Prospective investor's guide to finding right derivatives broker

Choosing the right derivatives broker is a crucial step for any beginner investor, as the broker you select will be your gateway to the financial markets.

- Maboko Seabi

This guide will help you identify the key factors to consider and the red flags to watch out for.

1. Regulation and reputation
Your first consideration should be the broker's regulatory status and reputation.

Brokers should be regulated by the Financial Sector Conduct Authority (FSCA).

Watch out for: Brokers not regulated by any credible authority or with a history of customer complaints or legal issues.

2. Fee structure
Costs can erode your investment returns, so it is important to understand the fee structure of any broker.

Key fees to examine
Trading commissions: Some brokers charge per trade, especially on shares or ETFs, while others offer commission-free trading.

Account maintenance fees: Some brokers charge flat monthly or annual fees.

Spread costs: Brokers who offer contracts for difference (CFDs), forex, or commodity trading often make money with the spread, the difference between the buy and sell price.