The regulator is an institution that maintains the law and order compliance of future industries and markets players.
Regulatory agencies are crucial to uphold the standard in the financial industry. Their policies ensure clients' protection against fraud schemes, so it's only normal to see them regarded as one of the main references when choosing a good broker.
The top regulatory agencies in the world include:
- FCA and PRA (United Kingdom)
- Commodity Futures Trading Commission - CFTC/NFA (United States)
- Swiss Federal Department of Finance - FDF/FINMA (Switzerland)
- Australian Securities and Investments Commission - ASIC (Australia)
- Financial Services Agency of Japan - JFSA (Japan)
- Cyprus Securities and Exchange Commission - CySEC (Cyprus)
To find out how each agency above regulates brokers in their respective countries, let's continue with the discussion below.
1. FCA and PRA (United Kingdom)
If you live in the U.K, you will find the two major regulatory agencies, it is the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
On April 1, 2013, both of these agencies replaced the Financial Services Authority (FSA) as the financial industry's regulatory body in the UK. These two agencies' goals are:
- to protect consumers
- ensure industry stability
- promote healthy competition in the financial services industry through the regulation of financial advisers, asset managers, or any firm not covered by the PRA.
If you are a forex trader or investor and looking for a good brokerage in the UK. The license from these two agencies can relate to the quality of the brokerages themselves. OANDA, XM, and Admirals are a few of the many brokers regulated by FCA and PRA.
2. Commodity Futures Trading Commission - CFTC/NFA (United States)
The Commodity Futures Trading Commission (CFTC) is a federal agency that independently regulates derivatives markets in the United States, including futures contracts, options, and swaps. Its goals are:
- to foster competitive and efficient markets
- to safeguard investors against manipulation, fraudulent activities, and abusive trade practices.
All brokers regulated by the CFTC can be verified through the National Futures Association (NFA) website. You can search for a specific company by inputting its business name, usually found at the bottom of a forex broker's homepage. In there, you can see brokers such as OANDA, BDSwiss, Interactive Brokers, and many more.
See Also: List of Brokers with CFTC/NFA Regulation
3. Swiss Federal Department of Finance - FDF/FINMA (Switzerland)
Federal Department Of Finance (FDF) or FINMA, is one of the seven departments of the Swiss federal government. This agency was formed in 1848 and collaborate with other departments in Swiss regulates the banks, securities dealers, and stock exchanges.
The FDF deals with a wide range of tasks, including:
- the federal budget, both national and international finance
- monetary and tax matters
- customs and merchandise control
- the implementation of legislation on alcohol
- provides services for the whole of the Federal Administration, from IT to human resources, infrastructure and logistics.
That's why if you are a trader or investor and live in Switzerland. The safest way to spend money on financial business is foreseeing a firm which has licensed by the Swiss Federal Department of Finance (FDF). Brokers like Dukascopy, Swissquote, and Eurotrader are operating under FDF supervision.
See Also: List of Broker with FINMA Regulation
4. Australian Securities and Investments Commission - ASIC (Australia)
The Australian Securities and Investments Commission (ASIC) is one of the best regulators in the world from Australia. This agency founded in 1991 roles as a corporate regulator in Australia. Shortly, ASIC is responsible for:
- promoting a fair, transparent and efficient financial system for all
- regulates the conduct of Australian companies, financial markets, financial services organizations and professionals who deal in and advise on investments, superannuation, insurance, deposit-taking, and credit
- responsible for authorizations to operate in industries it regulates
Several popular forex brokerages that have ASIC's license are IC Markets, Pepperstone, Axi, FXOpen, etc. If you are an Australian trader who is looking for a worthy broker or futures company. The first thing you should do is checking the regulation, if the firm has ASIC's license it means the brokerage is safe.
