The Main Role of Trading Regulations on Forex

The Main Role of Trading Regulations on Forex

The main role of regulation is trading on forex in various parts of the world. When it comes time to choose a forex broker, one of the most important factors to look at is whether the broker is under a regulator who has a good reputation or not. The surge in the number of forex brokers operating lately has increased the likelihood that many of them operate without official regulations or supervision.

Because the forex market is decentralized and operates without an exchange or clearing center, the supervisory body is assigned to act as supervisor for each market and provide financial licenses to reputable organizations that have enough funds to run a brokerage business.

The Main Role of Trading Regulations at Various Countries of Forex

Why Are Regulations Important?

The foreign exchange market is the largest financial market in the world with nearly $ 4 billion in trades made every day. Forex in the past has been considered as the exclusive domain of banks and large companies, but now forex is increasingly being traded through forex brokers, which increases the need for supervision and regulation.

The forex trading regulation process is burdensome and takes time to complete, making so many brokers choose to avoid it. What makes the procedure even more difficult is because the regulatory environment is not the same at every location.

CySec, FCA and MIFID

There are several major regulators that stand out, recognized and trusted by forex brokers and forex traders. The most well-known forex regulator in Europe is CySEC and FCA. Both are in accordance with financial market instruments or MiFID . MiFID allows forex operators from one EU country to do business with all other countries in the European Economic Area (EEA). However, the level of forex regulation varies in each country. So maybe there are several EU countries that have more stringent regulations than other countries. This is legal and permissible.

MiFID rules give traders some protection even if they do not cover all things. This establishes the need for a number of mandatory investor compensation in the form of refunded money deposited if the broker is claimed to be bankrupt. It also summarizes the minimum capital requirements needed by brokers and the need to separate client and operator funds.

Many brokers choose to establish their business in Cyprus for several reasons.The corporate tax rate in Cyprus is the lowest in the EU and this is always attractive to business people. The financial sector is large and advanced so forex service providers realize that the business environment on the island is very profitable.

In addition, because Cyprus is a member of the EEA and the EU, the Cyprus-based forex operators are aware that they are under MiFID regulations that provide minimum protection standards for those who are based in Cyprus despite doing business in various other countries.

Well besides Cyprus, this time we will discuss the regulation of trading on forex in several countries in the world. Although regulation in Indonesia will not be discussed here, but at least this review can be a little additional knowledge for all of us. Check out the following review:


Another popular tax haven for Forex operators is Belize. As with Cyprus, Belize is an island. In addition to tax benefits, the island also provides regulations based on the International Financial Services Commission (ISFC) which offers several basic protection clauses and demands strict accountability from forex brokers doing business on the island.



The US regulatory structure is considered one of the most stringent in the world.CFTC under CEA has jurisdiction over the leverage of forex transactions offered to retail clients and allows entities to act as third parties for forex transactions with retail customers. This requires all online forex dealers to be registered and meet the strict financial standards imposed by the NFA.

The US regulator expects total transparency from forex operators and they are required to announce various data, including the profitability of traders, the number of original accounts registered with the company and many more.Because of these strict regulations, few foreign brokers are allowed to do business in the US


Forex brokers who do business in the UK can choose to be regulated by the FCA who recently took the responsibility of the Financial Services Authority. Or they can also choose to register with the UK Financial Services Authority but are still regulated in their home country. The official status of the EEA is given to companies authorized in other countries in the EEA region and given permission by the British FSA to provide cross-border services to British citizens in accordance with MiFID.


Turkish regulator agents, CMB or SPK are quite strict and not many forex brokers can meet the criteria and obtain operating licenses here. In January 2016, CMB introduced several changes for companies smaller than $ 6620, limiting maximum leverage to 50: 1 for popular trading such as EUR / USD, USD / TRY or EUR / TRY and also gold. As for other currency pairs, leverage is limited to 25: 1.

Then for companies larger than $ 6620, the maximum leverage for popular currency pairs is 100: 1, while for other currency pairs it is at a 50: 1 ratio.


Retail forex regulation in Australia is in the hands of ASIC, the Australian Securities and Investment Commission since 2006. Brokers operating in Australia must hold an Australian Financial Services license and regulations in this country include several criteria for companies that wish to obtain this license, and the requirements for this are fairly strict.


Russia and other CIS countries do not currently have a regulatory framework for providing financial services such as Spot FX and CFD Trading . RAFFM or the Russian Financial Market Association is just one of many independent regulatory organizations formed to try and convince customers when dealing with unregulated brokers who have power in the region.

RAFFM only has 4 member companies which make it one of the small independent regulatory organizations and does not have a strong reputation because many criticize the neutrality and usefulness of the organization.


In recent years there has been an increase in forex trading and CFDs in Israel. Financial market regulator in Israel, ISA has introduced new regulations to tighten reporting, provide transparency, leverage restrictions and other aspects requested by forex operators in other countries.

Beware of Unregulated Brokers

For retail forex traders, the biggest risk of something that is not regulated is an illegal activity or scheme. Fraud activities including excessive commissions, ponzi schemes, misrepresentations to boiler room tactics must be very cautious.Although regulators are there to regulate all this and supervise brokers, they still cannot guarantee the honesty of the forex broker you choose. So the last step that can be taken is to remain vigilant. That is the main role of forex trading regulation that you can know and some other information, hopefully useful.

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