Regulated Forex Brokers

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The Forex market attracts thousands of new traders around the world every day. With daily turnover approaching $7 trillion, the low capital requirements to start a portfolio and high leverage combine with countless trading opportunities that drive demand. Many professional firms and multi-national companies deal with Forex every day, and retail traders remain indirectly exposed in numerous ways. A rapidly rising number of them show interest in the attractiveness of Forex trading. They open new online Forex broker trading accounts to get access to the fast-moving market, keeping demand for trading services elevated. One of the most critical requirements for a successful trading career is trading with one of the many regulated Forex brokers. I cannot stress the significance of it enough. Never deposit with an unregulated Forex broker, regardless of how attractive an offer they make. The negatives outweigh any short-term positive marketing-related push. One of the worst nightmares of profitable Forex traders is the inability to withdraw their earned capital because their unregulated Forex broker does not honor it. Therefore, traders must ignore any offers from unregulated sources and pay attention to competitive trading environments maintained by regulated Forex brokers.

Not all regulators are the same, and trading from the proper jurisdiction provides a competitive edge. The UK was home to the best regulatory trading environment maintained by the Financial Conduct Authority (FCA). It changed following counter-productive regulatory changes by the European Securities and Markets Authority (ESMA). It made EU-based Forex brokers the least competitive globally. With the Brexit transition period ending at 23:00 on December 31st, 2020, European Central Time (ECT), the UK financial sector is expected to make changes and return to its previous glory. London remains the financial center of the world and is ideally positioned to expand its leadership position. UK Forex brokers have always been among the industry leaders. Australia offers Forex traders another excellent and competitive trading environment. The Australian Securities and Investments Commission (ASIC) ensures one of the best regulatory jurisdictions. Since former hotspot Cyprus and the Cyprus Securities and Exchange Commission (CySEC) fall under ESMA jurisdiction, one exciting regulatory environment to monitor is South Africa and the Financial Sector Conduct Authority (FSCA). South Africa shares the same time zone as Cyprus, is an English-speaking country and a G-20 member.

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image Top Rated

Min. Deposit

$100


Bonus

Up To $5000


Trading Platform


Max. Leverage

1:400


Regulation

MiFID, Central Bank of Ireland, FSA, ASIC, BVI, FFAJ, FSCA, ADMG - FRSA

Highly regulated, choice of fixed or floating spreads

Min. Deposit

$10


Bonus

30% Welcome Bonus


Trading Platform


Max. Leverage

Flexible


Regulation

CySEC, FCA, FSC, CMA

Best all-around: high floating leverage + fast execution

Min. Deposit

$100


Bonus

Deposit $500 and trade with $1000!


Trading Platform


Max. Leverage

1:500


Regulation

CySEC, ASIC

ECN trading with leverage up to 1:500

Min. Deposit

$100


Bonus

None


Trading Platform


Max. Leverage

1:30


Regulation

CySEC, FCA, ASIC, FMA, FSB, MAS

Wide range of CFDs + trailing stop losses

Min. Deposit

$250


Bonus

None


Trading Platform


Max. Leverage

1:500 (ASIC entitiy only), 1:30 CySEC Retail, 1:300 CySEC Pro


Regulation

CySEC, FCA, ASIC, FSC, FSCA

Excellent educational offerings

What is Forex Regulation?

Forex regulation is a set of rules by an authority with enforcement powers that ensures brokers treat customers fairly. It also enables the financial health and stability of the system and provides dispute resolution. In some cases, an investor compensation fund in case of bankruptcy by a broker exists. Not all regulators grant equal protection and enforcement, and some maintain an uncompetitive trading environment like the ESMA, which applies to all EU-based brokers. I highly recommend that traders always trade with one of the thousands of regulated Forex brokers. While it cannot guarantee against fraud and malpractice, as well-documented cases in the US and Cyprus have shown, it offers a layer of protection and security that traders should demand from their brokers. Traders should seek a minimum of five years under a well-regulated environment and must also check the track record. Many brokers faced fines but continue to cater to clients. It shows that an attempt to take advantage of unknown retail traders was made, but the regulator caught them.

Why Should You Choose a Regulated Broker? 

Most traders conduct some research and due diligence to identify a trustworthy Forex broker and often follow the best-marketed one or the one with the most appealing offer, usually in the form of bonuses and promotions. While the majority of brokers and all traders hope for the best outcome, issues may arise. They do not necessarily originate from malpractice, but a technological glitch, communication error, administrative backlog, or a third-party mistake may occur. Trading with a regulated broker provides traders access to a qualified team to resolve those issues. Regulated Forex brokers must adhere to financial regulations and maintain a certain amount of capital reserves before receiving a license to operate. Frequent audits ensure that client deposits and earnings reflect the accurate value, and regulated Forex brokers must segregate client funds from corporate ones. The processing times of financial transaction is faster and more transparent. It also enforces the protection of information provided by traders during the registration process.

