Different regulatory bodies impose certain rules on forex brokers. Among others, brokers are required to warn traders about the risks involved in opening a trading account. Regulators may also limit the leverage allowed and require brokers to segregate funds from clients in segregated accounts.
The protections offered to investors and the remedies available in the event of a dispute vary from country to country and from regulator to regulator. It is therefore strongly recommended that traders and dealers open an account with a broker regulated in their country. Forex is an unregulated OTC market and the regulatory authorities allow legal recourse in the event of a dispute with the broker.
A distinction must also be made between a licensed broker and a broker regulated by an organization. A licensed broker has an authorisation to offer its services in a country, whereas a regulated broker must abide by rules established by the regulatory body.
Before opening a trading account, it is essential to check whether the broker is licensed and regulated by a credible government agency. For example on the ACP (Banque de France) site for France or the FCA site for the United Kingdom. Each authority monitors the practices of brokerage firms, ensuring that all regulations are strictly adhered to. It is also best to choose a broker who has a branch in your country.
United Arab Emirates
France: Autorité Des Marchés Financiers (AMF)
The main body overseeing the foreign exchange market in France is the Autorité des Marchés Financiers, or more precisely the AMF. This independent entity was created following the adoption of the Financial Security Act, which was officially implemented in early August 2003. Brokers that violate French regulatory directives and target French customers without the authorisation of the AMF are generally added to a blacklist.
Canada: Investment Industry Regulatory Organization of Canada (IIROC)
Canada’s capital market is divided into different jurisdictions that impose different regulations through multiple regulators. The principal regulator of the foreign exchange market in Canada is the Investment Industry Regulatory Organization of Canada (IIROC). IIROC is a not-for-profit, self-regulatory organization that controls all forex brokers and the activities they provide to their clients.
Switzerland: Swiss Financial Market Supervisory Authority (FINMA)
The main financial regulator in Switzerland is the Swiss Financial Market Supervisory Authority (FINMA), a government agency that is institutionally, functionally and financially independent of the Federal Department of Finance. Based in Berne, the country’s de facto capital, it reports directly to the Swiss Parliament.
United Kingdom: Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA), easily wins the race for the position of the world’s toughest financial regulator. The regulator operates independently of the country’s government and is funded by the fees it receives from the market players it supervises. The FCA currently reviews the conduct of approximately 58,000 financial firms in the country. These companies employ more than 2 million people and inject more than £65 billion into the local economy.
Spain: National Securities Market Commission (CNMV)
In Spain, the foreign exchange market is regulated by the National Securities Market Commission (CNMV), an independent government agency that regulates the country’s financial sector. The CNMV operates under the supervision of the Spanish Ministry of Economy and Finance. The Ministry has full authority to interfere in the operations of the agency, if necessary. Established in 1988, the CNMV is by far one of the oldest financial market regulators in the world.
Ireland: Central Bank of Ireland (CBFSAI)
Forex trading in Ireland is subject to supervision by the Central Bank and Financial Services Authority of Ireland – CBFSAI. All brokers who accept Irish clients must either obtain authorisation from the Central Bank or have licences issued in another well-regulated EU Member State.
Australia: Australian Securities and Investments Commission (ASIC)
Forex brokers that cater to Australian clients are subject to the strict oversight of the Australian Securities and Investments Commission, also known as ASIC. ASIC was established in July 1998. It operates in accordance with the provisions of the Australian Securities and Investment Commission Act 2001.
Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)
In order to operate legitimately in Germany, forex and CFD brokers must be licensed by the local regulator, the Federal Financial Supervisory Authority BaFin. They may also be licensed in another jurisdiction, provided that it is within the European Economic Area, as permitted by the Markets in Financial Instruments Directive 2004/39/EC (MiFID).
Italy: Commissione Nazionale per le Società e la Borsa (CONSOB)
Forex brokers must hold a full license issued by the Italian regulatory body in order to operate in the country, the CONSOB (Commissione Nazionale per le Società e la Borsa). However, brokers who are licensed in other European Economic Area (EEA) countries are also allowed to offer their services to traders based in Italy. On the basis of their licence, brokers simply have to register in Italy and open a local office.
Greece: Hellenic Capital Market Commission (HCMC)
Spot foreign exchange transactions and Contracts for Difference (CFDs) are legal in Greece and subject to the supervision of the Hellenic Capital Market Commission (HCMC). Brokers can either apply for an HCMC licence or serve local clients with a licence issued in another EU Member State.
Poland: Komisja Nadzoru Finanswego (KNF)
The main supervisory body for the financial sector in Land Fields is the Polish Financial Supervisory Authority (KNF). This entity supervises forex brokers, capital markets, banking institutions, pension schemes and insurance companies. In order to operate in Poland, brokers must receive authorisation from this regulator and register in the country.
