The complete guide to the European Forex brokers and how they work

Contents

1 Top Forex brokers in Europe
2 Forex trading in Europe – guide by country
3 European Forex regulations
4 European Forex market – what lies ahead

As the direct source and birthplace of Western Civilization, the European continent is, without a doubt, the most important and central piece upon which our modern life was built upon. As a home to many countries that have pioneered and spearheaded countless innovations, discoveries, and explorations, not only in the physical and material sense but in the sense of our very lives and ways of being, Europe has a legacy like no other and has contributed to the advancement and well-being of the human species in immeasurable ways.

With achievements and merits such as this, it is no surprise that the European continent is home to some of the most prosperous and socially and economically advanced societies and countries in the world, among them the likes of Germany, Sweden, Norway, Switzerland, the Netherlands, France, and many more. With such a huge list of rich and advanced countries under its helm, the whole European continent is currently estimated to have a combined GDP of over $19 trillion.

Of course, much of these economic and social advancements could, and should, be attributed to the European Union, and the benefits that it brings. However, what many people don’t know is that the benefits of the European Union extend far beyond this. With Forex trading specifically, the EU countries have benefitted insurmountably due to the laws, regulations, and organizations that were established all with the aim of making it much easier for the cross-country Forex operation. We will discuss all of this below in detail. In the meantime, check our list of top Forex brokers available on the European continent, as well as our separate guides for all European countries.

Top Forex brokers in Europe

With the number of countries on the European continent, how interdependent these countries are, and how many opportunities the collection of these countries offer for Forex trading, naturally, there would be tons of Forex brokers to choose from in Europe. In fact, most of the major Forex brokers that are available internationally will also be available in Europe as well. With such a huge diversity of choice, it can be a little tough to make your decision on which broker to go with.

This is why we created this list, which will be of huge help with making a choice. The brokers were selected on their ability to provide a safe and secure environment while giving you enough opportunities for success. Check out all the brokers below, and you will find the ideal broker with ease!

XM

Min. Depo

Licences

FCA, CySEC, IFSC, ASIC, DFSA

Leverage

1:888

1:200

Platforms

MT4, WebTrader, Copykat

Global GT

Min. Depo

Licences

FSA, FSCA

Leverage

1:1000

Platforms

MT5,

Plus500

Min. Depo

$100

Licences

FCA, ASIC, CySEC, FSCA, FMA, MAS

Leverage

1:30

Platforms

WebTrader, Windows 10 Trader

Forex trading in Europe – guide by country

Below is the listing of guides that we have made for all the countries we have covered for Forex trading. These guides include invaluable information for any beginner looking to get started with Forex trading in Europe.

Whether that be information on how to stay safe and secure, how to adhere to the local laws and regulations, or what kind of advantages and disadvantages each Forex environment has, you can be sure, that you will find all the important pieces of information about almost everything Forex-related in your country.

European Forex regulations

Regulatory specifics are crucially important for anyone who is looking for a productive, constructive, and most importantly safe Forex trading experience. Whether that be how the regulators are monitoring the activities of the brokers, or what actual laws and regulations they implement, it’s doubtless, that the importance of an effective regulator can not be understated. As is expected of a market of this caliber, in Europe, the regulatory bodies are of the highest standards, and so is the adherence to the laws and regulations presented by them. Let’s take a brief but detailed look at some of these regulatory standards and practices that are common across the European countries.

Licensing and authorization of Europe based Forex brokers

As is common around the world, all countries have their own Forex regulations and laws that are, at least to some degree, unique to them specifically. This is of course understandable, as each country has its own economic context to take into account, along with its challenges and goals, advantages, and disadvantages to consider. As such, the licensing process, albeit to a small degree, is a bit different for all countries.

The licensing process depends on the broker being able to fulfill certain sets of requirements and demands. In case of being able to do so, they are given the license and are allowed to operate in the respective country. Of course, for the international brokers that are operating in dozens of different countries, expecting them to procure licenses in all the countries they operate in, would be quite challenging, if not impossible.

This is why the countries of the European Union decided to implement a system that would make everything much easier for brokers and traders alike. In 2007, the countries of the EU passed the law called “Markets in Financial Instruments Directive” (MiFID), which aimed/aims to harmonize and homogenize the market laws and regulations between different countries’ Forex environments. MiFID, along with the ESMA organization (European Securities and Markets Authority), has been invaluable in making Forex trading much more accessible for the traders and made it infinitely easier for the brokers to operate in different countries. Essentially, MiFID made it so that if a broker is licensed in any EU country, they can, also, legally operate in ALL other countries from the EU.

