CySEC Forex brokers are highly prevalent in the industry, as there are tons of brokers regulated by the CySEC that offer a multitude of trading products and brokerage services for investors in the EU as well as from all over the world. CySEC stands for Cyprus Securities And Exchange Commission, which is a regulatory agency based in the Republic of Cyprus. Cyprus is a member nation of the EU; therefore, CySEC regulation comes under the MiFID derivative to offer brokerage services to all European countries under the EEA initiative.
CySEC is one of the very first regulatory organizations to legalize and regulate Binary Options trading, and the agency also allows spread betting brokers to base their operations in Cyprus. Although spread betting is more common in the UK, binary options brokers do tend to set up their base of operations in Cyprus due to the numerous advantages that CySEC provides.
Why Is CySEC The Preferred Choice Among Forex Brokers?
Cyprus is a country that is dedicated to advertising its image as a business-friendly nation. Cyprus has highly lenient tax laws, easier and simpler business set up procedures, and comparatively relaxed rules and guidelines for creating a financial company. Therefore, Forex brokers find it easy to set up their brokerage in Cyprus to capture the vast majority of Forex traders in the EU, which is one of the primary reasons why Forex brokers prefer CySEC over any other regulatory agency. CySEC also offers brokers the ability to cater to any region in the EU owing to the EEA agreement, which binds all of the EU nations together. In fact, setting up a brokerage business in Cyprus allows a company to tap into the highly lucrative trading market in the EU without having to set up a representative office in any other countries. Such a move will not only help in reducing the tax burden but can also contribute to reducing the overall costs of running multiple satellite offices.
Why Do CySEC Regulated Brokers Face Extended Criticism?
The over-exuberance of Cyprus to appease international companies to do business in the country led to the CySEC initially favoring the brokers over the individual trader. Since its inception in 2001, CySEC had turned a blind eye towards fraudulent financial companies and allowed businesses to operate in the country with minimal sanctions or inconsequential penalties. As a regulatory organization, it is the duty of the CySEC to investigate all instances of customer abuse, and should work for the trader, rather than for the broker. However, the easier CySEC regulations provided an incentive for companies to offer brokerage services without any backup policies, which resulted in numerous brokers going bankrupt without providing any compensation to the investors. Several CySEC regulated Forex brokers also invested in the country to siphon money away from unsuspecting investors, resulting in widespread scams that had far-reaching effects on mainland Europe as well as on investors around the globe. Increasing instances of broker fraud led to immense criticism from other European regulators, which resulted in reforms in the regulatory guidelines.
The New Face Of CySEC Regulation
Since 2010, CySEC has been changing its policies for regulation and have consistently been updating its regulatory guidelines to satisfy the MiFID derivative. 2012 saw a massive shift in the way CySEC operates, which instantly saw a lot of scam brokers as well as fraudulent financial companies slapped with hefty fines and permanent bans, which resulted in uplifting the overall reputation of the CySEC. Ever since CySEC has been on an upward trend and has been seen juggling between offering a comfortable business environment without compromising the quality of regulation or affecting the integrity of the financial markets. Nowadays, CySEC is committed to the welfare of the investors and has introduced several measures to ensure that traders can enjoy peace of mind while investing their funds with CySEC Forex brokers. CySEC has introduced a minimum of €750,000 capital for Forex brokers, and brokers are also required to add their traders to the Investors Compensation Fund (ICF). ICF is a concept similar to the FSCS offered by the FCA (UK), which covers a trader’s investment for up to €20,000 in the event a broker files for bankruptcy or if a broker is liquidated due to any other reasons. The ICF is a significant step in the evolution of CySEC into becoming a trusted broker, as investors can now enjoy more protection against unethical broker practices or market risks. Such a compensation scheme is only available if the broker fails, and ICF is in no way any insurance for the trading decisions made by the investor.
CySEC regulates its member firms by requesting all types of audit reports and other financials to ensure that the brokers operate within the CySEC guidelines for a fair, open, and transparent marketplace. However, due to the relative ease of regulatory oversight, it is still common for CySEC regulated brokers to indulge in manipulative behavior. In such an event, the CySEC has instructed a detailed complaint resolution process that begins with the complainant contacting the broker directly with any issues and awaiting a response from the company representatives. Brokers should offer their traders with a fast and efficient complaint resolution; however, if a trader does not receive a satisfactory response, he can then contact the Financial Ombudsman service for arbitrage, or approach the court as a final resort.
Perform Adequate Research Before Choosing A CySEC Broker
CySEC regulated brokers are assigned a valid trade license and a unique tracking code that can help traders to perform extensive research about a broker before opening an account with the company. CySEC’s official website provides a rich platform where traders can go through multiple FX brokers and choose a broker that satisfies their requirements. Although the CySEC has a long way to go before reaching the levels of other established regulatory organizations, CySEC has indeed several industry firsts that make the agency a real innovator in the financial markets. As an investor, do your ground work before investing your fund with any broker, as ultimately, your due diligence will pay off in the long run.
Best and most trusted forex brokers in September 2020
All the brokers below are available in:
Trading instruments, or securities, are the various market types you can trade. Examples include CFDs, stocks, currencies, metals, and commodity futures.
Type of Brokers
Market Maker, DMA
Platform for trading Forex, analysing financial markets and using expert advisors.
Multi-asset platform for trading Forex and CFDs.
Trade online without downloading any software.
Wire Transfer, Bank Transfer, Credit or Debit Cards, PayPal
CySEC stands for the Cyprus Securities and Exchange Commission, which is a regulatory agency based in the Republic of Cyprus. CySEC regulation allows a forex broker to offer its services to clients in all European countries under the EEA initiative. It also ensures that the broker is operating responsibly and that you are protected by legal recourse should anything go wrong.
Can a CySEC regulated broker offer bonuses?
Brokers cannot offer bonuses to retail traders under CySEC licensing. The decision to ban bonus offers was taken to protect clients from being incentivised to trade in risky products such as binary options, CFDs, and spot forex.
Am I safe trading with a CySEC regulated broker?
Yes, as CySEC enforces strict guidelines on both STP and ECN brokers, trading with a CySEC regulated broker is very safe. Not only are brokers under their authority subject to various audits and checks to ensure proper business practice, but they must also comply with specific regulatory requirements. These include only offering limited leverage, banning bonuses, providing client fund protection, and full company transparency.
Does CySEC limit broker leverage amounts?
Yes, clients who are trading with a CySEC regulated broker are only allowed 30:1 leverage on currency pairs, and 2:1 leverage on cryptocurrencies. These limits were put in place to protect traders from the large losses higher leverages can cause.
When was CySEC founded?
CySEC was founded in 2001, after Cyprus joined the European Union. Since its inception, there have been several notable changes to its legal framework, including the 2014 requirement for binary option firms to be licensed and the 2019 change of leverage and bonus policy.