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Post Brexit: FCA vs CySec

Will CySec become the one and only regulator of the FX brokers open to EU-based traders?

by Forex Bonus Lab

Every European trader knows the importance of choosing a regulated broker, but now, however, following the UK's decision to leave the EU on 23 June, legislation surrounding CySec and FCA regulated brokers could all be set to change as uncertainty surrounds what will happen to EU traders who are trading through an FCA regulated broker. FCA regulated brokers have long been popular with European traders who believe that the FCA offers the highest possible standards of regulation, however now there are concerns that the EU may pass legislation forbidding EU citizens to trade through a UK regulated broker. Although CySec is a trustworthy regulatory body, many European traders prefer the security of the added protection that the FCA offers and fears that they may no longer be able to use these brokers are very much to the fore.

What is the FCA?

The FCA or Financial Conduct Authority is the United Kingdom's financial regulatory body which has been set up to monitor and regulate the financial services industry. Operating independently from the government, the FCA charges fees to members and maintains the integrity of the financial markets within the UK. With significant powers, the FCA is able to regulate marketing conduct as well as to specifiy minimum standards that must be met and to investigate any individuals or organisations suspected of flouting the rules. Any forex brokers who wish to be on the FCA's list of approved companies must meet the stringent criteria for inclusion and must operate to the highest professional standards. Most of the top rated forex brokers are regulated by the FCA, guaranteeing those who trade with them the best possible security of financial transactions.

What is CySec?

CySec or the Cyprus Securities and Exchange Commission, is based in Cyprus (a member state of the EU) and is the largest government regulatory agency of forex and binary options brokers. All of the member states of the EU recognise CySec licensing of financial companies. While some forex brokers are registered with both CySec and the FCA, others are only listed with one or the other. CySec have the responsibility of granting operation licenses to brokerage firms and are able to impose penalities and sanctions on any operator who flouts the rules. All transactions carried out through a CySec regulated forex broker is under their supervision including all withdrawals and deposits which means that a trader's money is protected as all of their money is held in a trust account. CySec also oversee the operations of regulated brokers to ensure fairness and standardisation across the board. Despite all of this, many traders prefer to use FCA regulated brokers as they believe that they offer increased financial protection and higher standards than CySec regulated ones.

How Will Brexit Affect Those In the EU Using FCA Brokers?

At the present time, the FCA is allowed to operate across the EU however this could all change depending on negotiations due to be carried out between the UK and the EU member states. If EU traders are forbidden from trading through FCA regulated brokers, they may be forced to switch to a CySec regulated broker or one of the few other options that are regulated by a different EU body. There is, however, a strong opinion that things are unlikely to change and EU traders will continue to be allowed to trade using FCA regulated brokers. At the moment, nothing appears to have changed with regard to regulation, and as negotiations are likely to continue for at least the next two years, there is no immediate rush to switch brokers to one regulated by a different body.


*This post was published according to the "Contributed Article Terms and Conditions"

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