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The Necessity of a Forex License

The Foreign Exchange Market does not have a centralized regulator. In other words, there is no single international authority or organization that controls the activities of all participants in the Forex market. Such a regulator does not exist because the transactions within the foreign exchange market are based on the independence of individual operators and their interdependence on other operators with whom they do business.

The Necessity of a Forex License

Nevertheless, the activities of individual Forex market players and brokers are carefully controlled. A broker's algorithms are constantly being tweaked and improved and they provide a lot of automatic, seamless control over market players. There are local regulators for individual countries and global regulators for multi-jurisdictional players in the Forex market.



Today, most legitimate brokers strive to obtain a license as a guarantee of their reliability to potential customers. Such licenses are issued by various financial authorities that verify the validity of the broker's operations, conduct audits, and regulate a broker’s activities after issuing them a license.



Forex brokers need a license to confirm that it is operating legitimately and to display the traders’ transactions on the interbank market.

How is the Forex Market Regulated and Who Regulates It?

A broker’s activities are controlled by Forex market regulators. The regulator can be local (competent public authorities) or international (independent financial commissions). Regulators perform three functions concerning the Forex broker. They are:

  • How is the Forex Market Regulated?

    verify that the broker complies with the license requirements;

  • Who Regulates the Forex Market?

    monitor compliance during trading and other transactions;

  • The Main Task of the Forex Regulators

    revoke the license when the broker severely violates the regulations.

The main task of the regulator issuing a license is to prevent a situation where the broker is not able to fulfill its obligations to traders. The regulator provides legal protection to traders and investors in the event of a dispute, investigates their complaints, and conducts inspections of brokers. Regulators also audit the activities of the broker to identify inconsistencies with its license requirements.

Инфо

Where a regulator has issued the broker a license in a particular territory or country (i.e., local regulator), the regulator’s authority is limited to only traders and investors who are residents of that particular jurisdiction. For example, if a broker was licensed by the FCA (UK), the regulator controls the broker’s work only for citizens of the United Kingdom. Traders and investors from other countries cannot rely on being protected by this regulator.

Another important issue is that in some countries brokers are not required to have a license. Therefore, a broker can be registered as a legal entity providing some financial services and can work all over the world via the Internet. This, of course, does not mean that such a broker is unreliable or a fraud. It’s just that traders and investors have no guarantees when working with such a broker.


These are the advantages of working with a licensed broker:

  • трейдер/инвестор получает гарантию на выплату

    the payment of funds lost as a result of bankruptcy by the broker is guaranteed to the trader/investor. To ensure this, the broker must create a compensation fund that is controlled by the regulator;

  • регулятор участвует в разрешении судебных споров с брокером

    in the event of a legal or financial dispute between a trader/investor and a broker, the regulator — serving as an independent third party or arbitrator — will work to resolve the disputes;

  • аудит работы брокера

    regulators constantly audit the broker's work and immediately revokes the license and inform the competent authorities in case of substantial errors or fraudulent schemes;

  • регулятор гарантирует прозрачность работы брокера

    the regulator that issued the license guarantees the transparency of the broker through the use of financial and tax audits.

Top Forex Regulators

Regulator Jurisdiction level Country
Commodity Futures Trading Commission of the USA (CFTC) 1 USA
National Futures Association of the USA (NFA) 1 USA
UK Financial Regulatory Authority (FCA) 2 Great Britain
Australian Securities and Investments Commission (ASIC) 2 Australia
Cyprus Securities and Exchange Commission (CySEC) 3 Cyprus
Malta Financial Services Department (MFSA) 3 Malta
Financial Services Commission BVO (FSC BVI) 4 Virgin Islands (Great Britain)
Belize International Financial Services Commission (IFSC) 4 Belize
Seychelles Financial Services Department (SFSA) 5-6 Seychelles
Saint Vincent and the Grenadines Islands Financial Regulatory Authority (SVG FSA) 5-6 Saint Vincent and the Grenadines Islands
Financial and Capital Markets Commission of Latvia (FCMC) 5-6 Latvia

European Forex RegulatorsEuropean Forex Regulators

The following regulators are the most popular among European regulators:

  • Logo FCA

    the UK Financial Regulatory Authority (FCA) is one of the earliest world-class regulators. It was created in 2001 and is characterized by having the most stringent requirements for brokerage organizations;

  • Logo CySEC

    the Cyprus Securities and Exchange Commission (CySEC) is a European regulator that was founded in 1934, and has been operating as a Forex brokers regulator since 2001;

  • Logo MFSA

    the Malta Financial Services Department (MFSA) is frequently compared to the Cyprus Commission in terms of its level of requirements and organizational structure. The MFSA has been operating since 2002;

  • Logo FSC BVI

    The Financial Services Commission BVO (FSC BVI) has been operating since 2001. It belongs to the fourth level of regulators.

