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Is Forex Legit? Who regulates Forex?


Many investors might ask themselves if the forex market is legit.🧐 So, the first point to have in mind is that the Forex Market is the largest and most liquid trading market in the world, with nearly 6 trillion in daily volume. With constant price fluctuations in its assets, called forex pairs or forex symbols, this market offers attractive opportunities for investors to make money.

Another important aspect of forex is that it is a decentralized market and this is why Forex is particularly hard to regulate. 

Then, who regulates the Forex market?

💡 At present, there is no consistent global approach to this market. The regulatory sector continues to operate at the local level, with each broker registering under regulation in a location of their choice. In this article, we will help you understand how forex is regulated in various countries and regions. 

How is Forex regulated? 🖋️ 

The regulation aims to ensure fair and ethical business behavior. Under applicable regulatory contracts, all Forex brokers, investment banks, and signal sellers must operate in strict compliance with the rules and standards set by Forex regulatory bodies or their activities may be considered illegal.

These bodies must be registered in the country where their operations are based, which ensures compliance with quality control standards. Brokers are subject to periodic audits, reviews, and evaluations that require them to maintain industry standards.

Forex Regulation 📃 

 

forex regulation

 

The European Financial Markets Authority (ESMA) was created in 2010 by European regulation. Its role is to ensure the stability and efficiency of the financial system in the European Union in the short, medium, and long terms.

💡 The year 2018 brought important changes for any CFD Trader in the European Union (EU). The European regulatory authority, ESMA, published new regulatory requirements that all CFD brokers in the European Union had to implement by 1st August 2018, at the latest. The new ESMA regulations put the protection of private customers first.

Product intervention measures that ESMA has approved under Article 40 of the Markets in Financial Instruments Regulation include:

  • Leverage limits
    • 30:1 for major currency pairs
    • 20:1 for non-major currency pairs, gold, and major indices
    • 10:1 for products other than gold and non-major equity indices
    • 5:1 for individual stocks and other benchmarks
    • 2:1 for cryptocurrencies
  • A rule for closing margins per account: this was to standardize the margin percentage (at 50% of the minimum required margin) at which suppliers were required to close one or more CFD positions opened by a retail client;
  • Protection against negative balance: to provide a guaranteed loss limit for retail customers
  • A restriction on incentives for trading CFDs
  • A standardized risk warning, including the percentage of losses on a CFD broker’s retail accounts.

 

forex regulation

 

The regulator of forex in the United Kingdom is the Financial Conduct Authority (FCA), one of the tier-1 global authorities. Every U.K. based broker must hold a license with the FCA.

The regulator operates independently from the country’s government and is funded by the royalties it receives from market players it oversees. The FCA is currently examining the conduct of approximately 58,000 financial companies in the country.

To hold a license with FCA, brokers need to guarantee the following rules:

  • Brokers keep their clients’ funds in segregated accounts
  • Protection against negative balance.
  • Have at least £ 1million in working capital
  • Instructs all brokers to submit annual audit reports and periodic financial statements
  • Retail Forex brokers are required to protect their clients under the FSCS (Financial Services Compensation Scheme)
  • Protect traders from ‘brokerage problems’ by providing a £50,000 guarantee as compensation through the Financial Services Compensation Scheme (FSCS)

Some regulated brokers in the UK are:

You can trade forex automated with an AI trading system in FXCM and Oanda!

By using the AI trading system, artificial intelligence will automatically invest in your account. You can monitor the AI trading performance in real-time directly on our Wiseinvest’s dashboard or the FXCM and Oanda trading station.

 

forex regulation

 

To provide trading services to clients based in the United States, brokers must be duly registered and licensed in the country. This may sound quite reasonable – after all, all forex brokers in Europe, for example, also apply for licenses from their respective regulatory or licensing authorities. In the United States, however, the capital requirements are so high that only a handful of companies can afford to operate legally in the country.

These rules were introduced in 2010 with the Dodd-Frank Act, which covers virtually the entire financial services industry in the country.

Proposed by President Obama’s administration in 2009, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted as US federal law by the US Congress in 2010. It aimed to reform the system of financial regulation in the aftermath of the 2007-2008 financial crisis.

