Regulations and Licensing for FX Brokers in 2022

Regulations and Licensing

If you are at the beginning of FX or planning to start brokerage company, obtaining a Forex license is mandatory thing you will need to do. Normative rules, among others points, ensures the reliability of brokerage structure and guarantees protection of clients’ interests.

FX license: what is it for?

Every proficient investor making money in FX space will confirm the importance of having permission from the regulator with the brokerage organization. It seems that today there are practically no beginners left who believe that a licensed broker or not is not important. A forex broker is an intermediary, often having the status of a brokerage house, that provides its customers with opportunity to use separate platform for trading on FX market and CFDs on such instruments as:

  • currencies (currency pairs);
  • raw material;
  • CFD;
  • cryptocurrencies;
  • stock indices;
  • shares of listed companies.

But operations of individual FX market players are still controlled, including brokers. Broker control algorithms are constantly developing and evolving, and this space already has not only local regulatory bodies for individual states, but also international ones.

Today, all brokers strive to get permission, which acts as a guarantee of their reliability in front of potential clients. Such licenses are issued by various fiscal commissions that check legality of broker’s deals, conduct an audit of it and, after the issuance of permission, control its function.

That is, a forex broker needs a license so that he can confirm the legitimacy of his actions, that he is not a fraudster, that he really brings his traders’ transactions to the interbank market and has obligations to them.


Brokers need to be regulated. Regulators such as CFTC and NFA monitor violations by FX brokers, thereby protecting consumers. Each state has its own regulatory bodies. Thus, CFTC and NFA act as regulators in America.

How can clients tell if they connect with regulated brokers?

FX brokers should list their regulatory representatives at the bottom of the page on the website or have this information accessible from one of hyperlinks in company’s details. If you can’t find info about Forex broker’s monitoring mechanisms, check out the reviews on it.

Forex features

Forex is a market where users earn on currency exchange. A huge number of people are involved in such trade. Daily FX market volume exceeds $5 trln. To earn, you need to give correct forecasts regarding the exchange rate of specific currencies. Naturally, errors also arise here, because it is impossible to always predict the movement of quotes.

Therefore, traders alternate between successful and unsuccessful operations. If the amount of winning predictions is higher, you earn. The opposite scenario leads to fiscal losses. You can make a profit on FX, but for this you should get:

  • understand foreign exchange market;
  • have experience in currency trade;
  • interact with a reliable broker.

Practice shows only some users receive income from such activities. Therefore, you need to take trading in this market very seriously. Forex is a great area, but you need to be able to earn money here. If you seriously decide to trade currency pairs, decide on the choice of a broker.

A licenses

Type A among licenses is considered the most authoritative and, accordingly, it is the most difficult to obtain. It includes countries such as Switzerland and America. If we talk about Switzerland, then the work of brokerage houses is controlled by representatives of Supervisory Officials. All have the strictest conditions in the world.

If you are the owner of brokerage project and want to acquire a permit in the US, be prepared to invest $ 20 million, not taking into account the finances of customers and, in addition, keep strict records. Additionally, broker’s headquarters need to be located in America. Equally significant are customer reviews that they leave about organization on network.

B licenses

UK and Australia are Type B countries. To acquire permission from one of the organizations, you must have an income of at least $100,000, excluding customer funds. The regulatory approval itself will cost the reseller between $22,000 and $50,000. It will take a maximum of one year to receive it.

Despite the fact that British regulatory authority FCA requires less from brokers than the American one, it has no less authority in the world. In this case, it is also mandatory to register organization in Britain or Australia, considering your case. Most often, fiscal intermediaries of LTD type have type B licenses.

Category C country licenses

Type C includes countries such as Cyprus, New Zealand and Malta. From a formal point of view, they are intended to protect the consumers of brokerage firms. Among their demands:

  • availability of real office;
  • min capital starts from $30,000 ($125,000 for STP, $730,000 for market-makers);
  • access to work of clients exclusively with Europeans;
  • hiring at least 3 managers with citizenship in the state of the country;
  • the director has min 6 months of expertise in the field of finances.

Permission from the type C regulator can be obtained in a maximum of six months.

It should be noted that opening a bank account in one of above states is easier and it’s real key to financial activity throughout the EU. Therefore, each market participant trading with organization from this country can count on the objective nature of the decisions that are made during the consideration of conflicts.

The Maltese regulation is almost identical in terms of strength to the Cypriot one. Therefore, having such permission, free accessibility to EU market is ensured. It is worth paying special attention to the experience of employees. If one of the representatives of the brokerage organization does not have enough, then the Maltese regulator will order them to take special courses.

Category D licenses

Representative states in which type D permits can be obtained are Cayman or Virgin Islands, as well as Vanuatu, Belize and Labuan. If we compare the process of accreditation by regulators from these countries with those listed above, we can see that it is many times easier and faster.

Vanuatu, Belize and the Cayman Islands are very popular permitting jurisdictions on FX. This is because everything here is much simpler and clearer than, for example, in Costa Rica or Panama. The tax burden in this case is at a minimum level.

Of course, you can set aside more time and study the issue of financial accreditation on your own. However, it is better to trust experts. They’ll assist you in correctly applying for a Forex permit, carefully completing all necessary documentation and accompanying you at every stage of the entire process.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.