Forex (FX) trading has been rising in popularity for some time now, and while this is a global market, there are different regulations around the world. This has led some Canadians to be unsure whether or not they can work with forex traders and brokers.
In order to operate in Canada, forex traders must comply with and be a member of the Investment Industry Regulatory Organization of Canada (IIROC). This means that there are only a select few brokerages operating in Canada, but there are forex brokers that gladly accept Canadian traders.
What Regulations Apply to Forex Traders in Canada?
The foremost requirement for FX brokers in Canada is registration with IIROC and compliance with its regulatory requirements. These requirements are more stringent than those in some other countries, and Canada has recently received information because of the enhanced security measures and tighter regulations for small businesses in particular.
These are some of the most notable regulations surrounding forex trading and brokers in Canada:
- Brokerages must have a valid financial license, in line with IIROC requirements, to trade within Canada.
- In the event of bankruptcy, a trader may be compensated with up to $1 million.
- There is no minimum deposit requirement set by Canadian regulators. This is determined by individual brokerages.
- Forex brokers are considered ‘securities dealers’ under Canadian regulations.
- Leverage is limited to a maximum of 50 to 1 for any prospective customer.
While Canadian regulations are some of the most strict and complex in the world (partly due to the different local regulations in areas such as British Columbia), this generally works to create a safer forex trading climate in Canada. If you choose to trade forex in Canada, you can be certain that you are highly protected.
How Can I Verify a Broker’s Regulatory Compliance with IIROC?
While forex brokers are legally required to be registered with IIROC in Canada, this doesn’t mean there are no scammers in operation. Therefore, taking the time to check a broker’s compliance before trading with them is good practice. There are two main ways to check whether a broker is registered with IIROC.
Firstly, you can check the brokers website. Reputable brokerages should have an ‘about us’ section that details their history, ethos, and which regulatory bodies they are registered with. If this section does not state that the brokers work in compliance with IIROC, it is likely they are not operating in Canada (and if they are, they are not doing so legally).
Once you have checked with the brokerage website, you should then head over to the IIROC website, where you will find a list of currently registered brokers. This will allow you to verify that the brokerage you are considering has an active and valid financial license to trade in Canada. If you find that the brokerage is falsely claiming association with IIROC, you can also report them via the IIROC website