This law is considered the largest and most comprehensive overhaul of the financial regulatory system since the reforms following the Great Depression of the 1930s. It is a complex piece of legislation that includes 16 major areas of reform, including foreign currency trading.

⚠️ The Dodd-Frank law enumerates the essential rules governing forex trading. Some of the limits and restrictions include the leverage cap – it is 50:1 for major currency pairs and 20:1 for exotic pairs. The current rules also limit hedging, a trading strategy that involves opening two trades in the same currency pair simultaneously to reduce losses from a losing trade. The so-called “First-in-First-out” (FIFO) model is applied instead.

Another requirement, unique to the United States, is that residents must complete tax returns: 60% of profits are considered capital gains and are taxed at 15%. The remaining 40% may be taxed, depending on the trader’s income bracket.

There are currently two institutions responsible for overseeing and regulating the foreign exchange market in the United States:

  • The Commodity Futures Trading Commission (CFTC)
  • 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.

The CFTC is an independent agency of the US government, established in 1974. It regulates the US derivatives markets, including futures contracts, swaps, and certain types of options.

The NFA, on the other hand, is a self-regulatory body under the CFTC and it oversees the trading of currency pairs, among others.

You can check the best forex brokers for USA citizens by clicking here.

 

forex regulation

 

The Canadian financial market is divided into different jurisdictions which 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 oversees all forex brokers and the activities they provide to their clients. It is a member of the Canadian Securities Administrators (CSA).

Under Canadian law, Forex trading is regulated as trading in securities or derivatives depending on the region or province where the forex broker is registered. All Canadian brokers who intend to provide services to Canadian citizens must be registered as a member of IIROC and be registered in the province in which they will operate and want to be able to offer margin trading.

Some regulated brokers in Canada are:

  • Oanda
  • CMC Markets
  • FP Markets
  • Interactive Brokers
  • Forex.com

You can automatically trade with the AI trading system through Oanda from $1!

You just need to link your Oanda account with Wiseinvest and the AI will automatically trade for you. That way, you don’t have to worry if you don’t have time to monitor the forex market! It is hands-free, efficient, safe, and timesaving.

 

forex regulation

 

Forex brokers that cater to Australian clients are subject to rigorous oversight by the Australian Securities and Investments Commission, also known as ASIC. ASIC was established in July 1998. It operates under the provisions of the Australian Securities and Investments Commission Act 2001.

ASIC has various areas of responsibility as it governs the financial services, derivatives, securities, and insurance industries. If an online brokerage company wishes to operate on Australian soil, it must first apply for a license with ASIC.

This license serves to assure Australian clients that the brokerage services provided are in full compliance with ASIC’s high standards of security and transparency.

Some notable ASIC regulations related to forex include:

  • ASIC is one of the highly respected agencies in the market that are concerned with safeguarding the interests of investors.
  • ASIC has made it mandatory for all Forex brokers to have a valid Australian Financial Services License.
  • ASIC is an agency that has a set of detailed rules of regulatory guidelines that aim to prevent any company from participating in financial scams or inappropriate business transactions.
  • Forex brokers regulated by ASIC are required to hold at least $ 1,000,000 in operating capital.
  • ASIC constantly monitors all regulated members, and the agency is quick to investigate any company for alleged negligence of regulatory guidelines.

Some regulated brokers in Australia are:

For more in-depth information on ASIC regulations, visit the website at http://asic.gov.au/.

 

forex regulation

 

Currency trading in South Africa is legal and is enjoying increasing popularity among residents. The foreign exchange market is overseen by the local regulatory authority, the Financial Services Conduct Authority (FSCA), whose main objectives are to protect market participants, ensure fair trading conditions, and prevent illicit activities such as trading. money laundering.

Foreign brokerage firms must receive authorization from the FSCA before they can legally offer their services in South African. Brokers must cover the minimum capital requirements of the regulator and be headquartered in South Africa.

The conduct of financial companies operating in the country is supervised and regulated by the Financial Sector Conduct Authority of South Africa (FSCA). It supervises and controls the entities that are authorized to provide financial products and services to the local population.

