Trading with Regulated Forex Broker

The Forex market is the largest, most liquid market on the planet. Combined with a highly volatile and extremely competitive CFD market, the FX/CFD industry has attracted massive attention and an ever increasing number of individual investors. Unsurprisingly, trading activity of that size and scope creates unique challenges regarding market regulation.

How is the Forex market regulated?

In an industry so liquid and lucrative, it is essential to have strong regulatory oversight to prevent malpractice. It is important to understand that there is no centralized body governing the currency trading market. Instead, there are a number of governmental and independent bodies that supervise forex trading around the world. These supervisory authorities regulate forex by setting standards which all brokers under their jurisdiction have to comply with. These standards ensure that Forex/CFD trading is ethical and fair for all parties involved.

As the largest and most liquid financial market in the world, the Forex/CFD market is regulated by the same regulating bodies that supervise banks and other financial institutions. The only difference however, is that these regulators can only regulate the Forex market domestically within their jurisdiction. It’s therefore very important for retail traders to look for brokers that obtain regulation which covers the jurisdiction where the trader resides.

What regulation means for traders

With Forex brokers supervised by a regulatory authority investors can be more confident about the credibility of the broker. For a retail trader, the biggest risk of trading with a non-regulated broker is that of illegal activity or schemes. Fraudulent activities include excessive commissions; very lose spreads, hidden Terms and Conditions and even restrictions on withdrawals. Regulatory authorities can provide a level of protection for investors as they can be trusted to restrict, sanction or ban such unwarranted actions and to safeguard investors.

Choosing a Regulated Broker

Trading with a regulated broker should be one of the main prerequisites for any individual trader looking to trade forex and CFDs. The fact that a broker is regulated implies that they respect industry standards. A regulated broker not only follows Forex regulation that is aligned with the clients’ best interests, but also offers safety, reliability, and security.
The biggest advantage of trading with a regulated forex/CFD broker is that a financial authority will step in if there are any problems. A broker that is regulated by a financial authority also offers segregated funds, meaning that your funds are not being used for any purposes other than trading. Traders’ funds are held in segregated accounts and cannot be used by the brokerage. What is more, a regulated broker will build its business around its clients and it is more likely to have outstanding customer satisfaction as well as a customer oriented service.

Regulatory Authorities around the world

The following table includes a list of the most important Regulatory Authorities across the globe. 

CountryRegulator’s website
Hong KongSecurities and Futures Commission
UKFinancial Conduct Authority (FSA)
Canadahttp://www.fsa.gov.uk/
FranceThe Autorité des Marchés Financiers (AMF)
GermanyBundesanstalt für Finanzdienstleistungsaufsicht (BAFIN)
BulgariaFinancial Supervision Commission
GibraltarGibraltar Financial Services Commission (GFSC)
CyprusCyprus Securities and Exchange Commission (CYSEC)
SingaporeMonetary Authority of Singapore
SwedenFinansinspektionen (FI) Swedish Financial Supervisory Authority
AustraliaAustralian Securities and Investments Commission
SwitzerlandFinancial Market Supervisory Authority FINMA
JapanFinancial Services Agency (FSA)
BelizeInternational Financial Services Commission (IFSC)
BVIBritish Virgin Islands Financial Services Commission (FSC)
 Mauritius Financial Services Commission Mauritius
SeychellesSeychelles Financial Services Authority (FSA)

 
In addition to the above regulatory agencies, the European Union obligates each member to be responsible for the regulation of its financial markets and conform with the E.U.’s Markets in Financial Instruments Directive or MiFID. This also allows for companies regulated in one E.U. member country to service customers in other E.U. member nations.

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.

How do I know if my Forex Broker is regulated?

In order to check if Broker is regulated or not, you should verify this information through the official brokers’ website first, as regulated companies always provide its licenses. And the next step is to verify a license through the official regulatory website. However, in our Forex Broker Review you will find all the necessary information and license check as well.

It is a fact, unscrupulous brokers may easily fake information and assure you of its license while its not true, so always verify information through the official source. As well, adhere to trade with brokers regulated in serious jurisdictions, not the offshore once, as they luck of strong regulation, requirements and necessary safety measures. 

Regulated broker means:

Safety of funds

A fully regulated Forex broker always keeps clients’ funds in separate accounts at top tier banks. Meanwhile, the whole process is regularly audited by the relevant regulatory authority. Other measures such as offering negative balance protection, diversification of clients’ funds, Investor Compensation Fund, and encryption protocols of all the transactions are taken to provide extra means of security. Also, all the regulated forex brokers are required to have sufficient capitals defined by the supervisory entities.

Business Ethics and Fair Practices

The rules and regulations are set to make certain that all the licensed FX brokers always offer fair financial treatment and act ethically towards their clients. Brokers ought to be regulated in the same country where their operations are controlled, so their compliance with the provisions is guaranteed. Moreover, they must present their clients with quality services including fast and reliable executions, reasonable pricing with no hidden fees, and transparency in their operational status.

