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Luxembourg is a Western European country that is regarded as a country with one of the highest standards of living in the world. With a population of just around 625,000. and a tiny area of 2,586 km², the country is one of the smallest in the world in almost all regards. However, what the country lacks in size and population, it makes up in riches and prosperity. With a GDP of around $74.50 billion for such a small population, it is easy to see why.
The country shares borders with some of the richest and most developed countries in the region in the face of Germany, France, and Belgium. Luxembourg utilizes the presence of these favorable neighbors to the fullest degree, and although they aren’t much of a manufacturer country, they still enjoy amazing trading partnerships with them. The main causes of the country’s economic prosperity are its effective fiscal policies and management, as well as its strong international openness. Considering that the financial sector makes up over one-third of the country’s economy, it’s easy to see why Luxembourg has the potential to provide you with one of the best Forex experiences in the world. However, such a high dependence n the financial sector definitely leaves Luxembourg vulnerable to economic shocks, which is a double-edged sword
As such, for anyone interested in Forex trading in Luxembourg, treading carefully, staying vigilant, and appropriately informing oneself is extremely important. This is exactly what this guide will attempt to accomplish – to inform you of all the important details about Forex trading in Luxembourg, meaning how it works, what are the legal systems in place that are governing it, what kind of advantages and disadvantages it has, what challenges and opportunities are available and much more. Whether you are a complete beginner or an experienced trader, this guide will help you be better prepared for Forex trading in Luxembourg, and get started in the right way.
List of top Forex brokers in Luxembourg
As one of the major financial centers in the world, Luxembourg is expected to provide only the best of the best, when it comes to the actual quality of the Forex brokers. While that is definitely the case, there are still a lot of brokers that can legally provide their service there, and the diversity and choice of brokers are pretty much the same as with any other country. In other words, the standard is the same, unless you know how to choose. This is where it gets important to know how to choose your broker and make your choice based on important factors that will greatly influence your success ratio.
This is exactly why you will love our list, which we compiled after hours upon hours of research, reviewing the brokers and comparing them based on these very important factors, such as your safety and security, your availability of options, the benefits yo get with each one of them, and much more. Take your time to carefully examine each one of them below, and you will be able to find your personal best Luxembourg-based broker today!
$5 FCA, CySEC, IFSC, ASIC, DFSA 1:888 MT4, MT5, WebTrader 100 USD ASIC, FSA, FSCA, FFAJ, FSRA, FSC 400:1 MT4, MT5 $100 FCA, ASIC, CySEC, FSCA, FMA, MAS 1:30 WebTrader, Windows 10 Trader $10 CySEC, FCA, SFSA 1:2000 MT4, MT5 $250 FSC 1:400 MT4, WebTrader 125 USD N/A N/A cTrader $100 IFSC 1:777 MT4, cTrader $100 NFA, CFTC, FCA, FSA, IIROC and CIMA 1:50 WebTrader, MT4, MT5 $/€100 FSA 1:1000 MT4 250 USD` FSCA 1:200 MT4, WebTrader, Copykat $5 FSA, FSCA 1:1000 MT5,XM
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AvaTrade
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Plus500
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Exness
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Oinvest
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PipFarm
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Axiory
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Forex.com
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Amarkets
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CMTrading
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Global GT
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Luxembourg’s Forex regulations
The Forex regulation in Luxembourg officially falls under the responsibility of Commission de Surveillance du Secteur Financier (CSSF). CSSF is a fully independent body that is in charge of regulating pretty much all kinds of products and services that are offered on the Luxembourg financial market, as well as all the financial entities offering them. The list of entities that CSSF regulates and monitors can include, but not be limited to, securities markets and operators, electronic processors and payment services providers, pension funds, and much more. It is essentially an “all-in-one” regulator that regulates all financial sectors in the country, with the sole exception being the banking sector.
Over the years, CSSF has introduced a lot of different regulations and laws, all with the aim of improving the market conditions and making it all a safer, more efficient, and productive environment for all parties involved. To enforce these rules and ensure that they’re followed, CSSF has a lot of tools and functions as its disposals, such as revocation of license, fines, and other disciplinary measures.
CSSF broker licensing in Luxembourg
Forex brokers that want to be based out of, and operate from Luxembourg, can obtain their official license permit from CSSF. The obtainment of the license, of course, has its own specific requirements and conditions, which themselves serve as a qualifier for the brokers. If the broker manages to adequately satisfy the requirements of the license, then and only then are they allowed to obtain it. Pretty simple.
Due to the past issues with the licensing fraud, the rules on how the license holders should conduct themselves have been quite changed. Nowadays, all brokers that hold CSSF licenses are required by law to display their licensing information in a very open and visible manner. This means, that the customers need to have easy, full, and uninterrupted access to the important licensing information such as the license number, registration details, and much more.
As of today, any individual interested in verifying the validity and legitimacy of a CSSF-licensed broker can easily look up all the information in the CSSF registry by looking up the broker’s details. It should also be noted, that CSSF has released some really handy and useful information on how to examine the brokers, and identify which ones are trustworthy and which ones are not.
