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Best European Regulated Brokers
Currently, there is a wide variety of regulated and unregulated brokers in the world. When you open a trading account with a broker you are trusting them not only with your money but also on their ability to treat you fairly. This is why trading with a regulated broker is of paramount importance, especially for those with limited trading experience.
List of the major European Regulators:
- ESMA – The European Securities and Markets Authority
- BaFin – The financial regulator for Germany
- CySEC – The Cyprus Securities and Exchange Commission
- FCA – The UK Financial Conduct Authority
- Finma – The Swiss Financial Market Supervisory Authority
- CONSOB – The financial regulator for Italy
- CNMV – The financial regulator for Spain
Around the world, there are regulatory bodies that supervise brokers and Forex trading activities by enforcing rules and regulations to protect consumers. However, not all regulatory bodies provide the same level of oversight and protection. Brokers have a choice on whether they want to be supervised by a well-known, highly reputable financial regulator in Europe or a lesser-known and more lenient regulator based offshore. Reading broker reviews can make sure you find the right one for you.
It’s important to remember that unregulated brokers may not have your interests in mind and trading with a demo account is essential in this instance. However, trading with a broker who is supervised by a European regulator can offer safety of mind and a high level of capital and consumer protection. This is because most European regulators will have to adhere to strict rules and regulations and help users, such as a Forex trader, understand how CFDs work and its risks.
MiFID II Act
In 2018, the European Securities and Markets Authority laid out a new legislative framework to strengthen investor protection and improve the function of the financial markets. In MiFID II, it sets out the:
- conduct of business and organisational requirements for investment firms;
- authorization requirements for regulated markets;
- regulatory reporting to avoid market abuse;
- trade transparency obligation for shares; and
- rules on the admission of financial instruments to trading.
Most European regulated brokers will have to adhere to some of the following requirements:
- Leverage limits. Brokers allow traders to borrow money from them in order to trade on leverage. This amplifies gains and losses which is why European regulators have cracked down on how much leverage can be provided to retail and professional traders. In short, the regulations protects traders from
losing money when trading by limiting the max leverage.
- Compensation scheme. Most European regulated brokers will be part of a compensation scheme that protects clients in the event the broker goes bust.
- Risk warnings. European regulated brokers have to provide risk warnings on their websites and materials on the dangers of CFD trading as CFDs are complex instruments. They also have to provide information regarding how many traders in percentage terms lose money with them.
- Segregated funds. All European-regulated brokers need to keep client funds separate from their own funds.
These are just some of the requirements European regulated brokers may need to adhere to. Below is more detail regarding each of the financial regulators in Europe.
The brokers below represent the best brokers under ESMA Regulation.
|Broker||Rating||Official Site||Regulations||Min Deposit||Max Leverage||Trading Platforms||Foundation Year||Publicly Traded||Trading Desk Type||Currencies||Commodities||Indices||Stocks||Crypto||Commission on trades||Fixed spreads||offers promotions||Official Site|
76.4% of retail CFD accounts lose money
ASIC, CySEC, FCA, FSB, ISA, MAS
No dealing desk
76.4% of retail CFD accounts lose money
62% of retail CFD investors lose money
ASIC, CySEC, FCA, MiFID
cTrader, Currenex, eToro Platform, Keystone, Marketspulse, Mirror Trader, MT4, MT5, Tradologic, Zulutrade
Market Maker, No dealing desk, STP
62% of retail CFD investors lose money
73.05% of retail investor accounts lose money
ASIC, FCA, FSP
Dealing Desk, Market Maker
73.05% of retail investor accounts lose money
ESMA is the European Securities and Markets Authority and is an independent financial regulatory body based in Paris. Its job is to enforce trading rules and regulations in the securities markets to protect consumers and strengthen the European Union’s financial markets. As such, its main objectives are to help investors by ensuring that:
- Firms treat their customers in a fair and transparent way and put customers interests at the centre of their business models and corporate culture;
- Investors are given clear and relevant information; and
- Investors are provided with products that match their needs and investment objectives.
For example, in 2018, ESMA introduced restrictions on the market, distribution and sale of contracts for differences (CFDs) to retail clients. This included:
- Leverage limits on the opening of a position by a retail client:
- 0:1 for major currency pairs;
- 20:1 for non-major currency pairs, gold and major indices;
- 10:1 for commodities other than gold and non-major equity indices;
- 5:1 for individual equities and other reference values;
- 2:1 for cryptocurrencies;
- A margin close-out rule
- Negative balance protection to provide an overall guaranteed limit on retail client losses
- A restriction on incentives to trade CFDs
- A standardised risk warning which should include the percentage of losses on a CFD provider’s retail investor accounts
European-regulated brokers now must provide all of the above to retail clients.
The following brokers represent the best brokers under ESMA regulation:
BaFin is the financial regulator for Germany. Its full name is Bundesanstalt für Finanzdienstleistungsaufsicht, but is also known as the Federal Financial Supervisory Authority. Headquartered in Bonn and Frankfurt, Germany the regulator supervises banks, financial services institutions and insurance companies.
