Best FCA Regulated Trading Brokers 2023: Regulation, Fees, Spreads, Trading Instruments & More

Summary

Foreign exchange (Forex) & top CFD brokers authorized by the Financial Conduct Authority (FCA) in the United Kingdom are highly sought after by traders all over the world. This is because of the FCA’s commitment to protecting its customers and putting the needs of investors first. We will take a look at everything about FCA-regulated brokers in detail, such as how to open an account with an FCA-regulated broker, the leverages on trading instruments FCA-regulated trading brokers offer, and how to safely invest with them. 

What are FCA Regulated Trading Brokers?

Brokers with regulatory oversight by the Financial Conduct Authority (FCA) are known as FCA-regulated trading brokers. The FCA is the autonomous body that oversees financial institutions and regulates them in the United Kingdom. The authority ensures that businesses entrusted with public money adhere to the highest ethical and legal standards. Since the UK is home to some of the world’s most sophisticated financial markets, brokers who operate under FCA supervision have a solid reputation, regulatory framework, and support system. While the Bank of England supervises the FCA, it works with the UK Financial Ombudsman to resolve disputes and complaints.

Although the markets accessible through FCA-regulated brokers and other brokerage firms are virtually identical, the brokers with FCA regulations are considered more competitive than brokers not regulated by the FCA. That’s because the FCA’s licensing costs, capital investment, and operational requirements are significantly higher than most tier-one regulators. 

How do FCA Regulated Trading Brokers Operate?

FCA Regulated trading brokers operate following the predefined procedures and guidelines stipulated by the authority. In addition to analysing the company’s business plan, budget, resources, established systems, and controls to determine its market viability, the authority also considers a broker’s size to decide the type of licence, i-e STP or Market Maker. 

Furthermore, the FCA requires brokers to maintain segregation between their funds and clients’ investments. Therefore, FCA-regulated brokers use separate bank accounts for commercial purposes to avoid mixing up with clients’ funds. In addition, FCA-regulated trading brokers also offer negative balance protection so that clients may never lose more than they initially deposited. A provision of funds compensation schemes to protect clients against losses that occur due to the company’s negligence or bankruptcy also follows as one of the safeguards available for clients when trading with these brokers.   

Pros and Cons of Using an FCA-Regulated Trading Broker

Let us quickly list some pros and cons of signing up with an FCA-regulated trading broker. 

Benefits of Trading with FCA-Regulated Trading Brokers

Segregated Accounts

Brokers holding FCA regulations are bound to keep clients’ funds in separate bank accounts, preferably with top-tier investment banks. That means FCA brokers never use clients’ funds for investment purposes. 

Operating Capital

FCA brokers need to maintain sufficient capital to avoid liquidity issues. These brokers work with large financial institutions and investment banks to fill clients’ orders at target prices. 

Instant Withdrawal Processing

No matter how much profit you make, there is no use if you can’t access them in time. FCA requires brokers to process clients’ withdrawal requests immediately. 

Financial Service Compensation Scheme (FSCS)

Though large numbers of regulators exist worldwide, only a few have shown they can reliably protect traders’ funds if a broker faces liquidation issues or goes into bankruptcy. FCA ensures brokers have funds compensation services in place to allow clients to claim their financial losses of up to a specific limit, i-e, £85000 per client. 

Factors To Consider When Choosing an FCA-Regulated Trading Broker

While all FCA-regulated brokers offer competitive trading conditions, you might want to pick the one that fits your trading style. Here are some factors that may ease your decision-making process.

Trading Platforms

Brokers offer a variety of trading platforms to enable clients to connect to the market. Not all brokers offer the same trading platforms; some provide access to their proprietary trading platforms developed in-house, while others choose to have the tried-and-true MT4 and MT5 systems on their list of offerings. A good trading platform should have an easy-to-use interface besides having all the basics and advanced trading tools required for a meaningful trading experience. If you’re just starting in the trading world, even the best MT4 brokers platform may prove too complex for you to use. Therefore, you must check if your prospective broker offers different alternatives. 

Fees and Commission

Fees are an inevitable part of trading on any market, from the foreign exchange market to stocks and commodities. Therefore, you must check if the commissions and overnight swaps offered by your potential broker are competitive by comparing them to other providers. In addition to trading fees, there may be other costs to consider, such as those associated with payment methods or account maintenance. You can also make regulated brokers list to compare their pricing structure side-by-side and select the one that fits your trading budget.

