ESMA urges investors to use regulated FOREX brokers

Chetcuti Cauchi | Published on 07 Dec 2011

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The European Securities and Markets Authority (ESMA) has issued a notice to investors urging retail FOREX investors to ensure that they only transact business using the services of regulated service providers, as well as highlighting some of the characteristics and risks associated with the FOREX market. The notice urges investors to 'to do your homework; check if the firm is authorised' and underlines the fact that investors using unregulated service providers are exposed to various risks. The notice may well signal an increase in regulatory attention towards this industry, and is likely to motivate more FOREX service providers to seek to upgrade their operations and obtain suitable licenses and authorisations. 

Malta is likely to be an interesting option for FOREX service providers seeking to work within a high quality regulatory regime. The country regulates service providers focusing on FOREX under the umbrella of its Investment Services Act, 1994, which implements the provisions of the Markets in Financial Instruments Directive (MiFID). Therefore Malta FOREX businesses are regulated at a European standard. Apart from ensuring operational soundness and giving a reputational boost, this can also provide interesting opportunities for passporting. In addition, the country can also provide service providers with flexibility vis-a-vis margin ratios. Together with the country's accessible regulator, competitive cost and fiscal base and business friendly environment, these factors are likely to lead more FOREX businesses to choose Malta as their domicile and base of operations.


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