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Top 5 Reasons to Choose a Cyprus-based Forex Broker

Oct 16 2012
By
Forexbrokerz.com
Cyprus is one of the favorite spots of forex brokers to base operations for a number of reasons, amongst which are the low corporate taxes and the relatively uncomplicated procedure to register a financial services providing company with the local regulator Cyprus Securities and Exchange Commission (CySec). Some of the brokers who prefer to have headquarters on the island are XEMarkets, TadawulFX (soon to be renamed to Liquid Markets), SkyFX, FxPro, JFX, etc.
 
However, I am guessing that as an end customer you don’t particularly care about the taxes and registration procedures of brokers, so I have compiled a short list of reasons to entrust your forex trading to a broker that is running operations out of Cyprus.
 
1. Regulation. The main regulatory body in Cyprus is the Cyprus Securities and Exchange Commission (CySec) has liberal and reasonable, yet strict requirements for brokers willing to be licensed by it. It supervises and controls the operations of the brokers – and while they are not obliged to get authorized by it, many of them choose to do so in order to increase their credibility.
 
Cyprus is also a member country of the European Union and as such, it is obliged to comply with EU legislation and regulations – and so are all Cypriot companies. One particular piece of EU legislation that you should care about is the so called MiFID – the Markets in Financial Instruments Directive, which is designed to establish harmonized regulation for investment services across the 30 member states of the European Economic Area (the 27 EU countries + Iceland, Norway and Liechtenstein). The main purpose of MiFID is to increase consumer protection in investment services.
 
2. Safety of funds. The Investment Services and Activities and Regulated Markets Law of 2007 requires each Cypriot investment firm to be a member of the Investor Compensation Fund (ICF): a scheme that protects customer assets of up to €20,000 in cases of investment firms/brokers unable to meet their duties. CySec also demands brokers to be members of the ICF in order to grant them licenses and authorization. 
 
3. Hedging. Cypriot brokers are quite flexible when it comes to what you are allowed to do. One of the things you can take advantage of is hedging – a strategy that is forbidden in the USA, for example (the National Futures Association there has pretty strict rules against it).
 
4. No FIFO rule. The FIFO policy (first in, first out) is another rule imposed by the NFA in the US. The nature of the rule is that it requires traders to close their oldest trades first whenever they have two or more positions open on the same currency pair. In a way, FIFO is yet another tactic to prevent hedging – it doesn't let you open a position in the opposite direction until you close the earlier opposite positions.
The good news is that Cypriot brokers are not obliged to comply with the FIFO policy, so with them you have a lot more freedom when it comes to establishing a trading strategy.
 
5. Leverage. Here, I will be comparing to the USA regulations again: there, a broker is allowed to offer leverage of up to 1:50. Cyprus doesn't have such rules and most brokers registered there offer leverage as high as 1:500 (for example XEMarkets, FxPro, or ACFX). Personally, I support lower leverage because it allows for more efficient risk management and effectively limits losses, higher leverage lets sensible traders make significantly higher profit.
 
To sum it up, the top three reasons to go for a Cypriot forex broker are regulation, freedom of trading strategies and high leverage. Combine these with good trading conditions (tight spreads and fast execution) and you’ve got yourself a nice, reliable partner for your trading.
TAGS: forex  forex broker  cyprus forex broker  leverage  fifo  Safety of funds  regulation  hedging 
Broker Country Regulation Platform Min Deposit Review
US CFTC, NFA MT4, Web,
in-house
$50 Review Website
US NFA, CFTC MT4 $250 Review Website
Cyprus, UK, Mauritius CySec, FCA, FSC MT4, MT5, Web $10 Review Website
Australia ASIC MT4, MT5,
IRESSTrader
$100 Review Website
Cyprus, Australia CySec, ASIC MT4, MT5 $5 Review Website
UK, Australia, South Africa FCA, ASIC, FSCA MT4, Trading
Station,
NinjaTrader
$50 Review Website
UK, Cyprus, UAE, South Africa FCA, CySEC, DFSA, FSB MT4, MT5, FxPro
Markets,
cTrader
$100 Review Website
Cyprus CySEC MT4, MT5, Web $1 Review Website
Belize IFSC MT4, MT5 $100 Review Website
Cyprus, UK, South Africa, UAE CySec, FCA, FSCA, DFSA MT4, MT5, Web $5 Review Website
Cyprus, UK CySEC, FCA MT4, MT5 $1 Review Website
UK FCA MT4, Web, MT4
for Mac
$100 Review Website
Australia, UK ASIC, FCA MT4, MT5,
cTrader
$200 Review Website

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