Best Regulated Forex Brokers 2020

Forex is an incredibly large market, with trillions in trading volume made every year. While most trades are made online, this makes it especially important to have some form of protection and safeguarding to the users that will never meet the recipient of their hard earned funds. Regulatory authorities ensure that brokers are transparent, honest and protecting the best interests of the users. They also ensure that trades are managed in a fair way.

Some of the major regulators in this industry include CySEC in Cyprus, FCA in the UK and ASIC in Australia. When a broker falls under the umbrella of any of these regulators, you as a trader can be rest assured your funds and privacy are being respected. They also offer an investor compensation scheme which protects your deposits up to a certain limit.

With so many regulated brokers available to choose from, how can you know who to work with? That is where we come in. We have conducted in depth research into the industry’s leading regulated brokers to come up with the best of the best. We consider product, the service and trading conditions. We also take into consideration the feedback from our users.

The brokers below represent the best Regulated brokers 

XTB

XTB is regulated by 5 leading regulators and its members have an investment insurance cover”

XTB has secured licenses with a wide variety of world’s top financial regulators. The following is the list of these regulations:

• XTB UK is regulated by the Financial Conduct Authority under license number 522157.
• XTB Europe is regulated by CySEC under license number 169/12 as at 2018.
• XTB international is regulated by Belize International Financial Services Commission under license number IFSC/60/413/TS/17.
• X-Trade Brokers DM SA is authorized by the Polish Securities and Exchange Commission under license number DDM-M-4021-57-1/2005 and supervised by Polish Financial Supervision Authority (Komisja Nadzoru Finansowego).
• XTB Spain is regulated by the Comisión Nacional del Mercado de Valores under license number 40.
• XTB is in the process of getting a license for its South Africa Entity.

IC Markets

IC Markets offers regulatory oversight from the Australian Securities and Investments Commission (ASIC) and the Seychelles Financial Services Authority (SFSA), as well as transparency on their auditing, insurance and banking relationships.

IC Markets is registered with the globally recognised Australian Securities and Investments Commission (ASIC) under International Capital Markets PTY Ltd (trading as IC Markets), as confirmed on the ASIC register below:

The company also holds an Australian Financial Services Licence, as confirmed below:

IC Markets is also registered and regulated by the Financial Services Authority of Seychelles (FSA)

ActivTrades

ActivTrades was founded in 2001 and was recognised by the Sunday Times Fast Track 100 as the 90th fastest growing company in the UK for 2017. The company is regulated by the UK Financial Conduct Authority (FCA), as well as the Securities Commission of the Bahamas and offers CFD and Spread Betting trading accounts with direct execution (non-dealing desk).

FxPro

FxPro is one of the most extensively regulated forex and CFDs broker in the industry. The broker in its quest to offer clients a safe and secured trading environment has subjected itself through its various subsidiaries to regulatory oversights in 5 different jurisdictions.

The FxPro trading brand is owned by the FxPro group Ltd. The brand is operated and managed by various subsidiaries in the group namely:

• FxPro Financial Services Ltd
• FxPro UK Limited
• FxPro Global Markets MENA Limited
• FxPro Global Markets Ltd

Swissquote

Swissquote Bank is a regulated entity. Regulation of Swissquote Bank is provided by the Financial Market Supervisory Authority (FINMA). Details can be found here.

Swissquote also provides segregation of clients’ funds, ensuring their insulation from broker-related financial activities. This provides a further layer of security for traders.

Swissquote Bank also provides a trader insurance scheme, which sets aside 100,000 CHF for payments in the event that the firm should face bankruptcy proceedings.

Traders are provided with security measures. These measures include the use of secondary login for authentication of certain transactions, as well as a Mobile Level 3 authentication process, which can be regarded as a tertiary level of security. With Mobile Level 3, one-time passcodes can be sent to the phone, or they can be sent physically via La Poste. The passcodes are used to match the passcode which appears on the screen just prior to activation, similar to one of the methods used by Google to verify logins.

FP Markets

FP Markets is authorised and regulated by the Australian Securities and Investments Commission (ASIC), as confirmed on the ASIC register below:

The broker also offers segregation of client funds, top-tier liquidity from major financial institutions and strong corporate governance by having financial accounts audited by external audit firms. FP Markets is a group of companies which also includes First Prudential Markets Ltd which is authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC).

