How to choose a broker: a neutral checklist for any firm

Take the questions in order, because the early ones decide whether the later ones matter. For each, look for the answer in the firm’s own published documents: its terms, its order execution policy, its fee schedule. If it is not published, ask in writing and keep the reply.

Three kinds of answer are worth telling apart: a statement that can be checked against something outside the firm, a statement that is written down but rests on the firm’s word, and no answer. A missing answer is information too.

Which legal entity would you contract with, which regulator has authorised it, and under what reference? Check the entry on the regulator’s own register and see that it is current and covers the service offered. The primer on regulation sets the steps out.

If a firm names no regulator, that is a fact to weigh and not a gap to fill with assumption. Some firms are licensed in jurisdictions whose rules ask less of them; some are registered companies with no financial licence at all. Know which you are looking at before reading further.

Where is a client’s money held, and in whose name? The usual questions are whether it is kept in accounts separate from the firm’s own money, with which bank, whether the firm may use it for its own purposes, and what happens to it if the firm fails.

Ask, too, whether an account can go below zero: whether a loss larger than the balance becomes a debt, or whether the firm’s terms limit a client’s loss to the money in the account. The answer should be in the terms, in words, and not only on a marketing page.

The cost of a trade has several parts: the spread, any commission, the overnight financing on a position held past the end of the day, and sometimes a conversion charge when the account is in a different currency from the instrument. Beside them stand costs that are not per trade: fees for paying in or taking out, and charges on an account left unused.

A low figure for one part says little about the total. Ask for typical spreads and not only the minimum, for the commission and whether it is charged per side or per round trip, and for the financing rates. Then work one realistic trade through from opening to closing, as in the example below.

How is an order filled, and against whom? A firm may take the other side of a client’s trade itself, pass it on to other parties, or do both. Each arrangement is lawful and each has consequences; what matters is that the firm says which it uses. The document to read is the order execution policy.

Ask what happens when the price moves between the click and the fill: whether an order can be filled at a worse price, whether it can also be filled at a better one, and whether it can be refused and requoted. Ask how a stop is treated when the market gaps over it. A firm that publishes figures for execution should also say how they were measured.

Which platforms are offered, and on which devices? Try each on a demonstration account before paying anything in. Look for what you will actually use: the order types, the charting, how a stop is placed and amended, how statements and history are exported.

Check where the software is downloaded from. A genuine platform comes from the firm’s own official address or from a recognised application store, and a firm should be able to say which addresses are its own.

When is help available, through which channels and in which languages? Test it before opening an account by asking one of the questions on this page in writing. The speed of the reply matters less than whether it answers the question.

Find the complaints procedure as well: who inside the firm handles a complaint, how long they may take, and who outside the firm it can be taken to if it is not resolved.

Paying in is always easy. The test of a firm is taking money out. Ask which methods are available for withdrawal, what each costs, how long each takes, what the minimum is, and what documents are required before the first one.

Proof of identity is a legal requirement in most places and is not, by itself, a warning sign. A condition invented at the moment of withdrawal is: a new fee, a tax to be paid to the firm first, a required further deposit or a minimum volume of trading that was never in the terms. A small early withdrawal is an ordinary way to see the process work.

Some things are not weaknesses to be weighed against strengths. They are reasons to stop.

• A promise of profit, a guaranteed return or a claim that losses are impossible.
• Pressure to decide today, or a caller who discourages you from checking or from asking anyone else.
• A regulator that is named but cannot be found, or a register entry whose details do not match.
• A bonus whose conditions prevent the money being withdrawn.
• A request to pay into a personal account, in crypto-assets to an individual, or to a company with a different name from the one in the terms.
• A request for remote access to your computer or telephone.
• Someone offering to trade the account for you informally, outside any written agreement.