Investments Commission), The FCA (Financial Conduct Authority), Commodity Futures Trading Commission (CFTC) started to tighten the screws so that scammers brokerages will have a hard time. The first thing that came into action from 2008 is lowering the enormous leverage some brokers back in 2000 used to offer 1:2000, which means 2000x buying power against your deposited funds. Just by investing 100$, I can buy an asset worth of 200,000$ which is technically insane and has more disadvantages. The standard leverage that was fixed at 1:500 (Max), The US-bound brokers even went a step higher by fixing the max leverage at 1:300 for Corporate clients and 1: 200 for retail clients. As days passed by more scams were unearthed, then came the destructive events such as SNB pegging and the Brexit which shocked the Forex market, many large players were Out of business the Reputable Alpari group along with several other brokers went out of business after 2015 SNB event
This made the regulators think even further to come up with stringent Compliance requirements and Further changes in Rule books, and cut in leverage offered to the retail clients. The year 2019-20 saw a terrible market crisis with the onset of coronavirus and market cash outflow, the entire forex market started to run on Sentiments rather than on technicalities. At present times the Prime regulators have made the Capital requirements even tougher and introduced Financial Protection schemes that have to be adhered to by all forex brokers who are participating in regulated jurisdictions. The leverage offered in the Us nowadays is as low as 1:25, For HNW or professionals, it is set at 1:50 with special approval. The leverage in the UK is at 1:100 for retail and 1:200 for HNW and professionals. For ASIC also the leverage has gone down at 1:200 and there is a proposal for further cuts.
