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Foreign Exchange Regulation & Security

Global regulators are put in place to govern and oversee the business conducted by foreign exchange traders and financial companies facilitating and brokering speculative and transactional business on behalf of third parties. Foreign exchange security and foreign exchange regulations are generally governed at the local level. Still, in many cases, if a company is regulated in the UK, they typically can trade in other locations.  

Foreign Exchange Regulation Security

What is foreign exchange regulation?  

Forex exchange regulation is a form of policy specifically designed for the Foreign exchange market. A market which is decentralised and runs without any central exchange or clearinghouse. As a result of its decentralised and  

global nature, the forex market has been prone to FX fraud and has historically been less regulated than other financial markets. 

Foreign exchange regulators are used to ensure a correct and moral approach is taken within the industry, and compliance is followed by foreign exchange providers, investment banks, payments specialists and FX trading platforms. The objective being that clients and investors are assisted in a fair, ethical manner. 

Due to the volume of trade and extensive coverage, the foreign exchange market as with any market can leave itself occasionally open to fraud. Therefore, foreign exchange regulations and foreign exchange security measure are put in place to ensure best practice. 

How to make sure your FX broker is regulated 

 You can check several things to ensure the foreign exchange broker you are considering is correctly regulated in your geography. These include. 

Their registration or license number is located on their website. You can find this number at the footer of the firm’s website or within the terms or conditions. 

Consult the regulatory register in your area. Once you’ve located the company’s registration number search the number on the local regulator’s registry. 

Search ex-pat or overseas property forums, any brokers with a negative reputation or incorrect regulation will undoubtedly be present. 

Related:  Foreign Exchange Margins, Commission and Fees

Foreign Exchange Regulators


The FCA regulates the financial services industry in the UK. It works autonomously from the government and is financed by the fees it charges to the financial services industry. The FCA has three core objectives; 

  • To ensure an appropriate level of protection to consumers 
  • Proactively enhance and protect the UK’s financial markets integrity 
  • And to actively promote for the benefit of consumers. 
  • The FCA has considerable jurisdiction and can regulate the marketing and promotion of financial products and services.  Where appropriate, it can investigate companies, individuals and organisations. 

At the end of 2012, the financial services act was approved by the monarchy and was implemented in early 2013. The act provided more concrete foundations for the financial services industry, bringing together more sturdy regulation and a new regulatory process incorporating the Bank of England’s finance committee and the financial conduct authority. 

UK – Security Of Funds

Part of the requirements for complying with the FCA’s Payment Services Directive affords clients the following protection: 

Segregated Client Accounts – Client funds have to be safeguarded following FCA rules and regulations. Therefore, all foreign exchange providers have to segregate client funds from their funds. Thus, in the unlikely event, the Foreign exchange providers got into financial difficulty client funds could not be claimed by creditors, and the transaction would still be completed. 

Capital Requirements – Foreign exchange providers would have proven they have sufficient capital to cover normal payment services risks under the payment services criteria. 

Bank accounts – reputable foreign exchange providers should use large, reputable banks such as Barclays, Citibank, Lloyds etc.  These banks will only service and facilitate foreign exchange companies that meet stringent foreign exchange regulations.  Also, these banks will process the money transfers on behalf of the FX provider. They all have robust operational processes in place, which will ensure payments are remitted securely and can be traced and located easily. 

Related:  FX Solutions

It is also worth noting that foreign exchange providers do not speculate with client funds or currency markets, thereby eliminating any market risk and exposure. 

Global Financial Regulation


Financial crimes enforcement or FinCEN as it is commonly known is put in place to safeguard the United States financial system from inappropriate use. Its core aims are to:

  • Combat money laundering 
  • Endorse national security through collecting, analysing, and disseminating financial intelligence and strategic use of financial authorities. 

Part of the department of treasury Fincen has the following duties: 

  • Sets and enforces foreign exchange regulations and foreign exchange security 
  • Implements and enforces compliance with the set regulation 
  • Handles data relating to the compliance and distributes to federal regulators 
  • Maintains US-wide access to FinCEN data with departments with mutual interests 
  • Supports law enforcement 
  • Coordinates and assists the FIU (financial intelligence unit) 
  • Researches to benefit policymakers, regulation, lawmakers, FIU and the financial industry. 


As the cornerstone of the European commission financial services action plan MiFID or Markets in financial instruments directive has jurisdiction over 31 member states including Iceland and Norway. 

The plans main goal was to harmonise regulation, increase consumer’s protection and companies’ competition. Whilst undeniably aims to increase transparency on services; pricing has been achieved. Unfortunately, increased trading locations have had an unforeseen effect, whereby multiple parties can be involved in any one trade or transaction, meaning a much greater additional workload. 

Core initiatives and responsibilities of MiFID also include: 

  • Authorisation and regulation in the member’s home state 
  • The categorisation of clients including counterparties, retail and professional consumers 
  • Pre and post-trade transparency 
  • Best execution for clients ensuring all reasonable steps have been taken 


The New Zealand, Financial markets association, is the leading financial body of NZ, ensuring professionalism throughout the wholesale banking and financial markets sector. Reformed in 2007 it is a not for profit organisation that oversees efficient operation of OTC markets. 

Related:  Canadian Dollar (CAD) Exchange Rate: What Determines It?


The Australian Securities and investments commission regulates corporate and financial services as well as tradeable markets. Established under the 2001 Australian securities and investments commission, their tasks are carried out under the same year’s Corporations act. The Australian Securities and investments commission acts objectives include: 

  • To maintain and facilitate the performance of the financial system 
  • Promote confidence to investors and consumers in markets and sectors 
  • Manage legalities effectively with minimal procedure 
  • Relay receive and store information effectively and quickly 
  • Make data about companies and other bodies available to the general public.  


FINMA is the independent financial markets regulator for Switzerland. Formed in 2009 its directive is to supervise exchanges, asset managers, securities dealers, funds, insurance companies, and regulating distributors and intermediaries. Its role is to protect creditors, investors and policyholders. 

Japan FSA 

They were established in 1998 as an administrative body whose primary responsibilities included supervising and inspecting private-sector financial institutions. In 2000 Japan’s Financial services agency was created more formally, and its supervisory became much more advanced. Today the FSA’s role is an independent agency that ensures Japan’s system whilst inspecting and managing securities transactions. Typical tasks handled by Japan’s FSA include: 

  • The financial systems planning and policymaking 
  • Overseeing and when appropriate, investigation of Japan’s banks, institutions, insurance companies, financial instrument companies (derivatives, swaps etc.) exchanges and market participants. 
  • Creation and integration of rules within tradeable markets 
  • Implementation of accounting and corporate finance standards 
  • Supervision of accredited public accountants 
  • Participating in international organisations activities to improve mutually beneficial financial issues and processes. 
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