Forex Regulators: what are they and which one to choose?
Organizations that are positioned as regulators forex marketThere are a lot of them. But not very many people really run the market, only the most authoritative ones (project reviews). Choosing an organization that licenses activities broker, you need to pay attention to its level and importance in the forex trading.
CENTRAL BANK OF RUSSIA (cbr.ru)
The most important Russian regulator of forex brokers is the Central Bank (Fig. 1), the Central Bank of Russia. In fact, this is the only Russian forex-regulator, all the others can be called pseudo-regulators (Forex brokers with a license from the Central Bank of Russia). This agency develops normative acts, requirements, parameters and other documents regulating the work at the Forex market. Industry SROs (self-regulatory organizations) accountable to the Central Bank control the dealers' functionality.
The Central Bank licenses brokers - it issues and takes away licenses, can prohibit or allow the activities of a broker, maintains a register of forex organizations. At present the following companies have a license from the Central Bank Finam-Forex (forex.finam.ru), VTB 24 Forex (vtbforex.ru), PSB-Forex (psbforex.ru), Alfa-Forex (alfaforex.ru). The Central Bank aims at the protection of non-professional participants of the trades, it limits the leverage, obliges to register the client agreements in the SRO, obliges to warn about the high risks of operations on forex-platforms, and if the dealer goes bankrupt the individuals are compensated for losses from the SRO's compensation fund.
The Central Bank also controls the taxation of brokers - it monitors the payment of 13% tax and obliges all funds received by a broker to be credited to accounts in Russian banks. As for SROs, there are two of them now: National Association of Forex Dealers (NAFD, former CFTC) and Association of Forex Dealers (AFD). The Central Bank accredited only the AFD.
NAFD (National Association of Forex Dealers, former SRO CSRFIN) is a nongovernmental organization that performs some key regulatory functions on the forex market. It provides criteria defining reliable brokers and has a blacklist of companies. The NAFD tasks include elaboration of rules for Forex brokers that are members of NAFD, unification of brokers' work standards, control and audit of brokers and their compliance with laws and rules, market analytics, consulting, training.
NAFD is formed by several brokers, Forex club (fxclub.org), Teletrade (teletrade.ru), Alpari (alpari.com), so although it is an important association with the functions of the regulator, the decisions of the organization were not initially quite independent, but, in principle, it was possible to consider their activities aimed at the development of the market, quite in the interests of brokers. The problem is that in 2018 all the founders were deprived of their licenses for forex trading by the Central Bank, so the NAFD now does not perform any serious functions of the regulator, the organization does not even have its own website. But formally, the NAFD exists.
The RAFMM (Russian Association of Financial Market Members) is a noncommercial organization of Forex market participants. Participants can rely on its help as a representative at negotiations with third-party organizations, government or private persons, and also it can take the role of an arbitrage court. Formally the aims of the Association are: formation and support of qualitative brokerage services, providing safety of work at the securities market, and also advertising, informational and consulting service.
The RAFMM can license the broker's activity, certify the professional broker, educate and explain the professional and legal issues, carry out technical support and organizational and legal directions. In the Internet the organization is not presented, but some brokers represent the pages of this Association, there are even the complaint forms to the RAFMM. As far as the effectiveness of these complaints, it was not possible to find out.
The FOMC (Commission on the Regulation of Relationships of Financial Market Participants), unlike previous figures, is fully represented on the Internet. It is a non-profit organization, which aims to regulate relations between Russian participants of international financial markets. The Commission focuses on settling disputes and issues, securing the fulfillment of obligations undertaken by certified brokers and dealing centers. On the website of the organization, you can submit your claims against brokers, regardless of their jurisdiction, apply to the Arbitration Commission, get acquainted with the members of the Arbitration Commission and the reports on the reviewed cases. The organization declares such goals as provision of conditions and coordination of activities of the participants of international financial markets, development and promotion of rules and standards of operations, training and improvement of financial literacy of traders, consideration and settlement of disputes.
