Ins and outs of Canadian FX regulation

By ForexBonusLab

Many of us know that Forex is the largest financial market in the world. Therefore it is no surprise that the Canadians are well invested with the whole ordeal. You might think that the Canadians known for their politeness would avoid dealing with finance as much as possible, but you would be wrong. The CAD is considered to be one of the major currencies of the Forex market and sees quite a lot of activity with traders. However, there are questions to be answered about how the Northern country deals with the Forex brokers located within its borders. How do they regulate them, who is the regulator? So on and so on.

The Canadian Securities Administration has quite clear guidelines for companies looking to offer Forex trading services. First things first, it is very important that these companies are registered in the province from which they are operating in. The reason being an easy accessibility from the Administration. By knowing the exact location helps to identify any suspicious activity and deal with it on the spot.

There are also additional institutions that need to be contacted. All of the Canadian Forex brokers here are also registered with Investment Industry Regulatory Organization of Canada (IIROC), because of their services in Forex connected to margin.

Multiple Registrations

Although many may think that the best places to have an operating office are Toronto, Ontario or Quebec, the CSA also provides the ability for these brokerages to have their listings in more than one province. Therefore having to operate all over the country, which spans over 6 separate time zones. Thanks to the length of the country, brokers are able to operate in completely different time zones while under the same regulatory framework. Although the time zone difference is no big deal for Forex, it is still a good addition for a broker to have multiple offices worldwide.

Strict Regulations

Unfortunately for CSA regulated Forex brokers it is not allowed to offer a high leverage. Thanks to the very stringent nature of the regulations the brokers are restricted to offering no more than 1:50 leverage which is a laughable number when comparing to other Forex brokers abroad who are able to feature leverages as high as 1:1000.

However, why is it so bad to have a lower leverage for CSA regulated Forex brokers? Because it creates a hardship for them to acquire new customers. The more the leverage decreases, the more of his or her money the customer needs to deposit in order to actually make a profit. Leverage is designed in a way to help traders conduct very high volume trades, in order to actually make their trading worthwhile. With a smaller leverage is the risk nullified? No, not really, as the traders used to this type of lifestyle will just deposit their own money, which further increases their risks of losses.

Security

By no means is the Canadian regulation a bad example. It is one of the best examples to be found actually. The IIROC was able to learn from the mistakes of their American counterparts.

The decision of making the regulations not as strict is what helped many of the brokers stationed there succeed so much.

The American style regulations simply wouldn’t work in Canada. The reason being the market of course. Even though the regulations are very tight in the US, brokers still find it profitable because of the large market. Having such a restricted industry in a relatively smaller population of Canada would be a devastating blow to every Forex broker stationed there.