4 possible pitfalls of the Forex broker regulation

Forex brokerage companies regulation: possible obstacles

Financial markets control giant flows of money. That’s why authorities provide policies for every industry related to working with different assets. It also includes the Forex market, where newer brokers need to get a licence to operate legally. That’s the only way how to start a Forex business. Otherwise, the brokerage company will face many sanctions and limitations.

In theory, it’s easy to get an FX license. However, numerous obstacles may disappoint newcomer business founders. Further, they must fully comply with all the requirements set by the financial authority. Newer brokers should be ready to address the following problems.

Getting a Forex license

It’s the fundamental challenge for every beginner business owner. Forex broker regulation has many nuances. Governments all over the world provide their citizens with great investment opportunities. Meanwhile, state authorities want to protect them from scammers and criminals. That’s why the critical task of the financial legislature is not to allow shell companies to enter the market and rob their customers.

Newcomer traders prefer to protect their rights adequately so that they will trust licensed brokerage companies. Brokers without a license will fail on the Forex market.

Wide range of jurisdictions to select

Many countries provide licenses for brokerage companies, and a newer broker needs to choose the needed jurisdiction. Every Forex broker regulatory body has a unique set of requirements for new companies. Some of them are strict enough, while others are not.

Experts divide all countries into 5 levels:

  • Category A (jurisdictions with the most stringent requirements): the United States and Japan.
  • Category B (jurisdictions with strict demands for FX brokers): the UK and Australia.
  • Category C (jurisdictions with medium regulations): Estonia, Malta, Cyprus, etc.
  • Category D (jurisdictions with weak requirements): Belize, British Virgin Islands, Vanuatu, etc.
  • Category E (mostly off-shore jurisdictions without special regulations for FX brokers): Seychelles, Saint Vincent and the Grenadines, etc.

On the one hand, Forex prime brokers with the license by the stricter authority will get more trust from traders and investors. Meanwhile, brokers want to lead a straightforward way to success. That’s why category C is enough for beginner brokers, while they can meet precise requirements and get a trustworthy license.

What are the most notable regulation potholes?

Regulated FX brokerages need to get a license for processing trading operations legally. In addition, a specific authority controls the implementation of national financial laws. As a result, a brokerage company needs to hire a qualified lawyer specialising in the Forex market. The reason is simple: there are many pitfalls in the market requirements. Here are the main obstacles to Forex brokers regulation.

The target audience

All FX brokerages need to indicate their target countries to service. Different licences provide different opportunities for business owners. For example, most category C licenses permit trading activity throughout the EU. The Australian Securities and Investments Commission (ASIC) license empowers global services (except the USA). To work with American traders and investors, you need to get the SEC license.

Financial leverage

Leverage multipliers must comply with the requirements of the Forex regulation body. Some jurisdictions don’t set the limitations, while others do their best to protect their citizens from losing money. The highest multiplier for Forex trading regulated brokers from the United States is 50:1. Further, the maximum multiplier set by the Australian legislature is even lesser – 30:1.


The next obstacle is supporting economic sanctions imposed by authorities in a specific country. For example, the brokerage company has got an American license. This is why the broker must block access for traders from jurisdictions under sanctions imposed by the US. There are Iranian, Syrian, North Korean, and many other users. Other countries set the same demands.

Tax legislature

Every regulated Forex company is a business related to buying and selling assets. That’s why business founders need to meet the taxing requirements. The trading platform needs to integrate accounting systems that calculate trading statistics and taxes. For instance, the first-class CRM systems provide timely reports, making it easy to pay taxes and enforce legislation.

White Label FX regulation

Most newer Forex brokerage companies need to choose from two options: getting a license on their own or exploiting the White Label model. The latter is cost-effective while saving money on bureaucracy and providing access to trading platforms and liquidity aggregators.

But there’s a question: Are Forex brokers regulated after choosing the WL model? Yes, primary brokerages are responsible for the regulation of their customers while following the cooperation conditions.

It’s complicated for newcomer brokers to learn all about FX requirements. There are two pieces of advice on how to cut as many troubles as possible. First, find a trustworthy partner (for example, B2Broker) and get access to the top-notch White Label trading platform. Our specialists help with company registrations, provide all documentation and offer a ready-made company. Second, hire competent lawyers with experience in Forex regulation. They have the upper hand in legislature updates so that the White Label Forex broker never breaks the law.

It’s not so hard to follow all Forex requirements if your brokerage company takes regulations seriously and is a good-natured business.

You may also like:

Sarcastic Writer

Step by step hacking tutorials about wireless cracking, kali linux, metasploit, ethical hacking, seo tips and tricks, malware analysis and scanning.

Related Posts