What regulators say: four examples
- United Kingdom (FCA): if you deal with a firm that is not authorized, you won't have access to the Financial Ombudsman Service (a free complaints service) or to compensation from the Financial Services Compensation Scheme. The FCA also warns about "clone firms", fake firms that copy the details of real authorized ones.[1]
- United States (CFTC): check a firm's registration before trading. The CFTC notes that registration alone may not protect you from fraud, but most frauds are carried out by unregistered dealers and individuals.[2]
- India (RBI): the Reserve Bank of India says residents can trade forex only with authorized persons and for permitted purposes, and electronically only on platforms it has authorized or on recognized Indian stock exchanges. It publishes an Alert List of entities not authorized to deal in forex, and says a firm not on the list should not be assumed to be authorized.[4]
- Japan (FSA): the FSA warns that firms not registered in Japan contact people living in Japan to sell forex, including through Japanese-language websites. It lists cases such as binary options operators refusing withdrawals, and unregistered firms advertising leverage far above Japan's limit as a selling point.[3] Japan's leverage cap and tax rules for registered firms are covered in our Japanese article (in Japanese).
These are only four examples. Other countries, including those in the EU and elsewhere, have their own financial regulators and rules.
What to check where you live
- Find your regulator: search for your country's financial regulator and its public register of authorized firms (see how to check a forex broker)
- Is the firm authorized? Look the firm up in that register
- Which company is your account with? One broker brand may use different companies in different countries. Find the full legal name of the company in your account agreement or terms, and which country's regulator the broker says authorized it. Then look that exact company name up in that regulator's own register, and check that the registration number matches (see step by step). Any protections usually come from the rules of that country, which may not be where you live, so check what they cover
- Is it a clone? Check that the contact details you've been given match those in the official register[1]
- What protections apply? Complaint routes, compensation schemes and how your money is held
- Tax: how profits are taxed, and whether losses can be carried over to later years, where you live
If no firm is authorized for retail forex where you live, the protections available to you may be very limited. If you already have a problem, such as a withdrawal that is not paid, contact your regulator.
Higher leverage means the same price move changes your account more. See leverage limits by country and margin and margin level.
You decide
This article does not decide which broker to use. If you use more than one account, noting which account each trade was in, the lot size and how you felt lets you look back later. The position size calculator finds a lot size from the amount you are willing to lose, and the margin level and stop out calculator shows how much room you have.
Sources
- Financial Conduct Authority. How to check a firm or individual is authorised. https://www.fca.org.uk/consumers/using-financial-services-register
- Commodity Futures Trading Commission. Customer Advisory: Eight Things You Should Know Before Trading Forex. https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CustomerAdvisory_MustKnowForex.html
- Financial Services Agency, Japan. Caution against solicitation by unregistered firms (Japanese). https://www.fsa.go.jp/ordinary/kanyu/20090731.html
- Reserve Bank of India. (September 7, 2022). RBI issues Alert List of entities not authorised to deal in forex and to operate electronic trading platforms for forex transactions. https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=54333