Forex Major Regulators & Traders' Compensation Schemes
When trading online, regulation and compensation schemes are both important. Always remember that uncertainty is part of every financial market and all related processes.
🏦 Highlighting the Importance of Regulation
The Foreign Exchange market operates as a decentralized financial system without a central clearing service. To manage this, several government and supervisory bodies oversee Forex participants, ensuring they follow fair business practices. These authorities issue financial licenses and can impose penalties or revoke licenses if firms act improperly.
In many cases, there is also a compensation scheme to protect clients if a financial firm becomes insolvent.
Regulators’ Objectives
✅ Monitor financial firms and ensure they follow fair business practices
✅ Protect retail traders from fraud
✅ Ensure financial firms meet minimum liquidity requirements
✅ Reduce credit risk in the financial market
Under these regulations, brokers are subject to audits, reviews, and evaluations. Not all brokers are licensed or regulated by trustworthy authorities, so traders must carefully choose their partners.
🌐 Major Regulators Around the Globe & Compensation Schemes
Forex market regulators (listed alphabetically) and their compensation schemes:
(1️⃣) ASIC -Australia
ASIC is an independent Australian government agency responsible for regulating financial services and consumer credit. The Australian Securities & Investments Commission (ASIC) was established in 1991 and employs over 2,000 people.
🔗 ASIC (Australia) | 🔗 Securities & Investments Commission Act (2001)
💸 COMPENSATION SCHEME: NO
There is no direct compensation if a financial firm regulated by ASIC goes bankrupt. However, AFCA provides a free complaint resolution service as an alternative to the courts. AFCA investigates and resolves complaints against financial firms that are its members. ❌
🔗 AFCA
(2️⃣) BAFIN –Germany
Founded in 2002, BaFin is Germany’s financial regulatory authority. In German, BaFin stands for "Bundesanstalt für Finanzdienstleistungsaufsicht" and employs over 2,100 people.
💸 COMPENSATION SCHEME: YES
In the event of insolvency, compensation is €20,000 per client. ✅
(3️⃣) CFTC –USA
Founded in 1985, the Commodity Futures Trading Commission (CFTC) protects the public from fraud, manipulation, and abusive practices in the trading of commodities, financial futures, and options. The CFTC employs 435 people.
💸 COMPENSATION SCHEME: NO
The CFTC’s Reparations Program, run by the Office of Proceedings, offers an affordable, quick, and fair way to resolve disputes between derivatives customers and registered trading professionals. ❌
(4️⃣) CYSEC -Cyprus
Founded in 2001, CySEC is the "Cyprus Securities and Exchange Commission". CySEC employs 42 people.
💸 COMPENSATION SCHEME (ICF): YES
The ICF (Investors' Compensation Fund) exists to compensate retail traders if an ICF member cannot return clients’ assets due to financial difficulties. Compensation is capped at €20,000 per client. ✅
🔗 ICF (Investors' Compensation Fund)
(5️⃣) FINMA -Swiss
Founded in 2007, FINMA is the Swiss Financial Market Supervisory Authority. FINMA oversees banks, insurance companies, stock exchanges, securities dealers, and other financial intermediaries in Switzerland. It employs 350 people.
💸 COMPENSATION SCHEME (FINMA): YES
In case of insolvency of licensed securities firms or banks, the compensation is 100,000 CHF per client/depositor. ✅
🔗 Investor and creditor protection
(6️⃣) ESMA EU & MiFID
ESMA (European Securities & Markets Authority) works to enhance investor protection and promote stable, orderly financial markets. MiFID refers to the European Union’s Markets in Financial Instruments Directive.
💸 COMPENSATION SCHEME: GENERAL
In the European Union, the general compensation in the case of insolvency is 20,000 EUR per client. ✅
(7️⃣) FCA UK -United Kingdom
Founded in 2000, the FCA (Financial Conduct Authority) is the United Kingdom’s financial regulator. It oversees financial firms, brokers, and exchanges in the UK.
🔗 FCA UK
💸 COMPENSATION SCHEME (FSCS): YES
The FSCS protects customers if authorized financial firms fail. Retail clients can receive compensation of up to £85,000 per client. ✅
(8️⃣) NFA -USA
Founded in 1982, NFA is the US National Futures Association.
💸 COMPENSATION SCHEME: NO
There is no direct compensation if a financial firm goes bankrupt. ❌
(9️⃣) SFC -Hong Kong
Founded in 1989, the SFC (Securities and Futures Commission) is an independent regulatory body.
💸 COMPENSATION SCHEME (SFC): YES
If you incur losses from exchange-traded products in Hong Kong, or from securities on the Shanghai or Shenzhen Stock Exchanges eligible for the northbound Stock Connect, the maximum compensation is HK$500,000, or approximately $64,000. ✅
■ Forex Market Regulation
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