Broker regulation

Broker regulation is government oversight of forex and CFD brokers: licences, capital requirements, how client money is held and how retail traders are protected.

How it works

To serve clients legally, a broker gets a licence from a financial regulator. Well-known examples are the FCA in the UK, CySEC in Cyprus, ASIC in Australia, and the CFTC and NFA in the US. Every country has its own rules, and one brand may operate through several entities with different licences.

Strict regulators typically require client money to be held in separate accounts, cap leverage for retail clients, provide negative balance protection and disclose what share of clients lose money. Some countries have compensation schemes if a broker goes bust, but their limits are capped and depend on the jurisdiction.

An offshore registration is not the same as a licence: some jurisdictions simply register a company without supervising its forex business. Scammers often write regulated on their site or copy the details of real firms, so always check the licence in the regulator's own register.

Example with numbers

A broker's website shows a licence number. You open the regulator's official register, enter the number and find the licence belongs to a different company with a different website. That is a clone: do not send money, even if they offer a 100% deposit bonus.

Common mistake

The main mistake is trusting a licensed broker claim on a website or in a chat without checking it. Another is choosing a company for high leverage or bonuses, which strict regulators specifically ban for retail clients. Check the name, website address and licence number in the official register, and find out which legal entity will actually hold your account.

Questions and answers

How do I check if a broker is regulated?

Find the licence number and legal entity name on the broker's site, then look them up in the regulator's official register. The name, website and licence status should all match.

What does broker regulation do for clients?

Usually it means segregated client money, leverage caps, negative balance protection and a complaints process. The exact set depends on the country.

Is it safe to use an offshore broker?

The risk is higher: client protection offshore is often weak or missing, and getting money back in a dispute is hard. Rules for retail traders also depend on the country you live in.

Broker regulation

How it works

Questions and answers

Related terms

Read next