United States: National Futures Association (NFA)
There are currently two institutions responsible for overseeing and regulating the foreign exchange market in the United States, namely the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). All brokers who intend to offer foreign exchange trading to clients based in the United States are required to register with the CFTC and become members of the NFA.
China: State Administration of Foreign Exchange (SAFE)
The State Administration of Foreign Exchange (SAFE) is responsible for the supervision and regulation of the foreign exchange market in China. Together with the People’s Bank of China (PBOC), SAFE supervises the flow of foreign exchange to and from China. The two entities are also responsible for setting exchange rates through a managed float regime.
Singapore: Monetary Authority of Singapore (MAS)
The main government agency responsible for supervising and regulating the foreign exchange market in Singapore is the Monetary Authority of Singapore. The Authority is the country’s central bank and sole financial regulator. It issues the Singapore dollar (SGD, S$) and has the authority to regulate all aspects of monetary, banking and financial policy in the country.
Russia: Central Bank of Russia (BCR)
Forex trading in Russia is regulated by the Central Bank of Russia which supervises the country’s financial sector and ensures that all market participants comply with local regulatory guidelines. There is also the Financial Market Relations Regulatory Center (FMRRC) which regulates the quality of services offered by brokerage companies in Russia.
Japan: Financial Services Agency (JFSA)
The forex trading industry in Japan is subject to vigilant regulation by the Japanese supervisory body, the Financial Services Agency (JFSA). The JFSA regulates markets and licenses commercial banks, forex brokers and insurance companies. Locally licensed financial companies that do not comply with JFSA requirements are penalized.
Argentina: National Securities Commission (CNV)
The CNV is the national agency responsible for the supervision and control of the stock markets in Argentina. It was created in 1968 and is currently an independent entity under the Ministry of Economy and Finance. The CNV regulates all securities transactions and is the main body that issues rules and regulations concerning the equity and Forex markets.
United Arab Emirates: Securities and Commodities Authority (SCA)
The Central Bank of the UAE is responsible for regulating any activity that acts as an intermediary in the trading of shares, commodities, bonds and currencies. The Securities and Commodities Authority (SCA), on the other hand, licenses forex brokers. It also determines market rules and issues Sharia-compliant guidelines and codes of conduct.
Qatar: Qatar Financial Markets Authority (QFMA)
Qatar’s financial sector is subject to review by several regulatory bodies, the Central Bank of Qatar (CBQ), the Qatar Financial Markets Authority (QFMA) and the Qatar Financial Futures Regulatory Authority (QFCRA). All three bodies are responsible for the supervision of Qatari brokerage firms, banking institutions, insurance companies and stock exchange companies.
Kuwait: Central Bank of Kuwait (CBK)
There are several authorities in Kuwait responsible for the supervision and regulation of the financial sector and financial markets. Brokers offering their services in the country are licensed and regulated by the Ministry of Commerce and Industry. However, the main regulatory body is the Central Bank of Kuwait.
South Africa: Financial Sector Conduct Authority of South Africa (FSCA)
The South African financial industry is governed by two entities. The conduct of financial companies operating in the country is regulated by the Financial Sector Conduct Authority of South Africa (FSCA). The FSCA supervises and controls entities that are licensed to provide financial products and services. The South African Prudential Authority (PA) regulates non-bank financial institutions.
India: Securities and Exchange Board of India (SEBI)
To operate legally in India, forex brokers must be licensed and authorized by SEBI. The authority also imposes certain restrictions on the types of transactions allowed in India, the maximum leverage allowed and the currency pairs that can be traded. Forex trading is permitted only if transactions are made in pairs that include the Indian rupee (INR).
Israel: Israeli Securities Authority (ISA)
Forex brokers must receive licenses from the Israeli Securities Authority before they can legally operate in the country. Given the very strict licensing requirements in Israel, it is not surprising that many brokers continue to provide services to the country’s traders with licenses issued by major offshore jurisdictions such as Cyprus.
Thailand: Bank of Thailand (BOT)
The foreign exchange trading industry in Thailand is supervised by the Bank of Thailand (BOT), and the Thai Securities Commission (SEC). The central bank has several objectives, namely to centralize the foreign exchange sector in Thailand, monitor capital flows into and out of the country, and maintain the stability of the local currency, the Thai baht.
Norway: Financial Supervisory Authority of Norway (FSA)
The foreign exchange trading sector is supervised by the Financial Supervisory Authority of Norway (FSA). The Norwegian FSA (Finanstilsynet) also regulates local banks, stock exchanges, pension funds, insurance and finance companies. As Norway is a member of the EEA, many of its regulatory directives reflect the framework defined by the EU regulatory authority (ESMA).