Beware! Scandinavian Capital Markets is an offshore broker! Your investment may be at risk.
RECOMMENDED FOREX BROKERS
Don’t put all your eggs in one basket. Open trading accounts with at least two brokers.
Scandinavian Capital Markets is actually two forex brokers – one offshore and one boutique, aimed exclusively at professional traders with significant capital. Regardless of which option you choose, you will not enjoy the protections and safeguards afforded to retail traders in regulated jurisdictions. These legal specifics are not clearly explained by the Scandinavian Capital Markets, and the proposed trading conditions are not particularly competitive. In general, working with Scandinavian Capital Markets carries risks that are not necessarily offset by better profit opportunities.
SCANDINAVIAN CAPITAL MARKETS REGULATION AND SAFETY OF FUNDS
There are two companies behind the Scandinavian Capital Markets, and the customer must choose which one to work with when signing up for an account. One is the Scandinavian Capital Markets Ltd., based in Vanuatu. This is an offshore zone where the only requirement for brokers is maintaining a minimum available capital of 50 00 USD. By comparison, brokers in the European Union and the United Kingdom must maintain a minimum net capital of 730 000 EUR , among a number of other regulatory requirements.
The other company is Scandinavian Capital Markets SCM AB, based in Sweden. However, a check of the Swedish Financial Supervisory Authority (Finansinspektionen) database shows that the company is only registered but not subject to supervision by the regulator.
The FAQ section of the Scandinavian Capital Markets website explains this by arguing that “FX is not classified as a financial instrument in Sweden and is thus not subject to supervision like other asset classes”. But this is misleading. As a member of the EU, Sweden is subject to the rules of European Securities and Markets Authority (ЕSМА). The catch is that these rules apply to retail traders.
Although this is not explicitly explained by the Scandinavian Capital Markets, the services of the Swedish company are intended exclusively for clients who have the relevant personal capital and trading experience to qualify as professional traders. A professional trader waives the regulatory protections applicable to retail traders, including the right to appeal to a financial ombudsman and to receive compensation of up to EUR 20 000 from an investor compensation fund if the broker cannot meet its financial obligations.
The only protection promised by the Scandinavian Capital Markets is to hold customer funds in segregated bank accounts separate from the company’s operating cash. To get the full set of protections, you must use the services of a broker licensed and supervised by a regulatory institution such as the Cyprus Securities and Exchange Commission (CySEC).
SCANDINAVIAN CAPITAL MARKETS TRADING SOFTWARE
The Scandinavian Capital Markets provides a choice between two well-established trading platforms – MetaTrader 4 (MT4) and cTrader. Both platforms are available for Windows and Mac, and cTrader also has a web version. Here’s what the MT4 platform looks like when using a Demo account:
The MetaTrader software is used by the majority of traders around the world, but in recent years most brokers have switched to the newer and more capable version of the software, MT5. These platforms have established themselves as industry standard because they offer a wide range of features, including a variety of options for customization, multiple account usage, designing and implementing custom scripts for automated trading and backtesting trade strategies. MT5 does have some perks not available with MT4 such as the Market Depth option, which features the volume of bids and offers for a financial security at different prices, as well as a built-in economic calendar. MT5 also has more technical indicators, graphic objects and time frames available.
The leading companies in the industry also offer software packages extending the functionality of the older MT4, but this is not the case for the Scandinavian Capital Markets. The broker does offer other industry-standard services such as a Virtual Private Server, which allows automated trading scripts to run independently of the trader’s personal hardware.
SCANDINAVIAN CAPITAL MARKETS TRADING CONDITIONS
Most brokers offer different types of trading accounts tailored to the needs of clients with different capital, experience and investment preferences. The Scandinavian Capital Markets does not offer such a choice – the conditions depend solely on whether you prefer a Swedish company or one based in Vanuatu.
The base currency of the account can be USD, EUR or GBP. The asset classes that can be traded are limited to forex, metals and cryptocurrencies if you choose a Swedish company. This choice also requires a huge minimum deposit of 10,000 USD. As noted, the services of the Swedish company are aimed at professional traders.
The minimum deposit of the offshore company is more comparable to the typical conditions for retail traders – 250 USD. But you should know that many licensed and regulated brokers allow you to start trading with amounts of 100 USD, 50 USD or even less.
The offshore company charges a commission of 7 USD per lot plus a raw spread starting from 0 pips for forex, metals and crypto trading. At the Swedish company, the commission is 10 USD per lot. In the trading platform we see a spread of 0.3 pips for the benchmark currency pair EUR/USD. These conditions are fairly standard, but by no means the most advantageous on the market.
The etching company offers leverage up to 1:500, which is common for unregulated brokers. The Swedish company offers a leverage of up to 1:100, which proves definitively that it is not a broker operating according to the EU rules for retail traders.
High leverage creates the opportunity for more significant profit, but correspondingly increases the risk of sudden and excessive losses. All leading regulators therefore restrict leverage for retail traders. The European Securities and Markets Authority (ESMA) and accordingly all EU regulators limit leverage to 1:30 for major currency pairs, 1:20 for non-major pairs, gold and major indices, 1:10 for other commodities and non-major indices, and 1:2 for cryptocurrencies. These restrictions do not affect professional traders, but as noted, they also forfeit all regulatory protections and trade entirely at their own risk.
SCANDINAVIAN CAPITAL MARKETS DEPOSIT/WITHDRAW METHODS AND FEES
The payment methods used by the Scandinavian Capital Markets are also quite limited. If you open an account with a Swedish company, you can only fund it through a bank transfer. The offshore company allows deposits and withdrawals via credit card and Skrill. Most brokers offer a wider choice to clients, including popular e-wallets such as PayPal, Neteller and Sofort , and increasingly even cryptocurrencies.
Scandinavian Capital Markets states that it does not charge any kind of withdrawal or deposit fees, interest or monthly maintenance fees. However, it is stated that the bank they use has a flat withdrawal fee of USD 25, EUR 25 or GBP 27. Many brokers bear the bank charges on behalf of their clients up to a certain amount.
BOTTOM LINE
Although it advertises itself as a Scandinavian broker, Scandinavian Capital Markets is in fact unlicensed and unregulated. This broker’s services are not distinguished by wide choice or competitiveness.