See Also: List of Brokers with ASIC Regulation
5. Financial Services Agency of Japan - JFSA (Japan)
Located in Tokyo, the Financial Services Agency of Japan (JFSA) is the regulatory authority responsible for:
- authorizing and supervising various financial institutions in Japan, including banks, trust banks, trust companies, funds transfer and settlement service providers, insurers, securities firms, investment advisors, asset managers, and funds
- conducts inspections, exercises supervision, and promotes transparency in the financial system
Its primary goal is to ensure the stability of Japan's financial system and protect the interests of depositors, insurance policyholders, and securities investors. Brokers licensed under JFSA are OANDA, ThinkMarkets, Dukascopy, and many more.
6. Cyprus Securities and Exchange Commission - CySEC (Cyprus)
CySEC (Cyprus Securities and Exchange Commission) is an independent public supervisory authority responsible for the following:
- overseeing the investment services market, transferable securities transactions, and the collective investment and asset management sector
- regulates firms that provide administrative services
- market surveillance and investigations
The mission of CySEC is to exercise adequate supervision, ensure investor protection and foster the healthy development of the securities market. Most popular brokers in Europe are regulated under CySEC, including IC Markets, Exness, XM, OctaFX, Admirals, and FBS.
Other Agencies
Besides the five agencies mentioned above, there are others, too, such as:
Finanstilsynet - DFSA (Denmark)
The Danish Financial Supervisory Authority (DFSA) or in Danish called Finanstilsynet, is the financial regulatory authority of the Danish government responsible for the regulation of financial markets in Denmark.
The Danish FSA was formed in January 1988 and was charged with supervising financial activities in Denmark. Members of the FSA are monitored in an attempt to protect investors and prevent market abuse.
This agency is responsible for the regulation of financial participants in Denmark. These include; banks, stock exchanges, securities, and money market brokers, clearing and registration organizations, insurance companies, pension funds, insurance brokers, investment companies, and investment associations. The main role of this agency is to:
- strengthen the market's role as a disciplinary factor through enhanced transparency,
- protect consumers
- ensure industry stability
- promote healthy competition in the financial services industry
If you live in Denmark as a trader or investor and want to make business with your money, follow the guidance from this agency is the safest way. The company which has licensed by this agency means the firm already met the requirement. Tickmill, HF Markets, Pepperstone, Axi, and Dukasopy are regulated under DFSA.
See Also: List of Broker with DFSA Regulation
Securities and Futures Commission - SFC (Hong Kong)
Established in 1989, the Securities and Futures Commission (SFC) is an independent statutory body set up to regulate the securities and futures markets in Hong Kong. The SFC is one of four regulatory organizations in Hong Kong and as one of the major financial centers in the world.
The roles of this agency are monitoring all futures and securities-related activities in Hong Kong, such as:
- setting and enforcing market regulations
- licensing and supervising market participants such as brokers, investment advisers, and fund managers
- authorizing offering documents of investment products to be offered to the public
SFC is known for its strict regulations, so forex brokers supervised by SFC are pretty reliable. IC Markets, RoboForex, FXOpen, and FXCM are ones of some examples.
See Also: Forex Brokers in Hong Kong
Before you spent your money on financial investment or trading forex, the first thing you have to do is crosscheck the license or the regulator. The license indicates that the broker is not a scam, and the regulator to protect your funds.
6 Comments
Dec 28 2022
Is there something missing in this article? Where is the Cyprus Securities and Exchange Commission AKA Cysec? I believe many brokers in the world also use this regulator. Can someone please explain why even this regulator is not named in this article?
Dec 28 2022
Dec 28 2022
Dec 28 2022
Apr 19 2024
In my view, when it comes to forex regulation, ASIC and FCA tend to be considered among the best globally, while CFTC regulation is less common. The reason brokers might steer clear of CFTC regulation is because of the high costs involved, such as needing to set up an office in the US, which can be quite pricey.
Now, Swiss and Hong Kong regulations aren't as commonly discussed. I'm curious, what sets them apart, and why don't brokers seem to be as eager to get regulated there?
Apr 24 2024