Pacific Financial Derivatives

PFD is a company registered in New Zealand with the registration number 973842. It is regulated by the Financial Markets Authority (FMA) as a financial service provider. The license number is FSP 28944. Click here for details.

PFD maintains that all user data is stored in its secure servers with restricted access. The broker maintains standard security systems and controls which are subjected to external auditing once every year.

In compliance with the regulatory directives, PFD segregates investors’ funds from its own funds. The brand does not use traders’ funds to run its daily operations. This is done to protect investors’ funds from scenarios such as broker bankruptcy.

Plus500

Plus500 has multiple regulations from different countries. These regulatory bodies impose stringent rules to ensure that investor funds are adequately protected. Regulation includes FCA, ASIC, CySEC and MAS.

Plus500 is regulated by the following agencies:

• In the UK, Plus500UK Ltd is regulated by the Financial Conducts Authority (FCA) with license number FRN 509909.
• Plus500CY Ltd is authorized and regulated by the Cyprus Securities and Exchange Commission (CySEC) license number 250/14.
• Plus500 AU Pty Ltd, Australia hold an AFSL license number 417727 issued by the Australian Securities and Investments Commission (ASIC). This company also holds the Authorized Financial Services Provider number 47546, issued by the FSCA in South Africa. In addition, this company holds FSP license number 486026 issued by the FMA in New Zealand.
• Plus500SG Pte Ltd, Singapore holds a license No. CMS100648-1 from the Monetary Authority of Singapore (MAS). This authorizes them to deal with capital market products in that country
• The Israel Securities Authority (ISA) oversees its activities in Israel.

What is a Forex Regulation?

The foreign exchange market or forex market is the largest example of a free market at work. It turns over on a daily basis more than 4 trillion dollars worth of transactions. However despite the amount of money that flows through the forex market, it is an OTC (Over the Counter) market and is unregulated. Trading in the forex market is decentralized and there is no central exchange that is specially geared towards the handling of forex transactions. Even with the decentralized and unregulated nature of the forex market, trading on an institutional basis poses no problems due to the fact that the parties involved such as banks trust each other.

However as forex trading becomes more accessible and popular among retail traders, the forex markets has started to become more prone to fraud. In order to curb fraudulent activities in the forex markets, many countries are beginning to regulate forex trading activities by requiring forex brokers to be regulated by regulatory agencies such as the UK’s Financial Conduct Authority and the National Futures Association in the U.S. Within their respective jurisdictions, these regulatory agencies act as the watchdog for traders dealing with forex brokers operating under their jurisdictions.

Why should you pick a regulated forex broker?

Given the fact that the forex market is decentralized and unregulated, you might be asking why you should only choose to work with regulated forex brokers. It is important to bear in mind that regulations exist in a market to ensure that the parties involved in a transaction conduct their business in a fair and ethical manner. By requiring forex brokers, banks, institutional investors and support industries to operate within a set of rules as defined by the forex regulatory agencies, traders and investors can have the confidence to invest in the forex market and this promotes the growth of the industry.

Normally as part of the regulatory process, a forex broker must be registered and licensed by the regulatory agency that is in charge of regulating forex trading activities in the country that they are operating in. Apart from the need to be licensed, regulated forex brokers are also required to submit regular audits in order to ensure that they meet the regulatory requirements and industry standard. For example, most forex regulatory agencies will require that the broker hold sufficient liquid capital that will enable them to execute and complete the forex contracts initiated by their clients. In addition, the broker must also be able to return all its clients’ money in the event it becomes insolvent.

Major Regulatory Bodies

Forex regulations differ from country to country. For each regulatory agency, they have their own specific regulatory requirements and their area of jurisdictions. Enforcement policies also vary from region to region. Normally for major financial centers such as London or New York, the regulatory agencies in charge are stricter in their enforcement of breaches of regulatory requirements due to the need to protect the reputational integrity of the financial industry for that region. Nevertheless, below are some of the major regulatory bodies which every forex trader should be aware about:

1. Australia: Australian Securities and Investment Commission (ASIC)
2. Canada:

• British Columbia Securities Commission
• Ontario Securities Commission
• Investment Industry Regulatory Organization of Canada (IIROC)