The organization according to its own data maintains observations on the activities of brokers Instaforex (instaforex.com), FxPro (fxpro-global.org), GrandCapital (grandcapital.ru), TeleTrade, RoboForex (roboforex.org), Mtrading (mtrading.com), HotForex (hotforex.com), Alpari, Freshforex (freshforex.org), ForexClub, FX Exness, XM (xm.com), UFXMarkets (ufx.com), Larson & Holz (lhbroker.pro), VNCBrokers, Forex4You (forex4you.ru.com), AlfaForex. Despite the fact that in Russia, several organizations position themselves as regulators, we must not forget that the only and unique regulator of the Forex market, as well as all financial markets in Russia, is the Central Bank. Decisions of other organizations do not have the force of law, which must be observed by everyone.
ARFIN (Association for Financial Market Development) (Fig. 2) is a Belarusian independent non-profit financial regulator, quite large and well-known far beyond Belarus.
ARFIN participates in the rule-making working groups of the National Bank of Belarus and has a serious status of a financial regulator in its country. The main task of the organization is to form and support a civilized forex market. It develops standards of work at the Forex market, controls the brokers' compliance with the rules, but at the same time it defends ARFIN members before the state authorities in case of any questions, carries out consulting activity, accepts and considers complaints and claims of the brokers' clients from among its members.
Among those included in the register of ARFIN participants are Forex Club, MTBank CJSC (mtbankfx.mtbank.by), EMFI LLC (forexby.by), OpenFX (openfx.by), ForTrade (fortrade.by), BFB Capital LLC (bfb.by.), Capital Com Bel CJSC (capital.com.by); AEO New Investments Bay LLC (legacyfx.by), PRIME BROKERAGE SERVICES LLC (b2prime.by), Visuno Capital Limited LLC (wisunofx.by).
UCRFIN (Ukrainian Center for the Development of OTC Financial Instruments and Technologies) is a non-profit association that unites brokers providing forex trading services in Ukraine. True, this is not some independent "superstructure" over the market, the organization was created by several brokerage operators. In the legal information section (only in Ukrainian) there are legal acts and norms of the real regulators of financial markets in Ukraine. UCFIN aims to improve the Forex market regulation, optimize the existing legal and regulatory framework, strives to develop and offer for implementation common standards and rules for the market participants, provides information and analytical support of the participants' activity.
Another important task of the organization is to prevent fraud on the financial market of the country. The organization also provides legal support of the USRFIN members in the authorities. But objectively there are two or three brokers in the register of the USRFIN members, so the organization does not have any significant impact on the Ukrainian and other forex markets. And if there is a need to find out the rules of regulation of the forex market in Ukraine, you should contact the National Bank of Ukraine (bank.gov.ua) or the National Commission on Securities and Stock Market (nssmc.gov.ua).
Forex regulators of the world
CFTC and SEC (cftc.gov)
The CFTC, Commodity Futures Trading Commission is one of the central bodies of the US government, one of the main figures in any financial market in the world, the world's financial gendarme, but at the same time the body which provides the financial markets stability and protection of all market participants from any kind of fraud in the financial market. The CFTC can impose sanctions in case of law violations and is able to control brokerage companies at the exchange markets, if a broker wants to organize trading at the exchange in the USA, he will have to prove his compliance with the organization requirements.
The SEC, the U.S. Securities and Exchange Commission, is another mega-monster of the global financial market, an agency of the U.S. government that oversees and regulates the U.S. securities market. The SEC exercises complete control and regulatory regulation of securities markets, exchanges, brokers, market makers, securities issuers, investors, traders and others.
But the average forex trader or a small broker encounters with the CFTC and SEC only when reacting to currency fluctuations due to any decree or decision of the organizations, which instantly affects the dollar, which affects all currencies. That is, these organizations and direct and indirect regulators of the Forex market and other financial markets, so you should not forget about them when trading.
Finansinspektionen (Fig. 3) is a Swedish financial regulator, which reports to the Ministry of Finance of Sweden and is financed from the Swedish budget. So it is difficult to get a license from this organization, but on the other hand, the Fi license is an indicator of the broker's quality.
In addition to issuing licenses, Finansinspektionen monitors financial markets, controls the activities of organizations, can impose sanctions, fine a reporting broker a very large amount, take away the license (of course, in its national area of responsibility). All the information on its actions to control the financial markets is publicly available.
