Common laws and regulations of trading on the Forex market in the EU

30 Mar 2020 @ 10.00 am
| Business

It’s not a surprise that a lot of money is being earned by the foreign exchange industry. But because there are so many currencies involved, there have been Forex trading laws and regulations added to aid this process. So, whether you want to sell a currency and buy from another one, it’s important to know the regulations and laws of Forex Market trading in the EU.

With that being said, before EU traders sign-up with FX brokers, here is what needs to be known.

1 Promised bonuses

In some cases, there were promised bonuses by brokers, that had to be honored. But this was only available if the promises were made under the former regime. Nowadays, broker bonus promises are not allowed anymore, because some traders considered them indecent.

2 Private investor taxation

Are you classified as a private investor by the HMRC? If so, then you will be taxed for your losses and profits. It will all be done depending on the capital gains tax regime.

3 Self-employed trader taxation

If you’re a self-employed trader instead, then you will not be taxed any differently than any other self-employed individual. On the contrary – you will be taxed just the same as any other person capable of paying business taxes.

4 Enough share and operating capital

If you want to be a CySEC Forex broker, then you need to make sure that you have enough capital to make this possible. With that being said, you need to have at least €750,000 in operating capital, and €200,000 in the initial share capital.

5 Client protection

It’s not a surprise that you need to ensure the protection of your clients if you want to trade in the European Forex Market. Thus, you can do so by protecting their funds and by holding them in segregated accounts. Furthermore, you cannot settle for just any bank – you need to find top-notch banks for proper protection. Quality liquidity providers should be used too.

6 Investor compensation fund

There’s another thing that you should do in order to protect your clients. Basically, there is always the risk of bankruptcy, so you need to adhere to the Investor Compensation Fund (ICF). Through this, a client will be able to recover as much as up to €20,000 in the case of a bankruptcy situation.

7 MiFID rules

If you’re a broker following MiFID, then there are some rules that you need to pay attention to. Basically, you need to display prices, give clients warnings about the various risks that exist and categorize them, and be honest with your customers.

Final thoughts

You cannot afford to make a wrong move when trading on the Forex Market in the EU, especially after the changes have been made. Brokers and customers need to pay attention to all laws and regulations surrounding the matter. The ones listed here are only a number of them. So, before doing anything, get all the information that you can about Forex Market trading.