Forex regulation / regulated forex brokers

Currently forex brokers are usually better regulated in UK, US,Switzerland,Australia.

FCA UK (FCA UK) regulated Forex brokers #

Firm Status: Authorised Brokers List #

Abshire-Smith, ActivTrades, Atom8, Bulls And Bears Forex UK, City Credit Capital, City Index, CMC Markets UK, CMS Forex UK, Darwinex, DF Markets, FOREX.com UK,FXCM,  Fxopen UKFxPro UK, GAIN Capital,  GKFX, Hantec Markets, Hirose Financial UK,  HY Markets UK, ICAP, ICM Capital, IG Markets, IKON Markets,  Interactive Brokers (UK) Ltd, InterTrader, LMAX, London Capital Group (LCG), MB Trading, OANDA, One Financial Markets, Plus500 UK, RBS – Royal Bank of Scotland, SVSFX, Tradenext, Valbury Capital, Valutrades, Vantage FX UK, XTB UK

About FSA and FCA, PRA #

  • The Financial Services Authority (FSA) was a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom between 2001 and 2013.
  • In 2013, it became two separate regulatory authorities, The Financial Conduct Authority (FCA, www.fca.org.uk) and the Prudential Regulation Authority at (PRA, www.bankofengland.co.uk).
    • The FCA regulates financial firms providing services to consumers and maintains the integrity of the UK’s financial markets. It focuses on the regulation of conduct by both retail and wholesale financial services firms. The FCA is structured as a company limited by guarantee.
    • The PRA is structured as a limited company wholly owned by the Bank of England and is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms. It sets standards and supervises financial institutions at the level of the individual firm.

Requirements for FCA regulated brokers #

  • Ensure & monitor the quality of the bank in which clients funds will be held. The bank must be approved by FCA.
  • Keep clients’ funds separate from company funds, clients’ funds can never be treated and used as company assets including the situation when the company becomes insolvent.
  • Submit financial reports to the FCA regularly and undergo annual audit.

FCA Powers #

  • Regulate conduct related to the marketing of financial products;
  • Specify minimum standards and place requirements on products;
  • Investigate organisations and individuals;
  • Ban financial products for up to a year while considering an indefinite ban;
  • Instruct firms to immediately retract or modify promotions which it finds to be misleading, and to publish such decisions.

The Financial Services Compensation Scheme (FSCS) #

  • The FSCS(http://www.fscs.org.uk/) is an independent body and a fund of last resort for customers of authorised financial services firms.
  • FSCS covers claims against firms who are insolvent and unable to pay claims against themselves.
  • The compensation limits for forex market: A client receive 100% of the first £30,000 + 90% of the next £20,000, up to £48,000.( http://www.fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/investment-limits/)
  • The FSCS is funded by levies on FCA-authorised firms. Their costs are made up of management expenses and compensation payments. The service is free to individual consumers.

FCA Register-Protect yourself from unauthorised forex brokers #

Beware of cloned firms (fraudsters pretending to be from a firm authorised by FCA). If you deal with an unauthorised firm you will not be covered by the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if things go wrong.

Check FCA Register: https://www.fca.org.uk/firms/systems-reporting/register

The Register has information on forex brokers that are regulated by FCA. Firm status must be ‘Authorised’ or ‘EEA Authorised’(not ‘registered’).

If a forex broker does not appear on the Register but claims it does, contact Consumer Helpline of FCA on 0800 111 6768.

Unauthorised firms and individuals to avoid:

FCA: https://www.fca.org.uk/consumers/protect-yourself/unauthorised-firms/unauthorised-firms-to-avoid

Foreign regulators: https://www.fca.org.uk/consumers/protect-yourself/unauthorised-firms/foreign-warnings

UK Financial Services Authority (FCA UK)

www.fsa.gov.uk

The Financial Conduct Authority (FCA)

www.fca.org.uk

The Prudential Regulation Authority (PRA)

www.bankofengland.co.uk

Financial Services Compensation Fund (FSCS)

www.fscs.org.uk

NFA & CFTC US regulated forex brokers #

About NFA & CFTC #

  • National Futures Association (NFA) is the self-regulatory organization(non-profit, founded in 1982) for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives (swaps). NFA’s mission is to safeguard market integrity and protect investors. NFA is financed exclusively from membership dues and assessment fees.
  • Commodity Futures Trading Commission (CFTC) is the US government agency (founded in 1975) that protect market participants and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives – both futures and swaps.
  • NFA’s activities are overseen by CFTC.