What if your broker isn’t CSSF-licensed?
One common concern that many people doing Forex in Luxembourg have, is that their broker is not locally-based and licensed, but is licensed by the regulators from other countries. For many people – and understandably so – this seems like a dangerous arrangement as if your government is not actively involved in monitoring the broker, then the idea of it being secure seems quite unlikely.
However, what you need to know is that this is completely normal, and in fact, is common with many other countries besides Luxembourg. All of those countries have their own specific rules and regulations, which constitute their own unique framework. Following all of these at the same time, realistically speaking, is unlikely, if not impossible. This is precisely the reason why the European countries have decided to come up with some kind of solution to make everything much easier for all parties involved.
The solution that they came up with is what we now know as MiFID and ESMA. These two organizations were created with the sole goal of harmonizing the European Union Forex markets and creating a more-or-less same environment between many different EU countries. They provide guidelines and standards for the different brokers to follow and provided that the brokers follow these standards, as long as they are licensed by any Forex regulator in any EU country, then they can legally operate in ALL other EU countries as well.
Needless to say, this makes everything infinitely easier for the brokers and traders as well, and as such, make Forex trading much more popular and accessible for everyone. Thanks to this feature, instead of going after all regulators one-by-one, what most brokers do is they sign up with EU-based regulators that are more relaxed and liberal when it comes to rules and restrictions. This way, not only are they able to operate more freely and get started easily but gain access to all markets at the same time, essentially claiming the best of both worlds.
One common regulator that you will often encounter not only in Luxembourg and other EU countries is the CySEC (The Cyprus Securities and Exchange Commission). CySEC is extremely popular among brokers, as they make it very easy to get started, and have quite relaxed and flexible regulations. This is great not only for the brokers but in many cases, traders as well, as they gain access to an environment with more relaxed laws, thereby giving them more flexibility.
To sum this up, yes, it is perfectly fine going with a broker that is not locally-licensed. All you have to do is to make sure that they are licensed with at least one legitimate and internationally-known and respected regulator such as CySEC or FCA. With that being said, as a closing thought, we would like to state, that in general, it always makes sense to go with/prioritize a locally-licensed broker, if such exists. Why? Because in case it so happens that you have some kind of a dispute to settle with a broker, then the dispute will be resolved in accordance with your local laws and regulations, which is a huge help. Additionally, disputes with locally-licensed brokers are the only kind of disputes that your government can get involved with, which is also a huge help.
What kind of laws and regulations are the Luxembourg Forex brokers subjected to?
As we have mentioned, due to ESMA and MiFID’s efforts towards harmonizing the different EU regulatory environments, much of the regulations and laws that you will see in an average EU country are highly likely to be very similar to the laws and regulations that are in place in most other EU countries. While Luxembourg’s CSSF definitely has a few of its small twists on how it approaches the market regulation, it is still more-or-less in line with the regional EU standards. Let’s take a quick look at some of these common policies and regulatory demands that the brokers are subjected to.
- Minimum capital adequacy: In the EU environment, most regulators will demand a certain level of minimum capital adequacy from a broker. This will, of course, depend on the specific regulator and their approach towards the matter. As an example, with CySEC, the most common regulator, the minimum operating capital that the broker needs to hold is €750,000. If a broker doesn’t have as much, they simply won’t be given the license.The rule of minimum capital is, again, a common one that is shared across many EU and other countries. This rule was created with the goal of increasing the safety of the traders. By making it so that only the brokers that are able to procure such amount of money, the safety for the traders is automatically increased, as only the most committed and serious brokers will be let in. Additionally, having this kind of an amount in operating capital puts the brokers in a much better position to brace for the volatility and other dangers of the market.
- Brokers are continuously audited and reviewed: With most of the major EU regulators such as CySEC and FCA, for the brokers, obtaining the license is only the first part of it all. After getting the license, the brokers are continuously and constantly monitored and supervised. This is done in the form of audits, reviews, and various forms of research that the regulators conduct, as well as necessitate the brokers themselves to submit the info.The information and point of research can contain a broad spectrum of options, such as the financial transactions and activities of the brokers, the success and failure ratios of the traders, the customer satisfaction rates and general interactions with the customers, and much more. All of this info, in a nutshell, is collected with the aim of creating a safer, more secure, and overall better conditions for the traders. By examining the brokers’ behaviors in such a detailed manner, the regulators are able to identify brokers that are violating the code of conduct and can penalize them accordingly, which can include, but not be limited to, things like warnings, fines, or even permanent revocation of license.
- Account segregation: When trading with a broker that is licensed with any EU-based Forex regulator, a great benefit that you get is that your funds will be kept in a segregated bank account. Essentially, the brokers are not allowed to hold their own operating capital in the same account as your funds and investments. This is a great feature of safety, as it makes sure that the broker will not be able to intentionally or unintentionally misuse your funds. Additionally, in case something bad happens to them financially, I.E they go bankrupt, your funds will be kept safely in the segregated account.
