ESMA regulated Forex / CFD brokers offer traders one of the world’s tightest regulatory regimes with a high level of customer protection. Maximum leverage on Forex is capped at 1:30 while bonuses are banned, although neither of these issues should deter traders. Many of the best Forex brokers in the world enjoy their status as an ESMA regulated entity. We have reviewed them all and present our detailed broker by broker findings below.
- FXTM, Best all-around broker with high floating leverage and fast execution.
- FP Markets, ECN trading with leverage up to 1:500.
- AvaTrade, Highly regulated, choice of fixed or floating spreads.
- Eightcap, Competitive pricing + excellent daily videos.
Best ESMA Brokers Comparison
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Regulators | CMA, CySEC, FCA, FSC Mauritius, FSCA | ASIC, CySEC, FSCA | ASIC, BVI, Central Bank of Ireland, FFAJ, FSCA, KNF, MiFID | ASIC, CySEC, FCA, SCB |
Year Established | 2011 | 2005 | 2006 | 2009 |
Execution Type(s) | ECN/STP, Market Maker | ECN/STP | Market Maker | ECN/STP, Market Maker |
Minimum Deposit | ||||
Average Trading Cost EUR/USD | 0.1 pips | 1.1 pips | 0.9 pips | 1.0 pips |
Average Trading Cost GBP/USD | 0.2 pips | 1.4 pips | 1.5 pips | 1.2 pips |
Average Trading Cost Gold | $0.18 | $0.21 | $0.29 | $0.12 |
Trading Platform(s) | MetaTrader 4, MetaTrader 5, Proprietary platform | MetaTrader 4, MetaTrader 5, cTrader, Proprietary platform, Web-based | Other, MetaTrader 4, MetaTrader 5, Web-based+ | MetaTrader 4, MetaTrader 5, Trading View |
Islamic Account | ||||
Negative Balance Protection | ||||
| Visit Website | Visit Website | Visit Website | Visit Website |
FXTM
In Summary Best all-around broker with high floating leverage and fast executionFXTM ranks among the best ESMA Forex brokers due to its low trading costs and fast order execution. For a deposit of $500 or a currency equivalent, Forex traders get raw spreads from 0 pips for a commission between $0.80 and $4.00 per 1.0 standard lot, plus NDD execution, ideal conditions for scalpers, ranking it among the lowest trading costs covered by the ESMA regulatory framework. FXTM features the trusted MT4 trading platform, leader for algorithmic trading using EAs, and offers VPS hosting. FXTM additionally upgrades the out-of-the-box MT4 with six plugins and its FXTM Pivot Point Strategy. Beginner traders will benefit from the quality educational section available at FXTM. It consists of written content, videos, eBooks, webinars, and seminars. FXTM also developed an interactive Forex periodic table. Market commentary is available via podcasts, market analysis videos, and the FXTM Forex News Line. FXTM’s reported retail loss rate is 77.0%.
Pros & Cons
- Excellent commission-based Forex pricing environment and transparency
- Upgraded MT4/MT5 trading platforms plus proprietary mobile trading app
- Quality market research and educational content for beginner traders
- A highly regulated broker with a tier-1 license
- No cryptocurrencies and limited choice of commodities
FP Markets
In Summary ECN trading with leverage up to 1:500FP Markets caters to traders within the ESMA regulatory framework via its Cyprus operating subsidiary. Forex traders are offered 60+ currency pairs, fast NDD order execution without requotes, and ECN pricing. The available trading platforms at FP Markets are MT4, MT5, its proprietary WebTrader, and its newly developed mobile trading platform FP Markets Trading App. The twelve plugins for MT4, part of the FP Markets Traders Toolbox, upgrade the core version to a competitive trading solution. Traders have two pricing options. The commission-free Standard account lists average spreads at 1.2 pips for the EUR/USD, the lowest cost, or $12.00 per 1.0 standard lot. A notably cheaper cost structure exists in the commission-based Raw account, with an average mark-up of 0.1 pips and a commission of $6.00 per round lot for a total cost of $7.00. Video tutorials and daily market reports are also available. The retail loss rate is 70.7%.