NFA membership is mandatory for all forex brokers(including introducing brokers) in US.

  • NFA regulated brokers:
    • Must follow strict rules set by NFA to ensures the safety of clients’ assets.
    • Must have net capital of no less than $20 000 000 to guarantee client’s positions.
    • Must report their account balances to NFA weekly.
    • Must have comprehensive yearly audits.

NFA register #

Background Affiliation Status Information Center (BASIC) https://www.nfa.futures.org/basicnet/

Some NFA/CFTC rules #

  • Non-US brokers or brokers that are not registered in NFA are not allowed to accept US citizens as clients.(They can accept non-US citizens that live in US)
  • Maximum leverage of a US forex broker can offer should be 50:1 on major currencies and 20:1 on minors since October 18th, 2010.
  • US Forex brokers are not allowed to offer leveraged commodities and precious metal trading (including Gold & Silver) to retail clients.So they can only offer those on a 1:1 non-leveraged basis(requires substantially more margin).(Since July 15th, 2011, enforced by CFTC)

US Forex brokers with high leverage #

US brokers usually offer a higher leverage to international clients with non-US accounts. They usually have international branches.

Commodities and Futures Trading Commission (CFTC)

www.cftc.gov

Financial Industry Regulatory Authority (FINRA)

www.finra.org

National Futures Association (NFA)

www.nfa.futures.org

New York Stock Exchange (NYSE)

www.nyse.com

Office of the Comptroller of the Currency (OCC)

www.occ.treas.gov

US Securities and Exchanges Commission (U.S. SEC)

www.sec.gov

Chicago Board of Trade (CBOT)

www.cmegroup.com

Securities Investor Protection Corporation (SIPC)

www.sipc.org

Swiss Regulated forex brokers #

  • Swiss Bank Directive 3a mandates all brokers in Switzerland to obtain a banking license from the Swiss Financial Market Supervisory Authority (FINMA).
  • Swiss forex brokers are required to sign the Swiss Banks and Securities Dealers agreement, which protects all customer deposits of up to CHF 100,000.
  • About FINMA
    • FINMA(founded in June 2007) is Switzerland’s financial-markets regulator. (FINMA in English: The Swiss Financial Market Supervisory Authority; German: Eidgenössische Finanzmarktaufsicht; French: Autorité fédérale de surveillance des marchés financiers; Italian: Autorità federale di vigilanza sui mercati finanziari)
    • It supervises banks, insurance companies, exchanges, securities dealers, collective investment schemes, and their asset managers and fund management companies. It also regulates distributors and insurance intermediaries.
    • Deposit protection: If a bank or securities dealer authorised by FINMA goes bankrupt, clients will be able to get their funds back. (The Maximum is CHF 100,000 for each client)
  • FINMA authorisation
  • FINMA is institutionally, functionally and financially independent from the central federal administration and the Federal Department of Finance and reports directly to the Swiss parliament
    • Institutional independence. FINMA was established as a public law institution in its own right.
    • Functional independence. FINMA is functionally independent of Switzerland’s political authorities, neither Swiss Parliament nor the government can issue directives on how it carries out its regulatory duties.
    • Financial independence FINMA is financed not by the taxpayer, but by the levies and fees it charges for its supervisory work. FINMA’s accounts are audited by the Swiss Federal Audit Office.
  • FINMA’s objective
    • Protect the functioning of the financial markets, ensure that the institutions under FINMA supervision remain solvent
    • Protect all clients of financial institutions against institutional insolvency, disreputable business practices and to ensure equitable stock exchange execution. Claims filed by individual clients cannot be decided by FINMA. They must be settled through civil-law proceedings, or by an ombudsman in an arbitration procedure.
    • Enhance the competitiveness and reputation of the Swiss financial marketplace.