3. Cyprus: Cyprus Securities Exchange Commission (CySEC)
4. Denmark: Danish FSA
5. France:Banque de France Autorité de Contrôle Prudentiel (ACP)
6. Germany: Bundeszentrale für Finanzdienstleistungsaufsicht (Bafin)
7. Hong Kong SAR: Securities and Futures Commission
8. Indonesia: Badan Pengawas Perdagangan Berjangka Komoditi
9. Italy: Commissione Nazionale per le Società e la Borsa
10. Japan:

• Financial Services Agency,
• Japan Investor Protection Fund
• The Financial Futures Association of Japan
• Japan Securities Dealers Association
• Kanto Local Finance Bureau

11. Russia: The Commission on Regulation of Financial Markets Participants Relationships
12. Singapore:

• Licensed clearing member of the Singapore Exchange
• Monetary Authority of Singapore

13. Spain: Comisión Nacional del Mercado de Valores
14. Sweden: Swedish Financial Supervisory Authority (Finansinspektionen)
15. Switzerland:

• Groupement Suisse des Conseils en Gestion Indépendants
• Polyreg
• Association Romande des intermediares financiers
• Swiss Federal Department of Finance
• Organisme d’autorégulation fondé par le GSCGI
• Commission fédérale des banques
• Swiss Financial Market Supervisory Authority (FINMA)

16. Turkey: Capital Markets Board of Turkey (CMB)
17. United Arab Emirates: Dubai Multi Commodities Centre
18. United Kingdom: Financial Services Authority
19. United States:

• Financial Industry Regulatory Authority, Inc.
• New York Stock Exchange
• Office of the Comptroller of the Currency
• Securities and Exchanges Commission
• Commodities and Futures Trading Commission
• National Futures Association

It should be noted that member states in the European Union (EU) share a common regulatory framework under the Markets in Financial Instruments Directive (MiFID) passed by the European Parliament. The objective of the directive was to harmonize the regulation of financial services providers operating within the European Economic Area (EEA). This means an EEA authorized forex broker will be able to “passport” its services legally to another member state through the authorization obtained from its home country. For example, a CySEC regulated forex broker is permitted to operate in the UK by “passporting” its CySEC license to the UK’s FCA.

How can regulations protect you?

Regulations play a huge role in protecting the traders/investors interest as they compel the financial service providers such as forex brokers to act in a fair and ethical manner.

• For example a major requirement of the regulator is for the segregation of funds. Brokers must maintain segregated accounts for their clients’ fund and their own operational funds in order to prevent possible abuse by the broker. In addition should a broker become bankrupt, its creditors are not allowed to tap into the broker’s clients fund as settlement of the broker’s debt.

• Another important regulatory requirement imposed by the regulatory agencies is the requirement that forex brokers warn their potential clients of the high risk involved in forex trading. This rule was put in place to forewarn traders that they face a possibility of losing all their investments due to the risks involved.

• Related to the above requirement is the need for brokers to categorize their clients as retail investors or professional investors. This is due to the fact that professional investors are regarded as experienced traders and are well versed with the risks involved in trading forex. As such, brokers have to take additional efforts to educate their retail clients of the nature of risks involved with forex trading.

• Another way which regulations protect retail traders is the leverage which forex brokers are permitted to offer to their clients. Forex brokers in the U.S are only permitted by the NFA to offer their clients a maximum of 1:50 leverage ratio.

• Regulators provide a level of protection to the investors by guaranteeing a certain amount of compensation should the broker become insolvent. For instance CySEC provides compensation to the tune of 20,000 EUR for deposits lost.

Guidelines to regulated brokers

As mentioned earlier, the regulatory requirements for forex brokers vary from region to region. Nevertheless, although the specific details of the regulatory requirements may vary from region to region, there are some commonalities with all the regulations imposed by the various regulatory agencies:

• Brokers are required to maintain sufficient liquidity to meet all contractual obligations.
• Brokers are required to maintain segregated accounts.
• Brokers are required to submit regular audits to verify their compliance on their capital adequacy ratio.
• Leverage ratios are capped to a certain limit.

Conclusion

There is no doubt that investors benefit from working with a regulated broker as opposed to an unregulated broker. To help investors verify the regulatory status of a broker, most regulatory agencies maintain an online database which investors can access in order to verify whether a broker is truly regulated by the specific agency.

We have researched deeply into the very best regulated brokers in the market and can save you the trouble of searching for yourself. Here is our list of the best-regulated Forex brokers in 2017, with a view to their reliability, technology, service standards and ancillary products.

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