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regulation

What are Forex Regulations?

Forex brokers usually start with regulation in only one country. It is usually not easy to get such a license, especially in countries with stricter regulations. New brokers usually start with regulation in a single country and then seek licensing in other countries where they wish to operate. It is usually easier for forex brokers to obtain some sort of regulatory approval even in countries where they are not physically located if they want to actively market their services there.
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 brokers are risky places for traders to deposit funds, and traders who do so are likely to find that they have no effective remedy for losses caused by dishonesty or incompetence.

In the following list, we present the main regulatory bodies by country that are most relevant to Forex / CFD brokers and summarize the key points of applicable regulatory law.

Some of the globally recognized forex regulators include the FCA in the United Kingdom, CySec in Cyprus, and the NFA in the United States. In addition to Forex regulation by the bodies established by national governments, it is important for some brokers to acquire memberships with professional and cross-border bodies. Forex brokers operating in the European Union must comply with the Markets in Financial Instruments Directive (MiFID), an EU-wide regulation that ensures 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 trading regulator should be transparently listed somewhere on the broker’s website. If it is not, you should be able to find the address of the broker’s headquarters on the website and conclude that it is hopefully regulated in that country.

If you can not find at least this information on the website, it’s a clear sign that this broker is not regulated – for obvious reasons, brokers who are not regulated at all do not usually advertise this fact. If you have a country where the broker operates, you can locate the relevant regulatory body and check their website to see if this broker is on their published list of regulated forex brokers.

Below you will find the financial regulators of each country in alphabetical order, as well as the maximum leverage that a Forex / CFD broker operating from that country is allowed to offer to its own residents, which occasionally differs from that which may be offered to residents of other countries.

regulation

Australia:
Australian Securities and Investments Commission

Maximum Forex Leverage: 1:500

Australia is a very popular offshore location for Forex / CFD traders. The reason for this is the mix of a very high maximum leverage, a solid but flexible regulatory framework and a large number of ECN brokers. What prevents many brokers from seeking ASIC regulation is the large geographical distance, which makes it difficult for brokers to operate in Australia.

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

Maximum Forex Leverage: 1:50

Canada is not a popular location for non-resident forex traders due to its strict regulatory regime and very low number of forex brokers. For more details on Canadian regulations, click here.

Cyprus:
Cyprus Securities and Exchange Commission.

Maximum Forex Leverage: 1:30

The Republic of Cyprus is a very popular offshore location for Forex / CFD traders as it offers a mix of EU membership, a very flexible regulatory framework and a very large number of brokerage houses as well as a comprehensive infrastructure.

Denmark:
Danish FSA

Maximum Forex Leverage: 1:30

Denmark is not a particularly strong location for Forex and CFD trading, but it has always been the financial services center of the Scandinavian countries. With Saxo Bank, Denmark has a well-known broker.

European Monetary Union:
Markets in Financial Instruments Directive

Maximum Forex Leverage: 1:30

France:
Banque de France
Autorité des Marchés Financiers
Autorité de Contrôle Prudentiel (ACP)

Maximum Forex Leverage: 1:30

France is not a strong location for Forex and CFD trading as most French traders prefer to use offshore brokers.

Germany:
Federal Financial Supervisory Authority

Maximum Forex leverage: 1:30

Germany is not a strong location for Forex and CFD trading, as most German traders prefer to use offshore brokers.

Hong Kong SAR:
Securities and Futures Commission

Maximum Forex Leverage: 1:500

Hong Kong is a very popular offshore financial center, especially for the Asian market, and hosts many Forex / CFD brokers due to its combination of light regulation and good supporting infrastructure. Hong Kong remains a popular trading hub for both domestic and offshore forex traders.

India:
Reserve Bank of India

Maximum Forex Leverage: Zero

Forex trading is legal for Indian residents only if the base currency is Indian rupees and the counterparty currency is USD, EUR, JPY or GBP. Therefore, there is virtually no domestic forex trading for retail customers in India.

Indonesia:
Badan Pengawas Perdagangan Berjangka Komoditi

Maximum Forex Leverage: 1:200

Indonesia has a growing domestic Forex / CFD brokerage industry that is beginning to recover from the initial scandals that arose in the early, relatively unregulated days. However, many Indonesia-based traders still tend to turn to offshore brokers, and Indonesian brokers have few offshore clients.

Italy:
Commissione Nazionale per le Società e la Borsa.

Maximum Forex Leverage: 1:30

Forex trading and CFD remain popular in Italy, although the relatively weak Italian economy has slowed the natural growth of the industry. Italian traders generally prefer Italian and Swiss brokerage houses.

Japan:
Financial Services Agency
Japan Investor Protection Fund
The Japan Financial Futures Association
Japan Securities Dealers Association
Kanto Local Financial Bureau

Maximum Forex Leverage: 1:25

Forex trading has long been popular in Japan, but the market remains almost impenetrable to foreign brokers. It is a highly and strictly regulated market.

Macau:
Monetary Authority of Macau

Maximum Forex Leverage: No explicit maximum

Macau has several brokers that handle some offshore business from the Asian region. Regulation is better, but reputation suffers from past scandals and Macau’s reputation as a gambler’s paradise.

