Many retail forex and binary options brokers are regulated by the Cyprus Securities and Exchange Commission (CySEC). A trader will actually find more regulated forex brokers in Cyprus than any other jurisdiction.
CySEC is the financial regulatory agency of the Middle East country Cyprus. Cyprus became an EU member state in 2004. Since then, all regulations, processes, and operations of CySEC had to comply with the European MiFID financial harmonization law.
CySEC Aims & Responsibilities
CySEC’s main responsibilities include the supervision of the local stock exchange and related companies and brokers. It is tasked to distribute licenses for investment and brokerage firms to operate in the stock, forex, and CFD market.
CySEC is responsible for effectively collating all necessary information on regulated forex companies and other brokers’ lists. It is also tasked to understand the meaning and advanced trading benefits. These are about new products such as the cryptocurrency Bitcoin and other virtual currencies.
CySEC’s responsibilities also include accurately reviewing and amending when necessary new forex regulations, license certificates, and investment advice. It is also supposed to undertake training to tackle money laundering and other threats to regulatory systems.
Part of this regulator’s job is to inspect the list of regulated brokers and companies. This includes checking they are meeting reporting requirements and operating a fair remuneration policy.
Lastly, CySEC is the one that asks questions and imposes sanctions on any registered companies that breach regulations.
CySEC brokers include FXTM, Plus500, IC Markets, IC Markets, Skilling, BDSwiss, IQ Option, Markets.com, 24 Option, and Instaforex. Moreover, it also regulates easyMarkets.com, UFX, Admiral Markets, Libertex, NordFX, and Capital.com.
History Of CySEC
CySEC is a public corporate body that sprung to life in 2001. It is from the Cyprus Securities and Exchange Commission Law of 2001 and became one of the EU members. As a result, all registered brokers and licensed companies have access to European markets.
However, the EU registration and transition had problems. The move had a significant impact on the tax haven regulatory framework that the regulator has previously adopted.
By May 4th, 2012, the board made an announcement that it was changing the classification of binary options. So, they counted as financial instruments. Platforms operating in the country had to adhere to the new binary options regulations in 30 days.
Furthermore, these new rules included providing consumers with clear information about products. The rules also required them to “operate in a way that is fair to clients”.
This move was significant for two reasons. Firstly, the majority of platforms are found in the country. Secondly, it became the first regulatory body to recognize and regulate binary options as financial instruments.
A board consisting of five members, two full-time employees, a chairman and vice-chairman run CySEC. On top of that, a non-voting member of the board represents the Central Bank of Cyprus.
CySEC has links to the government. The Council of Ministers decides on the board of directors after they receive proposals from the Minister of Finance
CySEC Regulation & Processing
On CySEC vs FCA or CFTC, the former is constantly having to adjust regulations. That is to try and keep up with significant growth rates and more reputable regulatory agencies.
In fact, during 2014-2015, CySEC was under attack in the news from traders and industry commentators. They thought more stringent regulations were necessary to monitor high-risk investment firms. Particularly, there was an argument that fines for binary options brokers were too low.
Because they were the first to regulate binary options, a huge number of brokers hold CySEC licenses. This is to be able to operate within the Eurozone. But many believe verification and processing times could be much quicker.
Furthermore, many brokerage websites claim “Binary Options are the simplest way to trade the market. They have been available since 2008 and became regulated in Europe in May 2012” by CySEC.
This, however, does not necessarily mean that a particular broker is regulated by CySEC. Having said, traders should search for the 5 Digit CySEC License Number and verify the license on the CySEC website.
CySEC has distributed guidelines and regulations on a whole range of trading activities like bonus circulars. It has also distributed new guidelines for cryptocurrencies, such as bitcoin and directives for money laundering.
A regulated forex company must adhere to these two important examples. A minimum of two people must be in charge of the administration of an investment firm. Additionally, it should also be in the appropriate register.
Licensed brokers must notify CySEC before extending their services. Therefore, it’s in the best interest of forex brokers to first detail all the investment services it plans to offer.
In addition, CySEC can also set minimum capital requirements, bonus qualifications, and leverage limits. Brokers must meet regulations around indemnity insurance and ensure access to investor compensation funds.
If a broker fails to meet license requirements, their offices can swiftly receive notifications of fines. This failure can also cause the removal of their license.
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