Swiss regulated brokers list #

Most popular Swiss regulated brokers:   Dukascopy (Suisse) SA( Visit)

BrokerTypeCountryMinimal LotRegulation
Dukascopy (Suisse) SA( Visit)ECNSwitzerland0.01FINMA, ARIF, KPMG, SCF Revision SA, is a licensed bank
Swissquote Bank( Visit)STPSwitzerland0.1FINMA, E&Y, SGS, CCIG, ACI, KPMG

Association Romande des Intermediares Financiers (ARIF)

www.arif.ch

Swiss Bankers Association (SBA)

www.swissbanking.org

Swiss Federal Banking Commission (SFBC)

www.finma.ch

Swiss Federal Department of Finance (SFDF)

www.efd.admin.ch

Swiss Federal Finance Administration (SFFA)

www.efv.admin.ch

Swiss Financial Market Supervisory Authority (FINMA)

www.finma.ch

Swiss National Bank (SNB)

www.snb.ch

PolyReg

www.polyreg.ch

Geneva Chamber of Commerce (CCIG)

www.ccig.ch

Organisme d’Autoregulation des Gerants de Patrimoine (OAR-G)

www.oarg.ch

Other Forex Regulatory Bodies #

International organizations: #

EU Commission

ec.europa.eu

Ernst & Young (E&Y)

www.ey.com

Financial Markets Association (ACI)

www.aciforex.com

KPMG

www.kpmg.com

Australia: #

Cyprus: #

  • Cyprus Securities and Exchange Commission (CySEC)

  • www.cysec.gov.cy

  • About Cyprus

    • Cyprus is an island country and a major tourist destination in the Mediterranean.
    • Cyprus has a high-income economy and a very high Human Development Index
  • About CySEC

    • CySEC (English: The Cyprus Securities and Exchange Commission)(Greek: Επιτροπή Κεφαλαιαγοράς), is the financial regulator of Cyprus.
    • CySEC was launched in 2001. When Cyprus became a member of the European Union in 2004, CySEC became a part of the European MiFID regulation, giving companies registered in Cyprus access to European markets(European Economic Area).
    • CySEC’s financial regulations comply with the European MiFID financial harmonization law.(MiFID = The Markets in Financial Instruments Directive, is a European Union law that provides harmonised regulation for investment services across the 31 member states of the European Economic Area)
    • A lot of retail forex/cfd brokers and binary options brokers have obtained registration from CySEC. Some of the biggest brands in retail forex industry are also regulated by CySEC.
  • Why many forex brokers are in Cyprus?

    • Lower Corporation Tax compared to many other countries in Europe.
    • Access to European Market. Forex Brokers regulated in Cyprus are allowed to offer their service to all residents in the European Economic Area(EEA), because Cyprus is a member of European Economic Area and European Union. And Based on the passport principle of a European Union law, a company regulated in a EEA country can offer its services to residents of other EEA countries.

Germany: #

  • About BaFin

    • https://www.bafin.de/EN/Homepage/homepage_node.html
    • Formed on 1 May 2002 with the passing of the Financial Services and integration Act (German: Gesetz über die integrierte Finanzaufsicht (FinDAG)) on 22 April 2002.
    • The Federal Financial Supervisory Authority ( BaFin German: Bundesanstalt für Finanzdienstleistungsaufsicht) is the financial regulatory authority for Germany.
    • It is supervised by the Federal Ministry of Finance (Germany).
    • BaFin supervises about 2,700 banks, 800 financial services institutions and over 700 insurance undertakings.
  • How is BaFin funded?

    • It is funded by fees and contributions from the institutions and undertakings under its supervision. BaFin must cover its expenditure entirely out of its own income. It receives no funding from the Federal budget. BaFin raises the funds required to cover its costs from the undertakings it supervises instead. The legal foundation for this is the Act Establishing the Federal Financial Supervisory Authority (Finanzdienstleistungsaufsichtsgesetz – FinDAG).
  • Authorization

    • Any undertaking wishing to conduct investment business or e-money business or to provide financial services or payment services in Germany requires written authorisation from BaFin.
  • Need Assistance?

New Zealand #

  • 1 FMA(Financial Markets Authority) is the primary regulator for brokers in New Zealand.
  • 2 FSCL(Financial Service Complaints LTD) is approved by the Minister of Consumer Affairs of New Zealand to operate as an external dispute resolution scheme in the financial services industry in New Zealand.
    • FSCL resolves complaints between consumers and it’s scheme participants.It is an alternative to legal proceedings for resolving financial services disputes.
    • FSCL is not government-funded. It does not regulate the financial services industry or discipline scheme participants.
  • 3 FSPR(Financial Service Providers Register) is a searchable online register of the people, businesses, and organisations that offer financial services in New Zealand.
  • Purpose of FSPR (Financial Service Providers Register)
    • Increase the level of transparency of public information. Enable the public and regulators to access information about financial service providers
    • Prohibit certain people from providing financial services (such as those with specific criminal convictions).
    • Prevent money laundering and the financing of terrorism;
  • Note:
    • Registration as a financial service provider is not an official approval of an individual, business, or organisation and does not necessarily indicate that the provider is licensed or regulated in New Zealand or any other country. This means some FSPR registered brokers are actually not regulated anywhere.
    • Most financial service providers (FSPs) who provide a service to retail clients must belong to an approved Dispute Resolution Scheme (DRS) under section 48 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSPA).