Broker Type

It is crucial to comprehend the trade execution policy of your selected broker so you may know whether or not you are working with a dealing desk broker or yours is among brokers following an ECN trade execution model. Such information can significantly influence your comfort level with utilising the broker over time. You would like to know if your broker actively trades against you. If so, that is your biggest concern. The term “market makers” and “dealing desks” are both used interchangeably for brokers who intervene in clients’ orders before passing them to liquidity providers (market). However, the non-dealing desk or STP/ECN broker processes clients’ orders without intervention. 

Trading Conditions

In the context of intermediaries, the terms of trade may vary. As an example, certain brokers do not permit scalping, while others restrict clients from using hedging techniques. The size of a trading lot can also be a point of concern for some traders. Therefore, it is recommended that you select an FCA-regulated broker that is tailored to your trading requirements.

Leverage

Leverage is yet another crucial element of forex trading. It entails opening large positions using borrowed funds. Brokers facilitate clients to use leverage to maximise their market exposure despite having limited funds to invest. Typically, brokers offer a leverage of up to 1:200. However, FCA regulated brokers restrict clients to maximum leverage of up to 1:30. When selecting an FCA regulated broker, make sure that your broker doesn’t offer excessive leverage. If it does, the information on its regulation status could be misleading and needs to be cross-checked. 

Spreads

Although FCA suggests brokers keep their pricing structure competitive, there is no such binding. Therefore, all FCA brokers don’t necessarily offer tight spreads. Some brokers employ fixed spreads, while others charge floating spreads. You may even find a broker offering zero-spread accounts. However, they may have higher commission costs that could exceed the overall benefit you expect from your trading outcome. So make sure to filter out some brokers based on your trading taste, compare them and select the one with a lower spread cost. 

What Type of Accounts Do FCA Regulated Brokers offer?

FCA-regulated brokers offer different types of accounts, including Standard, Raw, MT4, MT5, Swap-free, and Demo accounts. 

Standard Account

The most frequent type of brokerage account is a Standard account. Besides providing access to a wide range of trading instruments, brokers allow clients to exercise complete control to make trades, fund them, initiate withdrawals, or close them whenever they like. Typically, a standard account comes with both a spread and commission charging policy. However, services available to clients in the standard account, such as maximum leverage or margin requirements can vary from broker to broker. 

Raw Account

Trading with a Raw account gives you direct access to the actual price of an underlying financial instrument without any markup from the broker. As with traditional brokerages, you’ll have to pay a commission every time you make a trade.

MT4 Account

Some brokers offer clients to signup for MT4 accounts depending on the supported trading platforms, though these account types are not common among brokers. 

MT5 Account

MT5 accounts are similar to MT4 accounts with a key difference being that clients with MT5 accounts have only access to the MT5 trading platform. 

Islamic (Swap Free) Account

Top FCA-regulated brokers also offer swap-free Islamic accounts to shariah practising traders. Clients can use these interest-free accounts to trade their preferred financial markets while sticking to their religious beliefs. 

Demo Account

Brokers also offer virtually funded demo accounts to help clients learn and practice their trading skills without fearing the loss of their actual funds. Typically, demo accounts come with a $10,000 to $100,000 balance accompanying unlimited expiry.

How to Get Started with an FCA-Regulated Trading Broker?

Getting started with FCA-regulated brokers involves following the three steps listed below: 

Step 1: Choose an FCA Regulated Broker and Create an Account

While the forex market is full of legit and scam brokers, you must not overlook the above-listed factors, such as the broker’s regulation status, trading fees, and platforms, account types, etc. After filtering out your preferred broker you can then open an account with it. 

Step 2: Deposit Funds

You also need to have some funds available in your trading account so you can start placing trades. Brokers usually support multiple payment options, enabling you to select the one that suits your needs and budget. Remember, FCA-regulated trading brokers won’t allow you to deposit funds unless you complete the KYC process and verify your trading account. You can use a copy of your national ID card, Passport, or Driving licence for identity verification. Your broker may also require a copy of your bank statement or utility bill to verify your address. 

Step 3: Start Trading

You can start placing trades once you have an active funded account. Find your preferred tradable asset and initiate an order. However, do not forget to configure your trade settings, such as amount, lot size, leverage, stop loss, etc. 

Fees and Commission with FCA Regulated Trading Brokers

FCA-regulated brokers also charge their clients fees and commissions for trading across different markets. Typically the fee is charged in the form of spreads on most trading instruments, while you pay a commission on trading stocks. Clients sometimes also need to bear an account inactivity fee. However, not all FCA-regulated brokers mandate it. Please note that fees and commissions are entirely up to the broker’s discretion. However, FCA recommends that brokers maintain prices somewhat close to the average of the industry norm to encourage healthy competition.