For a broker to provide financial services in Germany and to be authorised and regulated by BaFin they will need to meet the following requirements, among others:
- Institutions will need to have a minimum level of capital depending on the nature of its business. For example, for securities trading banks the initial capital required is at least 730,000 EUR. For a deposit-taking credit institution, it is at least 5 million EUR.
- The institution must have at least two management board members who are “fit and proper.” This means they have acquired sufficient knowledge and practical experience to carry out their jobs properly.
- Applicants must declare holders of any significant holdings in the institution and the size of such holdings.
- The authorisation application must contain a viable business plan indicating the nature of the proposed business, organisational structure and proposed internal control systems.
BaFin’s main responsibility is to protect consumers by maintaining a high level of transparency in the country’s financial market. Through the Securities Trading Act (WpHG) the regulator collects financial market information and analyses and monitors the data to ensure there is no foul play.
CySEC is a popular regulator for Forex and CFD brokers. The Cyprus Securities and Exchange Commission (CySEC) arguably supervises the most amount of regulated brokers anywhere in the world.
According to the regulator, its mission is to “exercise effective supervision to ensure investor
protection and the healthy development of the securities market,” with responsibilities including but not limited to:
- To examine applications and grant operating licenses to entities under its supervision, as well as to suspend and revoke the said licenses.
- To supervise and regulate the operation of the Cyprus Stock Exchange and of other organised markets in the Republic and the transactions carried out in these markets.
- To supervise and regulate the agencies under its supervision in order to ensure their compliance with the laws governing their operation.
For a broker to be authorised and regulated by CySEC and become a Cyprus Investment Firm (CIF) they will need to meet the following requirements, among others:
- A minimum of two persons to be in charge of the administration for the investment firm.
- A minimum share capital of at least 200,000 EUR if handling client funds.
- Insurance coverage of at least 1 million EUR for individual losses.
- Maintain at least 750,000 EUR in operating capital.
- List all the services and products they plan to offer in the application process and notify CySEC before extending services.
The UK Financial Conduct Authority (FCA) is the supervisory body for all financial services institutions in the UK. Regulation from the FCA is perhaps the most prestigious, as the regulator governs around 58,000 institutions.
The regulator’s role includes protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers. They work alongside the Prudential Regulation Authority and the Financial Policy Committee.
The requirements towards becoming an FCA authorised firm differ depending on the ‘regulated activity’ of the firm. However, this generally includes defining the systems and controls that support a firm’s regulated activities, whether or not they meet the ‘threshold conditions’ and ensuring that people have the relevant qualifications.
Retail clients can use the Financial Services Compensation Scheme in the event of a broker going bankrupt to a maximum amount of £50,000 which is the highest in Europe.
Finma is the Swiss Financial Market Supervisory Authority and is responsible for the supervision of banks, insurance companies, stock exchanges and securities dealers in Switzerland. Finma works within a framework that was designed by the Swiss Parliament and is an independent body.
All Finma securities brokers must register as banks and maintain a high operating capital. There are not that many Finma regulated brokers due to the high capital requirements, rigorous application process and strict oversight and compliance management. Finma also uses private audit firms to perform supervisory tasks on authorised institutions.
Finma protects investors by also monitoring transactions to ensure no market manipulation is taking place. Deposits with financial institutions are also protected up to the value of 100,000 CHF in the event the broker/bank goes bankrupt.
The Commissione Nazionale per le Società e la Borsa (CONSOB) is the government authority which is responsible for the regulation of the Italian securities market. The role of the CONSOB is to carry out several functions, which include but is not limited to:
- Regulation of investment services and operations of intermediaries, the reporting obligations of companies listed on regulated markets, and the solicitation of investment from the public;
- Authorising the operations of regulated markets, the publication of prospectuses, the centralized management of financial instruments, and enrolment in registers;
- Penalizing any unfair conduct by the above-mentioned parties;
The Italian regulator has historically taken a hard stance on investments and trading activity. This is one reason why there are not many Forex brokers authorised and regulated directly by the CONSOB. Most brokers that offer services to Italian traders are covered by the cross-border markets directive and may be authorised by another European-regulated broker.
The Comisión Nacional del Mercado de Valores (CNMV), otherwise known as the National Securities Market Commission is responsible for the financial regulation of the securities market in Spain. It operates as an independent agency under the Ministry of Economy.
The aim of the CNMW is to ensure the transparency of the Spanish securities market and to protect investors while making sure authorised institutions behave correctly. The Commission mainly focuses on companies that issue or offer securities to be placed publicly on second securities markets and on companies providing investment services and collective investment schemes.
This regulator is part of international institutions, such as IOSCO (International Organization of Securities Commissions), ESMA (European Securities and Markets Authority) or FSB (Financial Stability Board). Most European-regulated brokers in other jurisdictions use cross-border market directives to offer services to traders in Spain.
Trade With A Regulated Broker
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