Pros & Cons
- Choice of trading platforms and auxiliary trading tools
- Very competitive cost structure and excellent asset selection
- Low minimum deposit requirement and leverage of up to 1:500
- Well-regulated and trustworthy
- Availability of Iress geographically restricted
AvaTrade
In Summary Highly regulated, choice of fixed or floating spreadsTraders looking for an ESMA compliant broker, a broad range of trading platforms, and a well-balanced asset selection from a commission-free trading environment will feel at home at Irish-based AvaTrade. Besides the well-known and trusted MT4, AvaTrade presents MT5, its proprietary WebTrader, its mobile app AvaTradeGO, its options platform AvaOptions, and its newly added social trading service Ava Social. Services by Trading Central are available as an MT4/MT5 plugin and in its mobile app. With 1,200 trading instruments, including options, AvaTrade presents a competitive asset selection. It is also a trusted cryptocurrency CFD broker operating within the ESMA regulatory framework. AvaTrade also offers a high-quality partnership program. Trading costs start from 0.9 pips or $9.00 per 1.0 standard lot. Beginner traders will benefit from SharpTrader, the spun-out trading academy featuring 40+ lessons and 200+ videos. It is the most in-depth broker-developed educational resource. The retail loss rate is 71.0%.
Pros & Cons
- High-quality educational offering via SharpTrader
- Excellent choice of trading platforms catering to various trading needs
- Broad asset selection and cross-asset diversification opportunities
- Well-regulated and trusted broker with oversight from a central bank
- Trading costs competitive but nothing special
Eightcap
In Summary Competitive pricing + excellent daily videosEightcap established itself among the best Forex brokers due to its superb trading infrastructure, excellent order execution amid deep liquidity, competitive fees, and cutting-edge trading tools. Manual traders get a well-designed AI-powered economic calendar, and Eightcap upgrades MT4 via Capitalise AI, which enables algorithmic trading in a code-free environment. MT5 traders benefit from Flash Trader, while the dedicated cryptocurrency solution Crypto Crusher caters to cryptocurrency traders.
Copy traders get the embedded MT4/MT5 services, and Eightcap connects social traders to the active TradingView community. Beginner traders get an outstanding educational and research offering via Eightcap Labs and Eightcap Trade Zone.
Pros & Cons
- Low minimum deposit and high leverage of up to 1:500
- Competitive cost structure
- Excellent technology infrastructure and seasoned management team
- Daily research and quality educational content
- Limited leverage in some areas
Forex Brokerages Working Under ESMA Regulations
Forex/CFD brokerages operating under ESMA regulations carry two very notable regulatory conditions which are worth understanding. Firstly, the maximum leverage which can be offered to clients trading Forex currency pairs is thirty to one. This means that the largest trade you can open is your total account size multiplied by thirty. Some traders will not like the idea of being limited to a maximum leverage of thirty to one, but it is worth considering how much money you could become liable for at a much higher level of leverage in the event of a sudden huge price movement.
Closely connected to this is a further restriction which prevents any retail client from being liable under any circumstances for an amount beyond the funds which are already sitting in the brokerage account. This “negative balance protection” is a welcome one, as in the past when there have been huge sudden price movements which slip right through brokerage stops, such as the huge Swiss Franc move in January 2015, clients could suddenly find themselves legally liable for large sums far exceeding their deposit. The sudden volatility triggered by that event and effective freezing of the entire global market in Swiss Francs for about an hour resulted in traders leveraged by more than 1:3 seeing instant losses exceeding their account equity with no ability to immediately exit the trade. This is now a danger which belongs to the past if you trade with an ESMA regulated Forex/CFD brokerage. However, it is also true that many brokers who are not regulated by ESMA offer negative balance protection as it has come to be seen as a fair practice.
