Legal Canadian Forex Trading and Trading Platforms 2018
Important Information For Canadian Traders
The Forex market is an extremely liquid global market. This makes it very popular with individual investors and small businesses as well as with banks, insurance companies and financial institutions. Roughly 5% of the Forex market are attributed to individual investors and small businesses and 95% to big banks and financial institutions. However, since big banks and financial institutions are heavily regulated, it is those 5% of the Forex market which are most prone to scams and frauds.
That’s why it is paramount for governments around the world that they protect individual investors, who in the search of high leverage and quick profit, often end up as the damaged side of a transaction and lose all of their deposit. Even though it is quite difficult to regulate the fast paced Forex market, there are quite a few governmental and non-governmental agencies around the world which regulate the flow of capital in the Forex market.
Some of these include the CFTC and NFA in the USA, the FCA in the UK, the AISC in Australia and the Swiss PolyReg and the Swiss Federal Department of Finance in Switzerland. The chief regulatory body for the Forex market in Canada is the Investment Industry Regulatory Organization of Canada (IIROC). The IIROC is a non-profit, self-regulatory organization which controls all Forex brokers and the activity they provide to customers. It is part of the Canadian Securities Administrators (CSA).
In Canadian law Forex trading is regulated as either trading in securities or derivatives depending on the region or province where the Forex broker is registered. All Canadian Forex brokers which intend to provide services to Canadian citizens have to be registered as a member of the IIROC as well as to be registered in the province in which they will conduct their business if they want to be able to offer trading on margin.
Frequently Asked Questions
In an attempt to explain legal Canadian Forex trading in more detail, we will list the answers to the ten most frequently asked questions on the topic.
Canadian forex brokers
One of the biggest perks of trading with a Canadian forex broker is the Canadian Investor Protection Fund (CIPF), which insures every trader's account for up to $1 million against suffering losses due to an insolvent broker. See a list of all CIPF members here. Furthermore, all brokers in the country must be registered with the Investment Industry Regulatory Organization of Canada (IIROC).
Depending on the province, where they are registered, brokers in Canada may need to comply with different regulations – Quebec and Ontario, for example, impose additional requrements on forex and CFD brokers (nothing too harsh, though). Unlike the United States, Canada does not ban hedging, there is no FIFO (firs-in-first-out) rule for closing positions, and leverage is not restricted.
Despite being a vast country, Canada is not particularly popular destination for forex brokers; one of the reasons for this is that Canadian citizens are not mandated to trade with nationally-licensed brokers only and can trade with pretty much any brokerage from any country.
Nonetheless, major brokers like FXCM and Forex.com have chosen to set up offices there so that they can cater to the needs of their Canadian clients better. A number of regulated forex brokers like HYCM also accept clients from Canada.
* InvestTechFX and Fx Clearing claim to be Canadian forex brokers, but they are not CIPF members.
Forex trading quebec
Still have a question? Ask your own!
Before answering this question, let us first understand what forex trading is in general sense.
Suppose that you are in Canada and wish to visit Eiffel Tower in the next spring. If you take your Canadian dollars to France, will you be able to visit Eiffel Tower? Absolutely, no. Even though you have money in your hand, you don’t have the correct currency in your hand that is valid and acceptable in France. You will need French euros to enter into transactions in France. For that purpose, you will have to exchange your Canadian dollars into Euros with the help of a trusted broker. Thus, forex trading refers to the trading of foreign currencies. Similarly, if you want to buy an authentic Japanese fan when you visit Japan, you cannot pay using your Canadian dollars. You will need currency of Japanese yen to make payment for buying the fan. This kind of currency exchange is known as foreign or forex exchange. Trading of various currencies is known as forex trading.
In forex trading, various firms and banking institutions participate in the exchange of different currencies to earn income. Currencies are practically exchanged. If you are inferring that forex trading is an excellent investment avenue to get stable returns, then you need to understand the next concept. Forex trading involves more speculation rather than investment. Even though people participating in forex trading are known as investors, they are in fact speculators. Forex markets attract entities and people who look forward to accept high amounts of risk and speculation to earn large chunks of income.
For international activities such as trade and commerce, there is continuous need for exchanging various currencies of the countries. It has resulted into expansion of forex trading market. It is also known as the most liquid market in the world.
But our task is to know ‘is forex trading legal in Canada?’ Yes, it is legal. In some countries, forex trading is not allowed and considered illegal due to several reasons such as restrictions on the usage of credit cards, ban on domestic banking, etc. It is essential for an investor to check the laws of the concerned country if he desires to get involved in forex trading activities. Some brokers may prove with the help of evidence that forex trading is legal in that particular country. However, the broker is not responsible for the legality or illegality of the forex trading activities performed by the investor. Hence, investor is entirely responsible for checking the legality of forex trading in that country.
In Canada, forex trading is legal and one can conduct forex trading activities subject to certain regulations. These regulations differ from province to province.
Forex trading in Canada is reasonably regulated by the authorities and bodies. There is absence of a securities regulator at national level. Each province of Canada has a different regulatory system and framework. The features of the regulatory system of forex trading in Canada are as follows:
- British Columbia: Forex contracts are considered as securities by the British Columbia Securities Commission. There is no mandatory requirement for forex dealers regarding registration and provision of prospectus to conduct trading activities.
- Quebec: Forex trading in the province of Quebec is governed as the over-the-counter currency derivative. The regulatory connecting to this governance is Autorite des Marches Financiers (AMF). Upon fulfilment of certain conditions, forex dealers acquire an exemption.
- Ontario: Forex is an important constituent of the Ontario Securities Commission. As per current scenario, forex contracts are treated as securities as well as derivatives.
- Others: There is no specific regulatory authority with regard to forex trading in other provinces. They are dependent on the national bodies for regulating forex trading domain.
- Regulators at national level: The Canadian Securities Administrators have implemented a new set of rules for registration process of forex trading in Canada in the year 2009.
Other regulating systems in Canada are listed as follows:
- Commodity Futures Trading Commission (CFTC): It regulates forex transactions with respect to retail clients.
- National Futures Association (NFA): The regulators tasks are delegated by CFTC to NFA. It evaluates forex trading activities of individuals, firms, and other entities.
- Investment Industry Regulatory Organization of Canada (IIROC): It regulates the investment industry in Canada.
- Canadian Investor Protection Fund (CIPF): Entities outside Canada do not receive protection under this organization. However, investments of all Canadians are protection by it.
Thus, in short, it can be said that forex trading in Canada is viewed as trading in a security or a derivative. The regulators of forex trading are different for various provinces in Canada. Canada lacks in establishing a national forex trading regulatory system. Hence, if someone is interested in forex trading in more than one province, then he has to comply with the regulations of the respective provinces.
The traders in Canada are free to trade with any kind of brokerage house as per their needs and preferences. This is an important advantage of forex trading regulators in Canada.
Thus, the significant question of ‘is forex trading legal in Canada’ has been answered in a sufficient manner. However, before conducting forex trading activities in any country, including Canada, one needs to check whether the laws of that country are aligned with it or not. Even if the laws allow forex trading in the country, the journey does not end here. Subsequently, one needs to check the requisite regulations of that country or provinces or states.
One set of regulations of a province may or may not be applicable to another province. It is recommended to check broker details using reliable sources and online portals. However, an investor must understand that he or she cannot held a broker responsible for the losses incurred. The genuine nature of brokers can be checked with the help of regulatory bodies. It is also better to seek advice of other investors who are already involved in forex trading activities in that country.
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