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Regulatory authorities control Forex brokers in order to ensure the implementation of proper business practicesAs the Forex Exchange Market is a non-centralized OTC market, proper brokerage regulation is a top issue for all Forex traders and partners. An effective regulation requires a reliable regulatory authority with sufficient resources, capable of closely monitoring its members.

Regulatory authorities control Forex brokers in order to ensure the implementation of proper business practices. They can impose high penalties or even withdraw a license at any time. This means Forex brokers have a serious incentive to conduct business with ethics and transparency.

 

Eleven (11) Regulatory Authorities Around the Globe

These are the most popular regulatory authorities of our financial world:

  1. FCA UK (Financial Conduct Authority –United Kingdom)
  2. CySEC (Cyprus Securities and Exchange Commission -Cyprus)
  3. FINMA (Swiss Financial Market Supervisory Authority –Switzerland)
  4. ASIC (Australian Securities & Investments Commission -Australia)
  5. FMA (Financial Markets Authority -New Zealand)
  6. FSA (Financial Services Agency -Japan)
  7. CFTC (Commodities Futures Trading Commission -US)
  8. NFA (National Futures Association -US)
  9. FSB (Financial Service Board –South Africa)
  10. IFSC (International Financial Services Commission –Belize)
  11. FSC (Financial Services Commission - British Virginia Islands)

FCA UK (Financial Conduct Authority)

Foundation: 2013 (previously Financial Services Authority, about 4,500 employees)

Capital Requirement: 100,000 to 1 million GBP

License Cost: 35,000 to 50,000 GBP

Covering: 50,000 GBP per client

Reliability: 9/10

Website | ► Studies

FCA UKThe Financial Conduct Authority monitors the British financial industry and regulates financial institutions such as commercial banks, investment firms, brokers, and dealers. FCA has under supervision 56,000 businesses, and it is the prudential regulator for over 18,000 of these firms. The FCA objectives include:

-Protecting financial markets & consumers

-Promoting competition in the domestic financial industry

European Economic Area (EEA) Authorization

The FCA also provides the European Economic Area (EEA) authorization, according to MiFID standards. However, the EEA firms are regulated in their home country, and not by the FCA.

FCA UK Registration Requirements

  • The registration process requires 1 calendar year
  • Initial capital requirement between £100,000 and £1 million, depending on the execution model (DD, STP, ECN)
  • Liquid cash of £100,000, unrelated to clients’ funds
  • License costs £35,000 to £50,000
  • Sufficient liquid capital to cover any probable negative impact from the company’s positions (liquidity is regularly monitored)
  • The broker should not have any debt
  • Client bank account segregation
  • Following the anti-money laundering regulations

Client Account Segregation

All FCA-regulated brokers are obligated to segregate their client funds from their own funds via Top-Tier banks.

Covering Client Funds in Case of Insolvency

In the case of insolvency, clients of FCA-regulated brokers can claim up to £50,000. The coverage operates under the FSCS (Financial Services Compensation Scheme).

FCA BROKERS: » FXCC | » ETXcapital | » HYmarkets | » GKFX

 

CySEC (Cyprus Securities and Exchange Commission)

Foundation: 2001

Capital Requirement: €125,000 to €1.0 million

License Cost: €35,000

Covering: 20,000 EUR per client (through ICF)

Reliability: 7/10

Website

Established in 2001, the Cyprus Securities and Exchange Commission (CySEC) regulates the domestic financial industry. CySEC was the first regulatory authority to provide licenses for binary options firms.

CySEC responsibilities include:

-Monitor and control the local investment industry (investment firms, consultants, brokers, etc.)

-Provide licenses to financial firms domiciled in Cyprus

-Impose penalties or even withdraw licenses in case of regulatory non-compliance

CySEC Registration Requirements

  • The registration process requires 6 months
  • €125,000 - €1 million minimum capital
  • Registration cost up to €35,000
  • Daily, weekly, and monthly reports
  • The nominated employees of the regulated broker must be residents of Cyprus
  • Since early 2017, CySEC banned bonus promotions tied to trading volumes.

Covering Client Funds in Case of Insolvency

In the case of insolvency, clients of CySEC-regulated brokers can claim up to €20,000 via the ICF (Investor Compensation Fund).

CySEC BROKERS: » XM | » HotForex | » IronFx | » FxGlobe

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