Deposit Insurance (Compensation Schemes)

Deposit protection programs such as Investor Compensation Fund (ICF) of Cyprus and Financial Services Compensation Scheme (FSCS) of the UK are designed to protect the covered customers and compensate them if the member organizations such as Forex Brokers could not hold up their end of the bargain or went out of business for a number of reasons. ICF and FSCS would reimburse the clients up to €20000 and £85.000 respectively. You can benefit from such compensation programs only if you’re registered with a regulated Forex broker.

Scams

Unfortunately, the Forex industry has historically suffered from scammers setting up unregulated or extremely lightly regulated brokers. These scam brokers tended to use a range of tricks to make their clients lose money, or to make it very difficult for clients to withdraw any funds they deposited.

I have taken care to ensure the brokers listed do not fall into this category.

There are also various scams which unscrupulous brokers may run quietly to maximize their clients’ losses where possible. You may find a broker which is well regulated and which will return your deposit, but which quietly engages in unfair manipulation.

  • Reliable Forex broker patternsReliable Forex broker patterns Broker-fraud (forex-scammers) patternsBroker-fraud (forex-scammers) patterns
  • Acting under a regulator whose license number is registered in the regulator databaseNo license information or the information is false
  • Indicates current quotes of the international marketIf you compare the numbers, you see the differences between the scammer’s numbers and the Interbank quotes
  • Offers to work on official trading platforms (e.g., MT4 and MT5)Forces you to work through its own platforms, which can contain spyware
  • Offers you a large number of trading tools, for example, 20–40 currency pairsCan offer only a very few trading tools
  • Offers only standard terms (minimum deposit $1–10, leverage up to 1:1,000, etc.)Promotes unrealistic, overly beneficial terms (e.g., leverage of 1:10,000 or colossal no deposit bonuses).
  • The official site was created years before or in the year of licensingWhen checking through a special service, it is revealed that the site was created after the specified licensing period
  • Reviews by other traders are real, as evidenced by their ability to be found on independent websitesThe reviews are self-made and, as a result, they are 95-100% positive and can only be found on the scammer’s website; on independent websites, reviews reveal that the scammer is a fraud

FAQs

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.

Are Forex Brokers Reliable?

Some Forex brokers are reliable, and some are unreliable. The easiest and best way to tell whether a broker is reliable is to check whether they have secured regulatory approval in a major financial center with a good regulatory reputation.

What is the Best Website for Forex Trading?

Forex brokers offer trading in Forex, not Forex websites, although all brokers have websites. The best Forex broker for you will depend upon how much money you want to deposit, what you want to trade, how often you want to trade, and your overall risk tolerance. Your country of residence and citizenship can also play a role in answering this question.

How Do I Choose the Best Forex Broker for Me?

Consider what assets you want to trade, what style of trading you want to do (long or short-term), and how much money you wish to deposit. These factors are the most important considerations and applying them will enable you to create a shortlist from brokers which are well-regulated and have good reputations. You can then make your final choice on the nice-to-have factors.

What is the Minimum Deposit for Forex?

Many Forex brokers require a minimum deposit of $100 or the equivalent, but it is becoming more common to find brokers requiring only $10 or even stipulating no minimum at all. Remember though, that it is very difficult to trade safely with even a micro account unless you deposit at least $100.

How Do I Know if My Forex Broker is Regulated?

You can tell very easily whether a Forex broker is regulated, as brokers will almost always publish this information prominently on their websites, as it is good marketing to potential customers. You do not have to take a broker’s word that it is regulated by a particular regulatory authority – you can and should check the regulator’s website to ensure the broker in question is listed there as having secured their regulatory approval.

What platform do Forex traders use?

Most Forex traders use the MT4 trading platform, which is offered by almost every Forex broker, and became the cornerstone of the online Forex trading industry.

Can I trade Forex with $10?

While some brokers offer trading accounts from $10 or less, sufficient to maintain one micro position, it is not enough to trade Forex.

Is trading Forex worth it?

Forex trading is worth it if new traders approach it with the same mindset as any other demanding profession. The failure rate, as high as 85%, confirms that most do not take it seriously or have misplaced and unrealistic expectations. Misleading marketing campaigns take partial blame for it.

Who is the largest Forex broker?

The largest Forex broker by volume traded is currently IC Markets.

Who is the best Forex broker for small accounts?

FXTM is a Forex CFD broker offering micro accounts and requires a minimum deposit of only $10 or a currency equivalent.

Who is the number 1 Forex trader?

The person who has made the most money from Forex trading, and who has made some famously profitable Forex trades, is George Soros.

What platforms do professional Forex traders use?

Bank traders and other institutional traders will typically use platforms such as Bloomberg terminals and bank to bank software, as they are going to be trading with other banks. However, there are private Forex traders making a living from their trading who are using retail platforms such as MetaTrader 4, MetaTrader 5, or cTrader, but they probably are also using technical add-ons, a VPN, and may be looking at other data such as depth of market (DOM) and related futures and other market data.

What is the best regulation for Forex brokers?

The best regulation for Forex brokers depends on what you think is the best regulation – do you want the strictest, or a more flexible approach that might allow the brokers to offer customers a bit more risk and potential reward? If you want the strictest regulation, look at tier 1 jurisdictions like Australia, Canada, the European Union, Hong King, Japan, Singapore, New Zealand, Switzerland, the United Kingdom, and the United States.

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