So, you have decided to open a FX (Forex) trading account.

In this case, it is not possible to overstress the importance of trading with a ‘regulated’ broker that abides by rules governing financial markets. Regulated status forces brokers to provide a significant layer of protection to both the firm and their clients (that you would be you!), on an ongoing real-time basis.


It is difficult to stress the importance of Forex regulation enough, trading with a properly regulated brokerage affords a trader significant peace of mind TheFXView

Brokerages operating from jurisdictions which lack any real regulatory oversight can get away with very questionable behaviour to say the least. Some ‘unregulated’ brokers can be rather unscrupulous and fail to provide an adequate level of service or protection for their clients – at best. At worst, they can disappear over the horizon with your money without a scrap of paperwork for a trail.

If choosing the most suitable broker for you, it is therefore highly recommended to opt for a broker with regulated status. If a broker is regulated in more than one country, this tends to be a bonus because it adds yet a further layer of oversight and accountability the broker must comply with.


Visit our Best Brokers page for more information or to assess which one could be good for you TheFXView

Regulation typically requires brokerages to keep client funds separated from the firm’s operating capital, this prevents rogue firms from embezzling client money or using client funds to pay operating costs. Many unregulated brokerages don’t undertake basic measures to protect client funds and often do not comply with this simple rule. In these cases, clients can experience delays in obtaining their withdrawals – in excess of 3 months in some extreme cases.


Foreign exchange regulation can be difficult to get to grips with as the regulatory environment differs significantly from jurisdiction to jurisdiction.TheFXView


In this article, we lay out the current regulatory framework in several regions and provide some comparisons. Take note that regulatory rules & regulations in all parts of the world are periodically updated, which means any broker’s regulated status is subject to change – and that you should keep your eye out for latest announcements from established regulatory agencies in your country, and where your chosen trading/investment account is held.


View a comprehensive list of all regulatory actions taken against brokerages  in the past 3 years here

1. Forex and CFD Regulation in Europe:

Financial services regulation in Europe is carried out at the national level by domestic regulatory agencies such as the Financial Conduct Authority (FCA) based in the UK, the Cypriot Securities and Exchange Commission (CySEC), Germany’s tongue-twisting  Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin for short), amongst many others.

We have a full comprehensive list further below.

Although each European country has its own regulator to oversee their domestic markets, there also exist intra-national regulatory agencies that provide oversight on a regional level. Examples of European regulators include:

  • European Central Bank (ECB)
  • European Banking Authority (EBA)
  • European Securities and Markets Authority (ESMA)
  • Staunchly independent Switzerland, not a part of the EU has its own regulator: FINMA.

You will often see Forex brokerages and other currency service providers advertising themselves as being EU Regulated, however there isn’t an overarching European financial regulator that supersedes all the others — each member country is responsible for regulating financial services in their own country – although broad agreements are reached via so called MoU’s, LOI’s and possibly other written agreements broadly expressing how agencies plan to co-operate with one another on key issues or concerns relating to financial services transacting between applicable countries.

An example of such co-operation, is the MoU signed between the CFTC and over 20 different European Union-based agencies in 2013, to better co-ordinate regulatory activities between Europe and US.

These types of co-operative agreements are becoming increasingly commonplace due to the evolving nature of modern markets which are becoming ever more online-based, therefore making cross-border trading/investment/FX flows more straightforward to carry out and more difficult to monitor. At the current time, all UK companies/brokers are regulated by the FCA, Cypriot brokers by CySEC and each individual EU-based firm by its own national regulator.

What ties all these national regulators together is the Markets in Financial Instruments Directive better known as MiFID (What is MiFID?).

1.a. MiFID Intro

MiFID is the Markets in Financial Instruments Directive. It has been applicable across the EU since November 2007 and sporting several tweaks over the years, remains a cornerstone of the EU’s regulatory apparatus, aimed at improving financial markets’ competitiveness within the EU by way of a single market. The EU’s overarching idea is to unify and harmonise as much European legislation as possible with the ultimate end-goal of overseeing and regulating the entire region through the European Central Bank (ECB).