Among the Fi license holders are almost all leading forex brokers, such as AMarkets (amarkets.org), Alpari, LiteForex (liteforex.com), Forex club, Grand Capital, Admiral Markets (admiralmarkets.com), FXOpen (fxopen.com), Exness, Dukascopy (dukascopy.com), IFC Markets (ifcmarkets.com), FXCM (fxcm.com), GKFX (gkfx.eu), Tickmill (tickmill.com), IronFX (ironfx.com), xDirect (xdirect.ua), MEX Group (mexgroup.net), UFX, STForex (stforex.com), NSFX (nsfx.com), NPBFX (npbfx.org), ForexMart (forexmart.com), MaximusFX (maximusfx.com), Arum Capital (arumcapital.eu), MTrading, TD Ameritrade (tdameritrade.com), Interactive Brokers (interactivebrokers.com), Deltastock (deltastock.com), OlympTrade (olymptrade.com).
BaFin is the German Federal Financial Supervisory Authority, accordingly, it is controlled by the German government and cooperates very closely with the German Federal Bank. A license from BaFin can be called an indicator of the high reputation of a broker, but it is necessary to meet the serious requirements and standards of the regulator. On the one hand, it excludes the probability of the fraudulent activity of the broker, on the other hand, in case of confirmation of such activity by the German regulator, severe sanctions and huge fines are imposed on the broker. At the same time the control over the activity is transparent; the results of monitoring and control are available to the public. Among the BaFin license holders are FxPro, X-Trade Brokers, FXCM.
The Cyprus Securities and Exchange Commission (Figure 4) is a popular licensing organization among brokers. To obtain a license you need to meet quite serious requirements of the regulator, but many people prefer CySec, because with this license it is convenient to work in many countries around the world. The organization controls the financial operations of the licensed brokers, evaluates the compliance with the standards and legality, has the ability to impose penalties and fines, sometimes acts as an arbitrator in disputes. Among the brokers with a CySec license are FXPRO, FOREXCLUB, FIBO GROUP (fiboforex.org), ADMIRAL MARKET (admiralmarkets.com), LITEFOREX (liteforex.com) and others.
ASIC is the Australian Securities and Investments Commission, which controls all financial markets in Australia, including forex. It assesses the quality of brokers, compliance with standards, detects fraud, sanctions and fines unscrupulous market participants. Brokers who want to get an impressive ASIC license need to meet a number of requirements, including a large share capital, qualified management, advanced software, availability of training programs, risk insurance system.
FCA is one of the most influential regulators of the financial markets, which provides a full range of control, supervision, licensing, monitoring and advice in the financial markets. A license from the FCA is one of the most prestigious. Obtaining a license presupposes that the forex broker has a large authorized capital, large funds for business development, providing insurance and readiness to submit regular detailed reports on financial activity. In case of non-compliance with the standards the regulator can impose a fine and take away the license.
In essence, IFSC (International Financial Services Commission of Belize) refers to the regulatory body of Belize, whose main purpose is to grant licenses to financial institutions and the subsequent verification of compliance with all the listed rules of the regulator. Moreover, the International Financial Services Commission stands on the control position of the Belize Securities Authority.
FSCL (Financial Services Complaints Ltd) (Fig. 5) is the regulator of financial markets, including brokerage in New Zealand. The main task of the organization is to solve conflicts between financial market participants. It is a commercial enterprise, which has a possibility to maintain the balance of interests when resolving conflicts, because it exists due to the contributions of the companies, which report to FSCL. However, the participants are not equal, but ranked according to the amount of contributions made. Conflict situations are resolved in one step - between the direct participants in the dispute. However, if no agreement is reached, then the "second stage" comes, when the FSCL simply introduces a new rule in the market, binding on all participants.
Limitations to the list of violations are accepted for review, including failure to perform duties by the broker, violation of the rules of the forex market, violation of the contract with the FSCL, and so on. The standard time for review in each case is 75 or 90 days, if the case is more complicated than anticipated. Despite the rather high status of the organization, market participants have repeatedly spoken negatively about the FSCL. The list of FSCL reporting forex companies includes RoboForex, Abbott Insurance Brokers Limited (abbott.co.nz), Brokerweb Management Limited (bwrs.co.nz), Crombie Lockwood (NZ) Limited (crombielockwood.co.nz), J P O'Neill Limited (brokersireland.ie), Gould Steele & Co (neighborhoodly.co.nz).