Offshore Forex RegulatorsOffshore Forex Regulators

The concept of “offshore regulators” is well established. Some experts in the foreign exchange market are also classified as offshore regulators of the 4th level. According to the overall characteristics, international organizations are usually referred to as being in this group. They allow the Forex broker to be licensed with minimum requirements. The most popular regulators of the 5-6th levels are:

  • Logo SFSA

    Seychelles Financial Services Department (SFSA). It is a relatively young regulator operating since 2013. Notwithstanding, its license is considered sufficiently credible and it gives traders and investors guarantees of protection;

  • Logo SVG FSA

    Saint Vincent and the Grenadines Islands Financial Regulatory Authority (SVG FSA) is also a young but popular regulator. It was created in 2012 and has proven itself to be a reliable organization with a high level of professional competence;

  • Logo FCMC

    Financial and Capital Markets Commission of Latvia (FCMC) was founded in 1997 and operates based on Latvian legislation and the legislation of the European Union.

Comparison of Forex RegulatorsComparison of Forex Regulators

Comparison of Forex Regulators

The first-level regulators are the most expensive regulators for licensing. No novice broker can afford such a license, but a lot of brokers obtain it after several years of brokerage. Offshore regulators are the cheapest.


Generally speaking, the licenses by regulators within all six levels are ranked and valid on the international market, but it is obvious that the higher the level of the regulator, the more prestigious the license and reliable the broker. However, novice brokers can also be reliable with high potential and and have favorable terms, but may not have capital reserves of $20 million.


Just having a license, no matter what type, shows that the company aims to work transparently and officially. On the other hand, when working with brokers without a license you are acting at your own peril and risk. Their guarantees and promises are unwarranted and have no legal effect. Therefore, the Traders Union recommends associating only with brokers licensed by any of the regulators within levels 1-6.

TOP 10 Most Popular Licensed Brokers

Regulators constantly monitor Forex brokers. Therefore, every year several brokers have their licenses revoked. In contrast, each year several brokers obtain licenses from higher-level regulators. Therefore, when choosing a broker, the relevance of the data is very important. Here is our latest list of the most reliable Forex brokers, which is regularly adjusted by our experts.

Broker Regulator Country of regulator Minimum deposit
RoboForex IFSC Belize $10
Exness CySEC Cyprus $1
IC Markets AFSL, FCA Australia, Seychelles $200
InstaForex FSC / FSC BVI Virgin Islands (Great Britain) $1
XM Group IFSC XM Group $5
FXCM FCA Great Britain $1
FxPro FCA, CySEC, FSCA, SCB Great Britain, Cyprus, RSA, Bahamas $100
FXTM FSCA, FCA, FSC South Africa, Great Britain, Republic of Mauritius $5
Admiral Markets UK ASIC, CySEC, FCA Australia, Cyprus, Great Britain $200

Is It Worth Giving Up More Favorable Conditions for the Sake of a License? Expert’s Opinion

Favorable Conditions for the Sake of a Forex License

“Novice traders and investors sometimes favor unlicensed Forex brokers because they seemingly offer the most favorable conditions upon first glance. Indeed, an unlicensed broker can offer you anything, such as a 3000% return on a transaction or a 100% return on investment upon a failed transaction. But such guarantees by an unlicensed broker are worthless because its activities are not regulated and because it does not have a third-party controlled reserve account. That is, it can declare bankruptcy tomorrow, and the trader/investor will lose the deposit without the possibility of recovery.



Licensed Forex brokers stand in stark contrast. Regardless of the level of license, such a broker is financially and legally responsible to its customers. If the broker goes bankrupt or another adverse situation occurs, the regulator and the law protect the trader/investor and help return the lost deposits from the broker's reserve fund. Therefore, it is recommended that all traders and investors work with brokers who have valid licenses.”

Thomas Miller, trader-analyst of Traders Union

About the Author of this Review of Forex Regulators and Licenses

Jack Moore
Jack Moore
Financial Trader-Analyst
  • Jack has been engaged in trading and forecasting in the Forex market for more than nine years. During this time, he’s gone from a novice to an expert in the stock and financial markets. Jack serves as a consultant to well-known brokerage companies, and he also helps private clients to choose a broker.
  • In 2013, he worked at System Capital Group (trading stocks and currencies online using investments of companies and individuals). He held this position for 5 years.
  • Jack Moore advises all traders to work with brokers through Traders Union. Throughout his professional career, he has received excellent recommendations from numerous clients who have been satisfied with his advice.

FAQs Regarding the Best Licensed Brokers

What does a “licensed Forex broker” mean?

The term means that the brokerage organization has successfully completed the voluntary process of obtaining an official license to conduct financial activities in the Forex market. Such a broker is reliable because its work is transparent and controlled by competent organizations.

Is a licensed or unlicensed broker more profitable and more reliable to work with?

An unlicensed broker is also an officially registered organization, but its activities are not regulated by anyone. It can be a Forex bucket shop or a pyramid scheme. Therefore, experts recommend working only with licensed brokers.

What types of licenses are available?

According to the generally accepted classification, licenses of Forex brokers are divided into six levels, and the fifth and sixth levels are offshore. It is safe to work with a licensed broker regardless of the type of license.

How can I tell the type of license of my broker?

Typically, brokers display their license number because it increases customer confidence. Also, the regulator and license number are indicated in the footer or in a special section of the broker’s website. You can verify the number on the official website by visiting the website of the regulator.