This has been a very difficult task to accomplish ever since the EU and the Euro were first forged back in 1999 – most of the problems have come from the deep-rooted cultural, socio-economic and political differences between the EU’s 27 members.

The MiFID, is a good example of the European Union’s commitment to a ‘common market’ for financial services. The core idea is to allow companies in one country to be able to do business in any other within the European Economic Area. This is what the UK has signed up to “Brexiting” in 2016, and continues to dawdle in executing its exit strategy at the end of 2016 – precisely because the UK’s City of London is the most gravitational financial services hub on the entire continent (and the world).

One of the central tenets of the Markets in Financial Instruments Directive is that of outbound passporting (like in Pension Retrieval). When brokerages state that they are EU regulated, what is meant by this is that they are regulated in a country which is signed up to the Markets in Financial Instruments Directive (MiFID). This allows for brokerages regulated in one European Economic Area (EEA) country to then offer their services to clients throughout the EEA. This means it’s possible for a brokerage regulated in Cyprus to take on clients in the United Kingdom without having to gain an additional regulatory licence in the United Kingdom.

This is partly why a number of the biggest names in retail FX, choose to operate a European subsidiary which allows them to promote their services to 500+ million residents.
Despite the ability for a brokerage regulated in one EEA country to do business across the European Economic Area, the scope of Forex regulation varies between member countries with regulation in some jurisdictions being tougher than in others. This is due to the fact that MiFID only aims minimal harmonization, introducing a minimum level of regulation which must be implemented by domestic European regulators. This has seen certain domestic regulators go above and beyond the minimum requirements as set out by MiFID, while other countries have stuck very closely to the bare minimums required by the European directive.

This has seen several brokerages open up shop in EEA countries which take a light touch approach to financial regulation. Many brokerages choose to operate from Cyprus, Malta and Bulgaria which are all seen as offering favourable regulatory atmosphere from a brokerages perspective. MiFID sets out a number of important protections for traders, and has done a great deal to ensure a level playing fields amongst brokerages based in the European Economic Area. One often mentioned protection introduced in MiFID is the introduction of mandatory investor compensation funds which protect retail customers should a brokerage go bankrupt, ensuring that deposited funds up to certain amount are returned to the client.

It also outlines the minimum capital requirements and the mandatory segregation of client and company funds, all of which provide traders with a level of important protection. Other parts of the directive are aimed at ensuring that customers receive the best possible execution and are treated fairly by brokerages.

View a comprehensive list of all regulatory actions taken against brokerages  in the past 3 years here

1.b. European Regulatory Bodies

As previously mentioned the Markets in Financial Instruments Directive applies to countries in the European Union and European Economic Area. Below you will find a list of all the countries and regulators covered by MiFID.

European Union Members

  • Austria: Financial Market Authority (FMA)
  • Belgium: Banking Finance and Insurance Commission (CBFA)
  • Bulgaria: Financial Supervision Commission of Bulgaria (FSC). Read more about Forex in Bulgaria.
  • Croatia: Financial Services Supervisory Agency
  • Cyprus: Cyprus Securities and Exchange Commission (CySEC). Find out more about CySEC.
  • Czech Republic: Czech National Bank
  • Denmark: Danish Financial Supervisory Authority (Danish FSA)
  • Estonia: Finantsinspektsioon
  • France: Autorite des Marches Financiers (AMF)
  • Germany: Federal Financial Supervisory Authority (BaFin)
  • Greece: Capital Market Commission
  • Hungary: Hungarian Financial Supervisory Authority
  • Ireland: Central Bank of Ireland (CBI) – Regulator of Avatrade, for instance
  • Italy: Commissione Nazionale per le Società e la Borsa (CONSOB)
  • Latvia: Financial and Capital Market Commission
  • Lithuania: Securities Commission of the Republic of Lithuania. Read more about Forex in Lithuania.
  • Luxembourg: Commission de Surveillance du Secteur Financier (CSSF)
  • Malta: Malta Financial Services Authority (MFSA)
  • Netherlands: Authority for the Financial Markets (AFM)
  • Poland: Polish Financial Supervision Authority (KNF)
  • Portugal: Portuguese Securities Market Commission (CMVM)
  • Romania: Romanian National Securities Commission
  • Slovenia: Securities Market Agency (ATVP)
  • Spain: Comisión Nacional del Mercado de Valores (CNMV)
  • Sweden: Financial Supervisory Authority of Sweden
  • United Kingdom: Financial Conduct Authority Read More about Forex in the UK