- Investor protection funds: Among the regulatory demands that provide you, the trader, with the most safety, are the investor compensation schemes. Investor compensation schemes can be different based on the specific regulator, but they all work in the same way. Let’s take CySEC’s ICF (Investor compensation fund) as an example since it’s the most common scheme that is used throughout the EU right now. Essentially, the brokers are required to maintain a separate fund where they would keep the funds necessary for the claims of the traders.In case you, as a trader, suffer financial damage that is not “your fault”, with the broker going bankrupt being one of the examples, then you will be compensated from this fund. Of course, there are certain terms and conditions as to who, when and why can qualify for any compensation from this fund, and as such, we encourage you to give all of these rules a read, as it’s very important. As an example, with ICF, there are limits as to how much compensation each trader can receive, and the limit is €20,000. Comparatively, with the UK’s FCA, the maximum compensation limit per trader is much higher at £85,000.
These were only a few small examples as to how the regulatory specifics may look in the EU countries. The truth is, although the regulations between the EU countries are all very similar to each other, there will still be some variance that is worth consideration. As such, we encourage you to always make sure you’re aware of exactly which regulator your prospective broker is licensed with. Taking a little time to inform yourself well of these details can go, and will go, a very long way.
Economic and Forex trading environments in Luxembourg
If you carefully read the previous section, you now know that Luxembourg offers a great legal and regulatory environment for anyone interested in Forex trading in a safe, secure, and profitable manner. Now, let’s take a closer look at what the actual economic environment looks like in the country, what are its strong and weak points, and exactly how it works to create the Forex trading opportunities that are available in Luxembourg.
As you probably already know, Luxembourg is one of the most economically advanced countries in the world. The very name of the country is synonymous with wealth and prosperity. In fact, based purely on GDP per capita, Luxembourg is the richest country in the world. How has the country become so rich? When you consider the fact that it’s not at all rich in any natural resources, the idea that it became so wealthy is definitely confusing, and really does make you wonder.
Well, the reason for Luxembourg’s wealth is not due to some one single asset that the country has a surplus of – as is the case with many Middle-Eastern countries like Qatar and their oil – but rather, Luxembourg built its wealth because they have advertised and presented themselves as one of the best international financial centers in Europe. Luxembourg is known worldwide for its ability to provide a perfect international financial haven, and many companies are fully utilizing this, allowing the country to prosper.
With how advanced the financial and banking sector of the country is, there are many international professionals working in Luxembourg, as it provides them with the biggest opportunities to monetize their skills and earn the most money. Luxembourg has just below 625,000 inhabitants, but over 1.5 million workers. The reason for this is that it has many international workers working for them from other countries, such as Germany, France, Belgium, etc. These people are highly trained professionals choosing to work in Luxembourg because of better opportunities. Of course, this is a huge plus for Luxembourg, because these people pay taxes in Luxembourg. Additionally, due to the fact that in Europe, you receive welfare from the country where you reside, rather than the country where you work in, this is a best-of-both-worlds arrangement for Luxembourg, giving it some huge financial surplusses.
This arrangement is absolutely ideal for Luxembourg, so much so that many believe it to be “exploitative”. This is because Luxembourg had so much to gain from joining the EU, of which it’s believed to be the biggest beneficiary. Indeed, as a country that is not much of a producer and exporter, having this very simplified, flexible, and open approach towards doing business with other countries is definitely what has allowed the country to reach the level it has reached.
We would, however, like to underline the fact, that although the financial sector is the biggest reason for Luxembourg’s prosperity, it is still not the only field that it excels at. Since the early 2000s, the country and its government have made a lot of effort towards making sure that their economic avenues and endeavors are diversified as much as possible. Luxembourg is a very strong performer in sectors like technology, biomedical research, clean/green technologies, and more. As of recently, it even made some efforts towards space technology and research, so the commonly-misunderstood notion that Luxembourg is simply a country that acts as a financial center and nothing else, is definitely not the truth.
However, to put this point to rest -yes, as we have already discussed, the financial sector is one of the key pieces of the country’s economy, accounting for over 35% of its GDP. This, of course, should be amazing news for anybody who is interested in Forex trading in this country, as you would be right in the “eye of the storm” if you are looking for a trading environment with lots of action and opportunities to be taken.
Forex trading in Luxembourg – our final take
It’s likely that you already knew of this, but after reading this guide, you are now probably fully aware of just how much importance Luxembourg holds as a major financial center. Despite being a small country with very small population and no natural resources of note, Luxembourg has shown the rest of the world how to make do with what a country has, and became one of the richest countries in the world.
Of course, for those of you who are interested in Forex trading in Luxembourg, you can only expect the best of the best opportunities there. Thanks to the country’s strong economy, aspirations for constant growth, and its position as one of the most important financial centers in Europe, then you really can’t go wrong with Forex trading in this country. The only thing that is required of you to start setting yourself up for success, is to conduct the appropriate research, choose the broker that is right for your personal goals and demands, and never stop learning and growing your skills!