Regulation in Forex Brokers and CFDs

What is the regulation of a Forex broker?

The regulated forex brokers they are all those that comply with the standards, rules and certificates established by one or several financial regulatory bodies (private and/or state). The issue of regulating brokers for trading is one of the first things that anyone who wants to dedicate himself to this world of trading should learn. Knowing all these financial organizations and market regulations is more than important to protect your money in the right Forex broker.

It is important that the Forex broker is regulated under reliable financial organizations and that they offer guarantees, since their objective is to supervise and regulate registered companies in order to avoid crimes and ultimately protect investors. If the broker for trading is regulated, the claim process will be easier in case of any setback in the operation or if the broker closes, being able to recover the deposited capital. This greatly reduces the risk when trading Forex with full guarantees, since your money is always covered.

An unregulated broker can put the security of the investment at risk, because these companies are governed by their own discretion and rules, and either do not have to respond to any regulatory agent, or the entity on duty does not have authority or resources. to apply the law.

What is a regulatory agent?

These financial organizations ensure that Forex brokers comply with the standards stipulated by law, according to the jurisdiction of the country and other regulatory and government bodies. They grant licences, review contracts and conditions, impose restrictions and prohibitions, study claims, punish crimes, inform consumers, etc. In this way they protect the trading market in which Forex brokers operate, reducing the risk for traders.

Would a regulator of a tax haven be reliable?

Especially in Forex and CFDs, there are many tax havens whose financial regulatory bodies are not entirely legal. This does not mean that brokers based in tax havens or regulated by an “exotic” body are a fraud. In many cases, it is an economic strategy simply to pay less taxes, and this does not seek to harm the end customer or evade the law.

For example, the case of Cyprus and CySEC, whose seal appears in a large number of CFD brokers. The Mediterranean island is not exactly a tax haven where money can be laundered, but it has a more lax tax regime than its European peers, ideal for the occasional broker.

Financial regulatory bodies in Europe

Most European organizations are governed by the regulations and opinions approved and published by the ESMA, which are mandatory for acceptance and adaptation for each of the European Union markets (Spain, Germany, France, Portugal, etc.) . In Europe, the country with the greatest security and least risk that can be offered to traders is the United Kingdom with the FCA (financial conduct authority). The brokers to carry out trading regulated by the FCA are subject to numerous requirements and controls on various factors that can directly affect the safety of the investor (traders). Here you can learn more about the FCA and the forex brokers that are registered in this regulation (

The ESMA (European Securities and Markets Authority) is a European regulatory body whose purpose is to protect client investments, assess the financial stability of the markets, detect risks and
emerging vulnerabilities so that if there is a problem it can be acted upon.

On the other hand, the MIFID (Markets in Financial Instruments Directive) is a regulation designed to harmonize the regulation of the different European stock markets and the instruments that are traded in them, so that any European investor can access the same degree of information and protection regardless of the country in which you trade within the EU. In Spain, this rule was incorporated in 2007 into Spanish law.

Financial regulatory bodies in America

Brokers regulated by US or Canadian agencies are equally recognized due to their strict rules and laws under which they govern. The most popular regulatory agencies in the US are FINRA, OCC, SEC, CFTC and NFA, while in Canada we find the BCSC, OSC, IIROC and IPPC.

The market in Latin America is very different, because trading regulations are still in the process of specifying rules of conduct, protecting investors and their capital, etc. However, there are agencies that are responsible for regulating the conduct of some foreign and regional brokers such as the SMV of Panama, the SVS in Chile and the Colombian SFS.

Financial regulatory bodies in Asia

As in most continents, Asia is one of the markets that is not exempt from tax havens, however there are some state regulatory agencies, since these Asian agencies make sure to protect the client’s account through tools to prevent or limit risks. The Securities and Futures Commission of Honk Kong (SFC) and the Singapore Exchange (SGX) stand out.

Financial regulatory bodies in Australia

Many brokers that offer their services in Europe and that are not regulated by the ESMA, have licenses in the Australian market. This is so because ASIC is one of the strongest regulatory bodies in the world, and therefore many European investors hire Australian brokers. Along with the FCA, ASIC is one of the financial organizations that offers the most guarantees to Forex brokers, and therefore to people who trade and want our money to be guaranteed.

Sounds interesting to you, right? Keep learning trading with DTP with upcoming articles on our Blog.

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