— Recommended read: Why are there so many FX brokerages in Cyprus

European Economic Area

The following regulators are party to MiFID due to being members of the European Economic Area:

  • Iceland: Icelandic Financial Supervisory Authority
  • Liechtenstein: Financial Market Authority (Liechtenstein) (FMA)
  • Norway: Financial Supervisory Authority of Norway



2. Forex and CFD Regulation the USA:

The US regulatory framework is deemed as one of the world’s strictest. US residents and citizens are only permitted to operate with CTFC and NFA regulated Foreign exchange brokerages. Firms and individuals, who do not possess the relevant NFA and CTFC regulation, are not allowed to solicit or approach US citizens. This is why many websites (this site included) feature a warning to US visitors, alerting them of the fact that the sites content is not directed towards US residents.

Regulatory oversight has increased dramatically since the introduction of the 2008 Dodd-Frank Act and US Brokerages have been on the receiving end of significant restrictions.
Retail brokers have been persecuted for the losses of many retail traders, with harsh leverage restrictions imposed. The National Futures Association (NFA) has reduced maximum leverage offered on retail accounts to as low as 50:1 leverage (compared to routine offerings of 500:1 – 1000:1 in the recent past) and services are only available to those who are deemed to be eligible market participants.

US regulators also place a great deal of importance on transparency and thus US Forex brokerages are required to publicly release a range of data, including the number of accounts with the firm and the profitability of the firm’s clients.

While the US regulatory framework has created a highly regulated and transparent marketplace, it has also forced some brokers to leave the US market due to lack of suitable capital to abide by suddenly steepened capital requirements set by the NFA. This means residents of the United States are more restricted when it comes to choosing a brokerage to transact with – and US residents have been opening FX/CFD accounts around the globe in droves (often without reporting the activity to the IRS and against the advice(wishes) of the NFA).


3. Forex and CFD Regulation Australia:

Since 2006, the regulation of retail Foreign exchange has been in the hands of the Australian Securities and Investment Commission (ASIC).  All brokers operating within Australia must hold an ASIC licence to receive client money and provide brokerage services. The Australian regulator sets out a rigorous list of criteria for firms wanting to acquire an AFS licence and operate within the country.

The requirements are very stringent and ASIC is considered be doing a good job at protecting Australian clients from a regulatory perspective.
However, with the advent of broadband internet and the ability of FX brokers (including binary options providers) to offer their services globally, it is now commonplace to see Australian citizens opening FX accounts in different countries, and going against the advice issued by ASIC.

This is because ASIC can only pursue complaints and cases against FX brokers based within Australia. Despite official advice, thousands of Aussies open accounts in Cyprus, UK and Europe and many are unfortunately disappointed if their broker decides fails to abide by market rules such as fair execution, KYC, capital segregation etc.

New Zealand:


Recent regulatory changes have seen the FMA crack down on non-regulated entities offering services including FX trading, CFD trading, investment schemes and financial advice
Working closely with its significant neighbour, Australia, the Asia/Pacific duo operate close-handedly on many issues including farming, industry, mining, financial services, employment and immigration law.

As a result of the close co-operation, New Zealand’s stature as a financial services hub, including strong regulatory support, has now been significantly improved.
Several years ago, many FX and CFD brokers used to see New Zealand as a “soft touch” and a defacto stepping-stone into Australia – by basing operations in NZ, but soliciting clients in Australia, brokers were able to circumvent many of the strict rules set by its larger neighbour (ASIC)

The introduction of stronger regulatory requirements for both FMA regulated and FSP firms has been a noticeable shake up of the industry, but by the same token, higher standards have seen many brokerages leave the country.

The new requirements include:

  • Minimum net assets of 1,000,000 NZD or 10% of average revenue.
  • A management team responsible for compliance, regulation and risk management.
  • Appropriate standards for the on-boarding of new clients.
  • Information on conflict of interest and dealing policies.
  • Standards for hedging internal risk and handling client margin levels.
  • Rules for the segregation of client funds.
  • Rules requiring firms to maintain a proper record of customer account information.