Now that you have considered ESMA-related issues, you can consider what the broker has to offer. Is the cost of trading there competitive or not? Check spreads, commissions, and other incidental fees. Remember that some brokers can offer very competitive fees on certain asset classes, such as Forex, while the cost of trading commodities might be high, for example, so check the fees section in the reviews carefully depending upon what instruments you intend to be trading the most. Traders who are planning to keep trades open over the New York rollover at the end of the trading day there should also consider the overnight swaps typically offered. Unfortunately, some brokers abuse this typically “hidden” fee.
Finally, examine the “nice to have” elements, such as the range of tradable instruments, quality of customer support, and trading platforms. Going through the process in this order should ensure you end up opening an account with the best ESMA regulated Forex broker for you.
Main ESMA Forex Regulations
- The maximum leverage which can be offered in Forex is 30 to 1. That applies to major currency pairs such as EUR/USD, GBP/USD, USD/JPY, etc.
- Other currency pairs, major equity indices, and gold will be subject to a maximum leverage of 20 to 1.
- Individual equities cannot be offered with leverage greater than 5 to 1.
- Cryptocurrencies are subject to a maximum leverage of 2 to 1.
- Brokers are required to provide negative balance protection, meaning it will be impossible to lose more money than you deposit.
- Brokers are required to close a client’s open positions when the account equity reaches 50% of the required minimum margin by all open positions. This “margin call” provision can be tricky to understand, so will be explained in more detail later.
- Bonuses or any other form of trading incentives may not be offered.
- Brokers will be required to display a standardized risk warning which will include the percentage of their clients who lose money over a defined period.
Understanding the “Margin Call” Regulation
The best way to understand the 50% margin call provision is to use an example. Imagine a client opens an account with a Forex broker, depositing €100 in total. The client opens a short trade in EUR/USD, by going short one mini-lot (one tenth of a full lot). One full lot of EUR/USD is worth €10,000, meaning one mini lot is worth €1,000. To find out the minimum margin required to support that trade, we divide the size of the trade (€1,000) by 30, which comes to €33.33. This is the minimum required margin to maintain the trade. Half of that amount is €16.67. Now assume the trade goes against the client, with the price of EUR/USD rising above the entry price. As soon as the price rises far enough to produce a floating loss of €83.33 (€100 - €16.67), the broker must close the trade out, even if the trade has no stop loss or has not yet reached the stop loss. In theory, this means that a client’s account can never reach zero. Examples involving multiple open trades will be more complex but will operate according to the same principles.
Who is a Retail Client?
The regulations detailed above only apply to “retail clients”. However, to get a broker to classify you as anything other than a retail client, you must show you have financial qualifications, a large amount of liquid assets, plenty of experience trading, and usually that you also trade frequently. Most traders will be unable to qualify.
Impact of 2018 ESMA Forex Regulations
The major impact these regulations have had since 2018 is simple – the maximum trade size that can be traded with brokers regulated in the European Union has shrunk.
Beyond having to deposit more margin, and automatic margin calls, the other major change for traders has been the post-2018 guarantee of negative balance protection. This is a positive development which hopefully makes brokerages focus more heavily on the risks they are taking with their business model in the market.
Two final notes: brokerages must report on their websites the percentages of clients who are losing and making money. Additionally, bonuses and promotions are banned.
Final Thoughts
Now that you have considered ESMA-related issues, you can consider what the broker has to offer. Is the cost of trading there competitive or not? Check spreads, commissions, and other incidental fees. Remember that some brokers can offer very competitive fees on certain asset classes, such as Forex, while the cost of trading commodities might be high, for example, so check the fees section in the reviews carefully depending upon what instruments you intend to be trading the most. Traders who are planning to keep trades open over the New York rollover at the end of the trading day there should also consider the overnight swaps typically offered. Unfortunately, some brokers abuse this typically “hidden” fee.
Finally, examine the “nice to have” elements, such as the range of tradable instruments, quality of customer support, and trading platforms. Going through the process in this order should ensure you end up opening an account with the best ESMA regulated Forex broker for you.
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