Malaysia:
Bank Negara Malaysia

Maximum forex leverage: Zero leverage

It is illegal for a Malaysian resident to trade forex except with a regulated Malaysian bank or other similar financial institution. However, foreign investment is legal, so the law can be at least a little gray in practice, and many forex brokers cater to Malaysian traders. Many Malaysians have accounts with offshore brokers, but Malaysian brokers do not attract offshore clients.

Russia:
The Commission on Regulation of Relations between Financial Market Participants.

Maximum Forex Leverage: 1:50

Russia has some notable brokers and has produced some of the most talented individuals who helped found the online trading industry in the 1990s. Unfortunately, due to a combination of scandals and financial overreaching, the reputation of Russian brokers has suffered and Russia is far less attractive to the offshore market than it once was.

Singapore:
Singapore Stock Exchange
Monetary Authority of Singapore

Maximum Forex Leverage: 1:50

Singapore has an attractive combination of strong but reasonable regulations

South Africa:
Financial Services Conduct Authority

Maximum Forex Leverage: 1:30

Forex has suffered from a very negative reputation in South Africa as it has been used as a cover for some Ponzi schemes and other scams, when in fact these scams had nothing substantial to do with the Forex industry. The Financial Services Conduct Authority (which replaced the FSB as the primary regulator of Forex / CFD brokers in 2018) is becoming increasingly involved as a regulator and there are a number of reputable brokerages in South Africa as well as an increasingly entrepreneurial population looking for a profitable hobby. There is room for expansion of the industry, but geographical and other factors mean that South Africa is likely to become just an offshore trading center for other South African countries.

Spain:
Comisión Nacional del Mercado de Valores

Maximum Forex Leverage: 1:30

Forex trading is not very popular in Spain, nor is there a significant domestic Forex industry. Many Spanish traders turn to Swiss Forex brokers / CFD.

Sweden:
Swedish Financial Supervisory Authority (Finansinspektionen).

Maximum Forex leverage: 1:30

Forex trading is not very popular in Sweden, nor is there a large domestic forex industry there. Many Swedish traders trade either through Swedish banks, but this is mainly for high net worth individuals, or perhaps through Saxo Bank in Denmark.

Switzerland:
Swiss Financial Market Supervisory Authority (FINMA).
Groupement Suisse des Conseils en Gestion Indépendants
Polyreg
Association Romande des Intermediares Financiers
Federal Department of Finance
Organisme d’autorégulation des Gerants de Patrimoine

Maximum Forex leverage: 1:200

Switzerland is arguably the oldest financial center in the world, and with some pioneering forex brokers and some interesting cutting-edge trading technologies, Swiss forex brokers are extremely popular both domestically and with offshore traders who have plenty of choice.

Turkey:
Capital Market Board of Turkey (CMB).

Maximum Forex Leverage: 1:10
Turkey had a small but growing forex industry, which has unfortunately fallen out of political favor due to the chronic devaluation of the Turkish lira. The maximum leverage is low, the minimum deposit requirements are extremely high and Turkish citizens are legally not allowed to trade with brokers outside Turkey. There are still a few forex brokers in Turkey, but virtually no one living outside of Turkey uses them.

United Arab Emirates:
Central Bank of the United Arab Emirates
Dubai Financial Services Authority

Maximum Forex Leverage: 1:500

When people talk about Forex in the United Arab Emirates, they usually mean Dubai, and for good reason: the city has become the offshore financial center of the Gulf. Regulation is light, taxes are virtually non-existent, and the industry is booming for both residents and non-residents. Dubai is the main foreign exchange trading hub for the Arabic-speaking world and a little beyond.

United Kingdom:
Financial Conduct Authority

Maximum Forex Leverage: 1:30

London, the capital of the United Kingdom, is one of the oldest and most prestigious offshore financial services centers in the world, which of course includes Forex and CFD brokers. London is indeed the forex capital of the world and this is reflected in the strong regulation and extensive technical expertise of the UK forex industry, which has always attracted more offshore than onshore clients. Forex trading and CFD are very popular in the UK, partly due to the fact that the profits made can be completely free to UK residents if the operations take the form of spread betting. London will always hold a special place in the global forex industry and remains a very attractive place for traders.

United States:
Commodities and Futures Trading Commission
FINRA
New York Stock Exchange
Office of the Comptroller of the Currency
Commodities and Futures Trading Commission
Securities and Exchanges Commission

Maximum Forex Leverage: 1:50

The United States is not a popular place for offshore forex traders, and US traders have few domestic options from traditional forex / CFD brokers. The US market has always been and still is dominated by futures brokers, who of course allow forex futures trading, but with much higher minimum trade sizes. The CFTC is primarily responsible for regulating all forex brokers in the United States, who are prohibited from offering CFDs or leveraged trading in commodities. Contrary to popular belief, US-based traders can use offshore forex brokers, but most offshore brokers do not want to accept US citizens as clients due to the onerous reporting requirements imposed by the US worldwide.

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