Aside from letting the brokers operate with a single license in all EU countries, the added advantage here is that the brokers can choose to register with regulators that have more favorable conditions, which can include, but not be limited to, favorable tax conditions, more relaxed restrictions on things like leverage, and much more. This is exactly the reason why many international Forex brokers choose to be based out of Cyprus, as they can obtain the license from CySEC, which is one of the most lenient regulators with the most relaxed laws. Of course, these relaxed laws do not mean that safety is compromised in any way. On the contrary, CySEC is one of the most highly-regarded regulators, due to how much of an amazing job they do.

In general, it will be quite common for you to go with a broker that may not be licensed locally in your country. At times like these, it’s perfectly fine to go with a broker licensed with FCA, CySEC, etc. With that being said, it is always preferable to go with a locally-licensed broker, as it makes everything more convenient and much simpler. As an example, if you have some kind of dispute with your broker, the said dispute will be handled in accordance with the local laws and regulations, which is a huge help.

Restrictions on leverage

For the regulators, leverage is one of the most common points of discussion when it comes to the governance and management of various Forex environments. As you may know, leverage gives way to the opportunity to make huge amounts of profit, even without having a lot of capital to deal with. However, on the flip side, when incorrectly using leverage, or simply getting unlucky whilst using it, it can lead to some huge losses. It’s essentially a double-edged sword, and some serious caution is advised for the people who use it.

This is exactly why the European authorities, specifically ESMA, have put forward certain guidelines regarding the restrictions that need to be applied to the usage of leverage. According to ESMA, the EU-based regulators should allow the brokers to offer leverage that is no higher than 30:1.

This number is now considered to be standard across many EU countries, especially because of the fact that CySEC, the most popular regulator, has adopted this limit. If you think this is a low limit, you should note, that there are many countries where leverage is significantly lower. Japan is a prime example of this, where leverage can be as low as 5:1.

If you still believe that this is not enough, and would prefer higher limits on leverage, then you are in luck – there are some Forex regulators that allow higher leverage limits, and you may register with the brokers that are licensed by such regulators. After all, thanks to MiFID, you can feel free to register with any broker licensed with any regulator in the EU!

Account segregation and investor compensation schemes

A great safety benefit that is now almost universally implemented on all EU Forex environments is the rule of account segregation, which states, that he broker is not allowed to keep their own funds and the investors’ funds in the same account. Rather, they are obligated to keep the clients’ funds in a segregated bank account. This is a great aid to safety, as it makes sure that the broker will not e able to misuse the funds of the client, whether that be intentionally and maliciously, or completely unintentionally. Also, in case something negative happens to the broker, whether that be going bankrupt or having their accounts confiscated, your funds will be kept away safe and sound.

Another great practice that is common in the EU is the investor compensation scheme. Investor compensation schemes exist with almost the same purpose as the rule of account segregation. In case of the broker going bankrupt, or becoming insolvent in any other way, you, the investor, may be eligible for a certain amount of money. This will depend on the regulator that the broker is signed with. As an example, with CySEC’s ICF (Investor Compensation Fund) program, each investor is eligible for compensation of up to €20,000. Depending on the regulator, this number may be lower or higher, so always make sure to verify this information beforehand.

It should also be noted, that all the brokers are required, by law, to hold a certain amount of minimum operating capital. The brokers that fail to procure this minimum capital requirement are simply not allowed to operate. The exact amount, of course, will vary depending on the regulator themselves. Going back to the example of CySEC, their minimum capital requirement is €100,000. This is a practice that is a great aid for increasing the safety and security for the traders, as it makes sure that only the brokers who are committed and serious enough to procure these funds are given license, thereby increasing the standard of service and safety itself, as it implies that the broker is able to brace and be prepared for the volatility and the unexpected events of the market.

European Forex market – what lies ahead

As you can see, the European Forex market is definitely at the height of its glory. With so many economically, socially and politically advanced countries being the EU, the opportunities for Forex trading on the European continent are really limitless. Whether you live in one of the European Forex powerhouses such as Germany, the UK, France or any other country, or an up and coming Forex country that is still in the process of establishing its regulatory and trading environment, you can be sure that you will never be bored, or feel lack of action.

No matter which country you’re choosing to get started with your Forex journey, make sure you’re conducting appropriate research beforehand. For this, get started with reading our extensive guide on the country of your choice, which will also help you make your choice on your first broker.