The National Futures Association (NFA) is one of the oldest (since 1976) major regulators of the US and world financial markets. It is a self-regulating organization designed to protect the rights of futures market participants. All brokerage firms with a license NFA obey the rules and requirements of the organization and undertake to strictly adhere to the Laws of the Federal financial regulation of the USA for work at the exchange, including in the online format.
If a member violates the rules, the NFA can really fine him and take away his prestigious license. The NFA broker license is considered to be one of the most reputable in the brokerage world. The organization works closely with the U.S. law enforcement agencies. And what is more, the NFA is directly subordinated to the CFTC, the state financial regulator, although it has a large share of independence.
The NFA has the right and ability to conduct a full examination of brokerage companies that intend to begin trading in securities and currencies on any of the U.S. futures exchanges. And it can issue a negative verdict, forbidding companies to trade. NFA also controls advertising of brokerage companies, warns brokers, traders and investors about risks and licenses employees of brokerage companies. Reportable brokers include forex.com (forex.com), Forex club, FXD (fxdd.com), BMFN (bmfn.com).
The Financial Commission regulator acts as an equidistant judge, which solves disputes between brokers and traders in the Forex market (but not only), including the use of its compensation fund. It is represented in Russia. The organization is not regulated and not registered as an arbitration organization in any jurisdiction, so it can maintain the independence of its decisions. The organization's website allows you to file a complaint and to read the blacklist of brokers. Regulatory organization responds to the request on unfair broker within 10 days, the trader can apply to the commission repeatedly.
Many large brokers are members of the organization, as this is to some extent a guarantee of fair decisions in disputes. Participating companies include Alpari, A-Markets (amarkets.org), Axiory (axiory.com), AXI (axi.com), BalansFX (balansfx.io), Binary (binary.com), Binomo (binomo.com), KapitalxTend (capitalxtend.com), Deriv (deriv.com), Forex Club, Forex4you, FXopen, FXTM (forextime.com), GANN Markets (gannmarkets.com) and many others.
Vanuatu Financial Services Commission formally controls the financial markets on the island of Vanuatu, but since the organization has loyal requirements for obtaining a license for forex trading, many brokers from all over the world try to register in it. The VFSC also monitors the financial activity of the brokers, renders paid services, in particular, provides training and consulting. As a rule, the license of the organization costs no more than 10 thousand dollars, it is also necessary to fulfill a number of requirements, but they are not complicated. However the VFSC license by and large is just the declaration of brokerage services, so it is not suitable for the brokers who have serious plans for their activity.
BVI FSC (bvifsc.vg)
BVI FSC (British Virgin Islands Financial Services Commission) is quite a large regulator of forex brokers in the British Virgin Islands, but popular mainly among beginners because of its reputation as a regulator of offshore financial companies. Theoretically, it is possible to file a complaint to the organization, but there are no known cases of any investigation or sanctions that the BVI FSC would impose on anyone. Also, the organization's website is practically inactive. Nevertheless, the Forex brokers do receive licenses from the Financial Services Commission of the British Virginian Islands and they have to prove the authorized capital, the fact of financial activity insurance, keeping money in good banks and regularly submit auditors' reports.
FSC Mauritius (fscmauritius.org)
Financial Services Commission Mauritius is the regulator of financial markets in Mauritius. It is relatively popular because it is not too strict when issuing licenses. It provides a standard set of services for sublicensed companies - regulatory and supervisory functions, licensing activities, proposes criteria, requirements and standards of work on the financial market, training and consulting.
Regulators for every taste
There are many organizations that take on the role of financial market regulators, including the direction of forex trading, many more than are described here. Some of them actually manage finances, some just "trade licenses". Forex brokers often have dozens of licenses from regulators at different levels, so to speak, just in case.
The presence of a license from a serious organization (for example, Fi) indicates the high status of the organization, and in this case the license of some Vanuatu should not be alarming. But if the broker only has the license of conventional Vanuatu and a few more of the same questionable jurisdictions, it indicates the low status of the broker, although formally he would have the right and permission to operate. Therefore, if a broker has decided to build a serious business in the forex industry, it is better not to spare money and time to obtain a license from a reputable regulator.
- 25 May 2021 at 16:25
- 4 March 2021 at 13:53
- 3 March 2021 at 07:17