Since NZ’s regulatory tightening, several brokers have moved to territories with similar regulator-arbitrage-potential – at the time of writing there has been a surge in new registrations in Cyprus, Malta, Bulgaria and the UAE.

4. Forex and CFD Regulation Russia:

RAFFM stands for The Russian Association of Financial Markets, and is a Self-Regulatory Organisation. In Russia, and other CIS countries there is currently no regulatory framework for the provision of certain over-the-counter financial services, such as Spot FX and CFD trading. RAFFM is just one of the many Self-regulatory organisations which have cropped up to try and reassure customers when dealing with unregulated brokerages who have a strong presence in the region.

RAFFM has only four member companies making it one of the smaller Self-regulatory organisations out there, with other organisations such as CFRIN and the FMRRC having significantly more members. The organisation doesn’t have the same kind of profile as other Self-regulatory organisations operating in Eastern Europe, with CFRIN being seen as the regions premier self regulatory organisation and boasts high profile members such as Alpari RU, FSB and other high profile Russian brokerages.

RAFFM however doesn’t have such a strong reputation, with many criticising the neutrality and usefulness of the organisation. Some have claimed that the four member organisations all have connections with one another, which would present a serious conflict of interest should this be true. It is possible for those who are customers with Mayzus Investment Services, InstaForex, LiteForex and CorsaCapital to make complaints with RAFFM. This being said there doesn’t seem to be any examples of where traders have been able to resolve their issues by making complaints to the organisation.

As with other Self-regulatory organisations, RAFFM has no real power other it’s constituent members with the organisation being unable to fine or recover traders losses should a brokerage go under. The main power the organisation has over it’s members is the ability to remove their membership, but with these organisation being dependent on membership revenues they are often reluctant to kick out member companies.

Self-regulatory organisations such as RAFFM, do not offer traders the same level of protection as governmental regulators. In particular, the membership of small and less reputable self-regulatory organisations means very little and traders looking to trade with a brokerage should avoid doing business with unregulated entities. It should also be highlighted that certain members of RAFFM, have particularly poor reputations with their being numerous complaints online regarding both InstaForex and LiteForex.

The days of Self-regulatory organisations may be soon coming to an end with the Russian government looking to regulate the provision of retail FX and CFD trading in the country, which would put an end to companies basing themselves offshore and using Self-regulatory organisations to coffer legitimacy, in Russia at least.

Recent Related news:

The Federation Council which operates as the upper chamber of the Russian parliament, has approved the long awaited the Forex law. The introduction of legal framework for the regulation of OTC instruments is something which has been in the pipeline for around 2 years, and is something which many traders and even brokers operating in the Russian Federation have been calling for. The law officially presented as “Amendments to Certain Legislative Acts of the Russian Federation” is meant to introduce a proper framework for the regulation of OTC instruments, such as Spot FX which is very popular with consumers in the Russian federation.

Starting from October, existing and newly formed brokerages will be required to obtain a licence from an approved Self-Regulatory Organisation (SRO). These Self-regulatory Organisations will be put under government supervision to ensure they provide appropriate protection for consumers. After January 2016, brokerages which are not members of an approved Self-regulatory Organisation organisation will be forced to close down or stop operating within the Russian Federation.

One of the most striking things regarding the bill, is the strict limitations it places on the levels of leverage which can be offered to retail traders. With brokerages be restricted to offering a maximum of 100:1 leverage, with tougher leverage limits being placed on what are considered more exotic instruments. It will be interesting to see how this plays with Russian brokers who offer some of the highest leverage in the retail FX market, with a number of Russian brokers advertising up to 1000:1 leverage.

Another interesting point of the bill, is that there is no explicit mention of CFD’s or Non-exchange traded Binary Options. So depending on the interpretation of the law, it may possible for Binary Options brokerages and brokers offering only CFD’s to continue operating in Russia without being licensed by an approved Self-regulatory Organisation. It should also be noted that foreign firms will not be affected by this regulation, though it is speculated that Russian lawmakers may try and limit trading with foreign brokerages by placing brokers onto warning lists or blocking access to brokerages websites. The structure of the law is very flexible and it may be perfectly possible that the regulation will be expanded to cover both Binary Options and Contracts-for-difference.



