Main Regulatory Bodies for Brokers Around the World

In recent years, the Forex market has experienced an exponential increase in brokers available to traders. This was only possible because of a new regulatory regime that lifted some restrictions on how investors could manage their money.  With the legal framework changed, companies across EU had the possibility to advertise and offer CFD trading for their clients.

Regulation is an important part of the business because it assures a fair trading environment and works to limit the risk exposure of clients to illegally run brokers. Clients work with Forex brokers that are regulated by the regulatory bodies. We have chosen the best Forex brokers available to Malaysian traders which are regulated by the biggest regulatory bodies around the world.  We do not feature, mention, or advertise non-regulated brokers on this website.

USA – CFTC and NFA Regulatory Body

The main regulatory bodies in the USA are the CFTC (Commodity Futures Trading Commission) and the NFA (National Futures Association). The CFTC establishes the regulatory guidelines to protect the interest of the retail FX investors.

Since most trading is done outside of a physical exchange on the over the counter (OTC) market, the retail trader is relying on the creditworthiness of a Forex Broker –  it’s important to assure your retail broker is properly regulated.  In order to become regulated, a broker should be adequately capitalized so client funds are protected against the broker going out of business. The US FX regulatory body is the only major regulatory agency to impose limits on the maximum leverage to traders which is set to 50:1 for major currencies and to 20:1 for exotic currencies.

UK and Europe – FSA Regulatory Body

In the UK and the EU zone, the FSA (Financial Services Authority) and CySEC (Cyprus Securities and Exchange Commission) in Cyprus act as the major regulatory bodies.  CySEC has a good reputation as a trustworthy agency and the preferred jurisdiction for many European Forex brokers.

The scope of the FSA and CySEC activities are:

  • Due diligence, only qualified Forex brokers get a license to operate on the European market.
  • Impose minimum capital requirements on brokers.
  • Consumer protection – updating and adjusting regulations to protect the consumer.
  • Protection against fraud.
  • Capital protection – which in the EU zone is set to $100,000.

Australia – ASIC Regulatory Body

Australia has its own regulatory body called ASIC (Australian Securities and Investments Commission).  This is an extremely credible body, and very traditional in the way they regulate.

Malaysia – Forex Regulatory Body

Malaysia is emerging as a new possible offshore destination for many Forex retail brokers in Asia. The Security Commission of Malaysia is in charge of overseeing the Forex brokers in Malaysia. The Security Commission also assures a fair market environment and at the same time protects retail Forex traders from wrongdoings.

China – CSRC Regulatory Body

The China Securities Regulatory Commission (CSRC) is the main Forex regulatory body in China. The CSRC was only created in 1992 and it doesn’t have a long history like its counterparts in the USA or UK. But, with China’s growing presence on the global stage, the CSRC will become more important in assuring investors that it provides a safe and transparent market environment.

Conclusion

The main benefit of having regulatory bodies is that they help to standardize how clients are treated, ensure that markets are fair, and client money is safe. Regulation varies across countries were in the most developed countries we have long-standing regulation authorities, but there are a lot of other countries that don’t have proper regulation. If you sign up with a Forex broker that is not regulated, then you have to accept additional risk in understanding that might not be safe.

Trading Forex and CFDs is not suitable for all investors and comes with a high risk of losing money rapidly due to leverage. 75-90% of retail investors lose money trading these products. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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