One of the most important criteria for traders when choosing a Forex broker is the regulatory status of the broker and under which regulatory body the broker is regulated. Unregulated Forex / CFD brokerages are risky places for traders to deposit funds, and traders who do so are likely to find they have no effective remedy to counter losses caused by dishonesty or incompetence.
In the listing below, we outline the major regulatory bodies by country which are most relevant to Forex / CFD brokerages and summarize the major points of regulatory law applicable.
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Forex brokers usually launch with regulation in only a single country. Obtaining such regulatory approval is usually not an easy achievement, especially in jurisdictions with stricter regulation. New brokerages typically start with regulation in a single country and will then seek to gain regulatory licenses in other countries where they wish to operate. Typically, it makes things easier for Forex brokers to obtain some kind of regulatory certification even in countries where they are not physically based, if they wish to actively market their services there.
Some of the more recognized Forex regulators globally are the FCA in the United Kingdom, CySec in Cyprus and the NFA in the United States. In addition to Forex regulation from bodies established by national governments, some brokers find it important to acquire memberships from professional and cross-border entities. Forex brokers operating in the European Union will need to comply with the Markets in Financial Instruments Directive (MiFID), a European Union-wide regulation ensuring harmonized regulation for investment services across the 30 member states of the European Economic Area.
If a Forex broker is regulated, the name of the relevant Forex regulator should be transparently listed somewhere on the broker’s website. If it is not, the website should tell you an address for the head office of the brokerage and from this you can tell that it should hopefully be regulated in this country. If the website does not give you at least this, it is a strong sign that this broker is not regulated – for obvious reasons, brokers which are completely unregulated do not usually advertise that fact. If you have a country from which the broker operates, you can find the relevant regulatory body and you should be able to search their website to find whether this broker is within their published list of regulated Forex brokers.
Listed below are the financial regulatory bodies for each country by alphabetic order, as well as the maximum leverage that may be offered by a Forex / CFD broker operating from there to its own residents, which occasionally differs from that which may be offered to residents of foreign countries.