5. Forex and CFD Regulation Israel:


Over the past few years Israel’s financial markets regulator, the Israeli Securities Authority (ISA) has sought to bring Forex & CFD trading under its remit. There has been long-running speculation that such a regulatory stance would eventually come into force, and replicate what many other regulators have done around the world.

In 2015, the ISA set out to introduce further measures aimed at making retail trading ‘safer’ although this has been a tough challenge for any regulator, including the ISA. Binary options trading has been completely banned in Israel for any firm applying to operate a licensed Trading Arena (as the regulators refer to online brokers). Trading CFDs and FX pairs has come under strict restrictions, including limiting the leverage, range and even the way the rates are calculated.

The ISA’s approach has been labelled by some as ‘draconian’ and overly strict despite the rapid growth of Over the Counter (OTC) derivatives, FX/CFD trading and a parallel improvement in reporting via EMIR and MiFID.

Arguably, the ISA’s changes have had a negative impact on the Israel’s retail trading industry, with several brokers leaving and many Israeli residents greatly incentivised to open trading accounts abroad (where the ISA has no reach or ability to effect anything).

As a simple example of the baby being thrown out with the bathwater, the ISA imposed a complete ban on the following trading instruments:


ISA cites ‘excessive volatility’ as being the reason for the ban, and yet, it is high volatility that appeals most to retail traders looking at OTC markets such as FX.

6. Various Offshore Territories

You will find a number of brokerages based in offshore locations; popular offshore locations include the Cayman Islands, British Virgin Islands, Mauritius and the Seychelles. While some of these jurisdictions do in fact provide a framework for the regulation of retail Foreign Exchange, these jurisdictions are generally very lax on all facets of financial services regulations and/or oversight.



As regulation varies significantly from jurisdiction to jurisdiction, it is incredibly difficult to fully encapsulate all existing regulatory regimes and their slight differences. Regulatory rules are also in constant flux, and in the hopes of national authorities, persistently striving for positive change and a beneficial effect on wider market participants.

In reality, regulatory bodies have the ability to move the goal posts and adjust the prevailing rules governing markets – but this often has the effect of merely redirecting particular resources or capital from one set of market participants to another; but do littler to ‘benefit’ some perceived level of order in the financial markets.

If your country/region doesn’t appear on the above list, it is important to research the state of regulation in your jurisdiction before proceeding with any financial commitments.

Effective financial regulation affords traders with extra peace of mind and it is recommended that individuals only do business with brokerages regulated in ‘reputable’ jurisdictions, namely: US, UK, EU, Switzerland, Scandinavia, Cyprus, Japan, Singapore, Australia, New Zealand. And it’s worth mentioning that citizens of the above countries are likely to obtain favourable/more straightforward bureaucratic hurdles.

To learn more about regulatory aspects of trading view our Social Trading Guide, as well as our binary options guide and our currency transfer guide.

4 thoughts on “Forex Regulation

  1. [Quote:]
    2. Forex and CFD Regulation the USA: The US regulatory framework is deemed as one of the world’s strictest. US residents and citizens are only permitted to operate with CTFC and NFA regulated Foreign exchange brokerages.
    [End Quote]

    I believe this statement is incorrect. US citizens ARE permitted to trade with unregulated brokers outside of the US. They simply will not have enforced regulatory protection, if they choose to do so specifically for greater margin at their own personal risk.

    They do however have to comply with FATCA and IRS obligations to identify their offshore Forex investments and pay any income tax or repatriation as is appropriate.

    1. Hi Mike, as far as we know the only brokers who WOULD accept US based clients are the most horrible and scammiest companies. So potato, potato, tomato, tomato – USA based client should not trade with anyone but locally regulated brokers.

  2. Since the title of this areticle is “Forex and CFD Regulation in Europe”, can you refer to one single law or regulation in any E.U. country which specifies that spot FX is subject to financial regulatory oversight ?

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