France: #

Autorite des marches financiers (AMF)

www.amf-france.org

Banque de France

www.banque-france.fr

Credit Institutions and Investment Firms Committee (CECEI)

www.banque-france.fr

Canada: #

British Columbia Securities Commission (BCSC)

www.bcsc.bc.ca

Canadian Investor Protection Fund (CIPF)

www.cipf.ca

Financial Transactions and Reports Analysis Center of Canada (FINTRAC)

www.fintrac.gc.ca

Investment Industry Regulatory Organization of Canada (IIROC)

www.iiroc.ca

Ontario Securities Commission (OSC)

www.osc.gov.on.ca

Ombudsman of Banking Services and Investments (OBSI)

www.obsi.ca

Japan: #

Financial Services Agency of Japan (FSA Japan)

www.fsa.go.jp

Japan Securities Dealers Association (JSDA)

www.jsda.or.jp

Japan Investor Protection Fund (JIPF)

jipf.or.jp

Tokyo Commodity Exchange (TOCOM)

www.tocom.or.jp

British Virgin Islands(BVI) #

  • About BVI
    • British Virgin Islands (BVI) is a British overseas territory located in the Caribbean to the east of Puerto Rico.
    • The British Virgin Islands is frequently labelled as a “tax haven”
    • Financial services account for over half of the income of BVI. The majority of the revenue is generated by the licensing of offshore companies.
  • BVI Regulation (BVI FSC)
    • All Financial services in BVI are regulated by British Virgin Islands Financial Services Commission(BVI FSC).
    • BVI FSC was established in 2001
    • BVI FSC website: http://www.bvifsc.vg/
    • BVI FSC Responsibility:
      • Authorising and licensing companies or persons to conduct financial services business
      • Monitoring the perimeter of regulated financial services activity to safeguard the public against any illegal and or unauthorised financial services business operating in or from within the BVI.
      • Registration of all companies formed in the BVI
      • Formation of Limited Partnerships and registration of Trade Marks and Patents.

Mauritius #

  • Mauritius FSC (English: The Financial Services Commission)(French: Commission des Services Financiers de Maurice) was established in 2001
  • Mauritius FSC is a regulator for the non-bank financial services sector and global business. It licenses, regulates, monitors and supervises the conduct of business activities in the non-banking financial services sector
  • FSC vision: “to be an internationally recognised Financial Supervisor committed to the sustained development of Mauritius as a sound and competitive Financial Services Centre”.
  • The FSC aims to:
    • Promote the development, fairness, efficiency and transparency of financial institutions and capital markets in Mauritius;
    • Suppress crime and malpractices so as to provide protection to members of the public investing in non-banking financial products;
    • Ensure the soundness and stability of the financial system in Mauritius.

Belize #

  • Belize’s banking sector (including offshore banking) is regulated by the Central Bank of Belize, while the non-banking sector falls within the jurisdiction of the International Financial Services Commission (IFSC) established in 1999.
  • IFSC Website: http://www.ifsc.gov.bz/
  • The IFSC’ mandate includes:
    • Promoting and developing Belize as a center for international financial services;
    • Protecting and enhancing the reputation of Belize as an offshore financial center;
    • Providing appropriate supervision and regulation of international financial services,
    • Formulating policies and providing advice and assistance to the government on the regulation of such services;
    • Collecting, storing and disseminating reliable and timely information to interested parties on changes and new trends in these services.
  • IFSC relies on self-regulation, meaning that while the belizean government sets overall standards, it expects much of the actual work in terms of monitoring and compliance to be done by the industry itself.

Seychelles #

  • The Seychelles Financial Services Authority is the regulator for non-bank financial services in the Seychelles.
  • Seychelles FSA was established in 2013. Website: http://www.fsaseychelles.sc/
  • Seychelles FSA Responsibility:
    • Licensing, supervision and development of the non-bank financial services industry of the Seychelles.
    • Registration of International Business Companies, Foundation, Limited Partnerships and International Trusts in the Seychelles.