Examples include insurance companies, brokerage firms, and pension funds. The FSCA ensures that all these institutions operate in full compliance with the local regulatory framework. It has the power to issue and revoke licenses.

You can check the best forex brokers for South African citizens by clicking here.

How to invest with AI from home 💹

You can invest with AI in forex while performing your personal activities at home or wherever you are and save time. It is simple, safe, and free.

Check out the 3 steps to trade automated with Wiseinvest’s automated AI trading system.

By trading forex automated with AI, you will save time and improve your performance without monitoring the market and managing trading platforms.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account every time that our AI system identifies a new worthy trading opportunity. You can monitor the AI trading performance in real-time directly on our dashboard.

Benefits of Automated AI trading  🏆

  • Try for free.
  • Setup in 3 minutes.
  • Totally hands-free, from anywhere.
  • Invest from just $1.
  • APY of 43% over the past 10 years*.
  • Capital protected under the brokers
  • Lightning-fast execution & no slippage.
  • No commissions, no management fees.
  • Portfolio with 40 different automatic strategies.
  • No MT4/MT5 or other platforms required.
  • Test with a risk-free practice account.
  • Trading results directly on our dashboard.

Don’t you have a broker account yet? Our AI is integrated to trade automated with the brokers Oanda and FXCM. Click here to open an account with FXCM or here to open with Oanda. Those are some of the best forex brokers in the world.

What does happen after linking a broker account with AI trading?

  • The AI will automatically invest on average every 12 hours in your account.
  • There will be up to 60 trades per month (Monday – Friday).
  • You can enable and disable AI whenever you want.
  • Check your trades on our dashboard or the brokerage.
  • You can link more than one broker at the same time.
  • You don’t need MT4 / MT5. It’s all on our dashboard.
  • Your capital is protected under the broker.
  • Your personal data is protected by us.

Would you like to try our automated AI trading for free in a risk-free demo account? Get started free here.

How much do I need to trade forex with AI?

You can start in forex trading with free AI forex signals or AI trading from just $1 through some of the best forex brokers. It is moreover possible to test using a risk-free demo account with our AI trading structure. Regardless, to do a capable peril, the board in authentic records, we suggest you start from at least $100.

What is the best forex broker to use AI trading?

To define which forex broker you should choose for using our automated AI trading, it is important to consider the following aspects.
  • Where are you from? For example, Oanda accepts US accounts, but FXCM does not. On the other hand, FXCM accepts accounts from some countries where Oanda does not.
  • How much do you have? With Oanda, you can start at $1, and FXCM is ideal if you start from at least $300.
  • FXCM sometimes provides higher liquidity volume and lower spreads than Oanda, which are vital aspects of the success in forex trading. But it can also vary.
We are confident that Oanda and FXCM are among the top 5 best forex brokers in the world and our AI trading works perfectly through any of them. Then, we suggest you take your final decision taking into account where you are and how much you have.
If you are considering trading with our manual AI forex signals, we would also like to suggest XTB, which is one of the best forex brokers in Europe.

Why trust Wiseinvest instead of other trading platforms

These are the main reasons why forex traders at all levels trust us, rather than other trading solutions.

  • Our automated AI trading is efficient, simple, safe, and affordable. You do not need MT4 or other complicated platforms to trade forex.
  • We are a legitimate and reliable company with extensive experience in finance. We combine 19 years of trading experience and extensive academic research in the financial markets.
  • Our AI outperformed the investment market with an average annual return of 43% over the past 10 years (2011-2020).
  • The automated AI trading works with some of the best forex brokers.
  • When using our AI solutions, all your money is protected by brokerage firms.
  • We do not have access to withdrawals from our customers’ accounts.
  • All of your data is encrypted and will never be shared.
🎯 We are engaged in democratizing the retail forex trading market through AI solutions. We work hard to provide financial education, allow anyone in the world to invest easily with Automated AI trading and free AI forex signals. Our AI platform is integrated with AWS, IBM Watson, and Google AI.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. FXCM warns that 74.74% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.