Forex Brokers and Regulatory Info for Euro Residents

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Brokers for European Residents

IMPORTANT: European residents are encouraged to understand their home country's specific broker and regulatory landscape as there are many factors that will affect trading conditions and funds safety.

Europe has multiple layers of regulatory bodies working together; At the top, Europe-wide, there's strong consumer protections and strict product rules set by the ESMA and industry laws passed such as MiFID. Then locally, countries have local authority on regulating the operations and capital requirements of brokers in their region. This leads the following hierarchy of regulatory authority from the top down:

ESMA - European Securities and Market Authority. The ESMA sets European-wide rules on trading that affect any regulated broker operation within Europe who deal to European residents. The main impact on Forex traders are the following ESMA set rules for European accounts:

Retail Leverage:

  • 30:1 for major currency pairs
  • 20:1 for non-major currency pairs, gold and major indices
  • 10:1 for commodities other than gold and non-major equity indices
  • 5:1 for individual equities
  • 2:1 for Cryptocurrencies

Retail negative balance protection. This means you can only lose what you deposit with the broker and not be held responsible for losses caused by your account beyond this amount. In the event of a shock market move (think black swan type events, unexpected events that cause the market to gap well beyond what anyone has seen before or would reasonably expect,) you would not be liable for losses caused by your positions that are greater than the capital you've invested. Any trader with 10+ years experience following the markets will tell you these events do happen and some are large enough to bankrupt brokers who had too much client exposure at the time.

Requirement for retail funds to be held in segregated bank accounts. A segregated bank account means the funds stay separate from the broker's operational accounts and comingling of funds cannot take place. This helps prevent misappropriation of funds by the broker (say, to cover operational expenses, or just outright fraud,) or the loss of funds if pooled with other accounts that suffer losses greater than their deposits. This might seem like a desired custodial and banking setup for client assets at any broker, but we still see unregulated brokers do this by mixing all funds together and dipping into client funds for short term operational expenses (which as you can imagine is quite risky for the broker to do as they would not have enough funds to cover client withdrawals if too many clients pulled out at once.)