Now that the UK is exiting the EU, Cyprus is becoming the most popular forex destination in Europe. We believe this is mainly due to the well-balanced financial regulation in this island country and the fact that it is a part of the European Union.
Forex brokers in Cyprus are referred to as Cypriot Investment Firms (CIFs) are required to meet a set of requirements and to adhere to certain rules, thus insuring the financial soundness and customer protection in the country. The governmental agency in charge of licensing and overseeing the activities of CIF is the Cyprus Securities and Exchange Commission (CySEC).
Advantages of doing business with a CySec regulated broker
Here are the main benefits of CySEC regulated brokers:
– Minimum Capital Requirement – CIFs must hold at least €730 000, which guarantees that the company is financially stable and has a serious long-term approach.
– Client Account Segregation – Whenever clients deposit money in their trading accounts, it is kept separate from the broker’s operating funds. Thus the clients’ money remains shielded in case of mishaps like a broker’s bankruptcy.
– Compensation Scheme – All brokers licensed in Cyprus are members of the Investor Compensation Fund, which may cover a maximum of 20,000 EUR per person in the event of broker insolvency.
– MiFID applies – Under the Markets in Financial Instruments Directive every CySEC-regulated investment company is entitled to offer its services to citizens of all EEA countries, without further hassle.
– Transaction reporting – Cypriot forex brokers are required to report their clients’ transactions on a regular basis. This requirement and other wide-ranging MiFID measures are designed to improve investor protection and promote market integrity and transparency.
The Leverage Cap & Negative Balance Protection
Speaking of MiFID and financial regulation on a European level, we have to mention another benefit of doing business with a CySEC-regulated broker, which is about to change. Until recently, there wasn’t a limitation on the maximum leverage provided by brokerages in Europe (except in Poland). Cypriot brokers were free to offer leverage of 1:500 or higher. As such high leverage can create immense levels of risk, which often prove to be devastating for unsophisticated clients, the European Securities and Markets Authority (ESMA) introduced a leverage cap of 1:30, which will take effect as of August 1, 2018.
That being said, the complete set of restrictions on the provision of contracts for differences (CFDs) to retail investors imposed by ESMA includes other measures, which protect the interests of traders. Most importantly, the EU regulator obliges all brokers to provide negative balance protection on a per account basis, which means that investors cannot lose more than they have deposited.
Below, you can find some of the best forex brokers, regulated in Cyprus.
EU brokers news
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