Regulated Forex brokers must satisfy know-your-client (KYC) and anti-money laundering (AML) stipulations, adding another layer of security. A compensation fund protects against any unexpected financial failure of the broker, which remains dependent on the jurisdiction. Some take out additional insurance protection or apply for membership with the Hong-Kong-based Financial Commission, an independent self-regulatory organization and external dispute resolution (EDR) body focused on the Forex market. The Compensation Fund provides coverage for traders up to €20,000 per case if the broker defrauded traders. It emerged as a favorite to many regulators. It enables brokers to register in business-friendly jurisdictions while offering superior protection. Regulated Forex brokers also process withdrawals swiftly, act in the best interest of clients, and stay clear of manipulating prices or stop-loss hunting. An ECN execution model generally provides more safety than a market maker model. The broker is not the counterparty and receives compensation via volume-based commissions rather than a mark-up on spreads and client losses.

Major Regulatory Bodies

All countries have a financial regulator, but there are several major regulatory bodies for the Forex market with a distinct cluster of brokers. Below is a list of the most dominant ones for Forex traders to be familiar with and to recognize:

  1. UK - Financial Conduct Authority (FCA): The FCA remains the best overall financial regulator globally. Many of the best-regulated Forex brokers operate under its jurisdiction. Following Brexit, the competitiveness the UK lost under the ESMA will return and enable UK-based brokers to increase their market share further.
  2. Australia - Australian Securities and Investments Commission (ASIC): A member of the UK Commonwealth of Nations, Australia quietly grew into another Forex hotspot with excellent and competitive regulation.
  3. Switzerland - Swiss Financial Market Supervisory Authority (FINMA): The global banking center provides well-trusted regulatory oversight with a forward-thinking approach.
  4. South Africa - Financial Sector Conduct Authority (FSCA): An up-and-coming regulator set to benefit from missteps by the EU.
  5. Seychelles - Financial Services Authority (FSA): The FSA maintains an offshore center for many financial firms. It remains a top location for Forex brokers with an active regulator.
  6. Mauritius - Financial Services Commission (FSC): Another well-known regulator with a business-friendly environment preferred by many Forex brokers.
  7. Belize - International Financial Services Commission (IFSC): The IFSC is another trusted regulator that offers excellent trading conditions and serves as a significant Forex broker location, especially for Latin American expansion.
  8. Dubai - Dubai Financial Services Authority (DFSA): Regional traders, thanks to the DFSA, have a secure and competitive trading environment. Dubai is the financial service center of the Middle East, gaining traction among Forex brokers.
  9. Singapore - Monetary Authority of Singapore (MAS): Singapore remains an excellent gateway to Asia, is a growing Asian financial hub, and an attractive destination for Asian-focused international Forex brokers.
  10. Cyprus - Cyprus Securities and Exchange Commission (CySEC): A former haven for Forex brokers, the ESMA turned it into the least competitive and most recognized Forex regulator. Numerous high-level scams operated under its oversight.
  11. US - Commodity Futures Trading Commission (CFTC): Three of the most significant brokerage frauds occurred under its oversight over the past decade. This regulator cripples financial innovation, and US traders operate under the least competitive framework.

How Forex Regulations Protect You

Forex regulations protect traders by ensuring that brokers segregate client deposits from corporate funds. They also provide an enforcement mechanism against broker fraud, police the financial sector, and issue warnings. Traders can check their websites and databases to retrieve information about brokers. Regulators require brokers to submit trade execution and financial data and command minimum capital requirements before granting an operating license. Some regulations remain counter-productive, like the ill-advised ESMA crackdown on leverage and bonuses, but traders should never trade with an unregulated Forex broker. Trading with uncompetitive EU-based brokers can harm profitability and limit competitiveness, but there are many viable options. I urge all traders to conduct their due diligence and select any of the regulated Forex brokers in competitive jurisdictions with a clean track record.

FAQ

Is Forex trading regulated?

Most Forex trading remains unregulated in the over the counter (OTC) market, but all trustworthy Forex brokers maintain regulation. Traders should never trade with unregulated Forex brokers, regardless of the offer they receive.

What does a regulated broker mean?

A regulated broker satisfied requirements by the supervising authority to receive an operating license. It includes financial stability, staff training, support infrastructure, risk management, and compliance.

Are Forex brokers regulated?

Many Forex brokers have an operating license from one or multiple regulators, but numerous brokers operate as unregulated entities, including subsidiaries, from well-known brokers.

How are brokers regulated?

The level of regulation depends on the authority. Not all regulated Forex brokers provide the protection and security that traders believe. Some rules and stipulations render the trading environment uncompetitive. Others do not enforce regulations or punish violations. I recommend trading with a broker operating under the oversight of the regulatory bodies mentioned above.

Do I need a license to trade Forex?

No, a license for individual traders who manage their capital in their portfolios does not exist. Some brokers will demand traders fill out a questionnaire to determine if they are fit to trade. Several countries ban retail Forex trading, and traders should consult legal advice if in doubt.

Can I trade Forex without a broker?

Yes, it is possible to trade Forex via a bank, exchange office, or peer-to-peer. Trading via an online Forex broker is more convenient and efficient.

How do I know if my broker is regulated?

Each broker provides its regulatory information at the bottom of their homepage. Traders can confirm it by checking the license number against the database of the issuing regulatory authority.