How to Check if a Broker is FCA Regulated?

Unauthorised brokerage businesses frequently engage in Ponzi schemes and other forms of investment fraud in the foreign exchange (FX) and stock markets. That’s why it’s important to make sure your potential broker is supervised and regulated. It is usually a good idea to learn as much as possible about a firm before doing business with it, regardless of its reputation. Here are some easy steps to check if your broker is regulated.

1) Collect Data and Information

Find information about your prospective broker, such as date of inception, headquarters, regulations, registration number, etc. Brokers are aware of this, which is why they include it in their “About Us” sections. You may also find the data listed at the bottom of a broker’s homepage. However, if you can’t find such details, there is no harm in asking them directly from the broker. Another option would be to go for reputable online forums. For instance, if your chosen broker is eToro, then find an eToro Broker Review from a trusted source.

2) Find your Broker on the Respective Regulator’s Database

Once you have the required information, visit the respective regulator’s website to check its regulation status and other details. For example, you can visit https://register.fca.org.uk/s/ to track FCA regulated brokers. 

Let’s say you wish to confirm if eToro is regulated by the FCA. Go to the FCA’s website and open its register, and enter the broker’s name in the search field. You can also track the company using its reference number.

3) Grasp the Meaning of the Data

No matter what, do not ever forget to verify the company’s legitimacy even if it looks to be regulated. Some businesses keep on providing trading services even after their licences have expired. For businesses that were previously subject to regulation but are no longer regulated, an expired permit is an evidence that such oversight has ended. It’s important to keep in mind that your broker’s business name and trade name may be different. If you want full details, then you should definitely check out the broker’s website.

How does the FCA Supervise Financial Services Firms?

There are three main tenets to the FCA’s regulatory oversight: proactivity, reactivity, and sector scanning.

Proactive Supervision

The primary goal of the regulatory body is the proactive monitoring of firms. Direct supervision allows the Financial Conduct Authority (FCA) to detect and mitigate material risk concerns within firms through data and on-site visits.

Reactive Supervision

When events occur that pose a threat of bad outcomes for consumers, the FCA responds quickly following its reactive supervisory model.

Sector-by-sector scanning

The primary focus of the FCA’s future-oriented sector scanning strategy is identifying potential consumer risks in a specific market subset through in-depth thematic analysis of items or concerns in that segment.

How does the FCA Categorise the Firms it Regulates?

The FCA previously employed a four-tiered classification system, denoted as C1 through C4, to divide regulated enterprises into several performance levels. However, the body has now simplified its approach to classification. Now businesses either have a fixed portfolio or a flexible portfolio category. While most firms fall under the flexible portfolio category, a few make part of the fixed portfolio class. The FCA determines the level of oversight required for firms placed in each category. 

Fixed Portfolio Firms

Companies in the fixed portfolio category have a low population density but need a high level of oversight since they serve a big number of consumers at retail or have a strong wholesale presence.

Flexible Portfolio Firms

Flexible portfolio firms do not have a dedicated account manager. Instead, FCA supervises them through a mix of market-based thematic work, communication programs, engagement, and education activities. 

Given that fixed portfolio firms necessitate close supervision due to their size, market share, and clientele base, the FCA assigns a specific manager to each business and monitors its activities closely. Conversely, the regulator only steps in when it receives a report, has doubts about the behaviour of a particular firm, or for some other reason when it comes to enterprises with flexible portfolios.

The Role of FCA in Trading

The FCA plays a critical role in ensuring the stability of the UK’s financial markets and the ethics of intermediaries offering online trading services through regulation.

The Financial Conduct Authority (FCA), the Financial Policy Committee of the Bank of England (BoE), and the Prudential Regulation Authority (PRA) make up the regulatory framework established by the Financial Services Act of 2012.

The FCA is authorised to do the following things by its charter:

1. Capability to conduct probes into entities or individuals.
2. To provide a watchdog role over banks and authorised payment institutions to prevent unfair practices, promote healthy competition, and identify and address financial concerns before they cause widespread disruption.
3. The discretion to halt a financial service or product for up to one year. The regulator can also decide whether to revoke the entity’s activities on a permanent basis.

Its mission is to develop rules for the delivery of financial services and to ensure their compliance through active supervision. The Financial Services Ombudsman is responsible for holding board members of the Financial Conduct Authority to account and providing information to parliament and the industry through various publications.

Guidelines for FCA Regulated Trading Brokers

The Financial Conduct Authority’s enforcement of its rules and regulations is geared toward protecting customers. The regulatory framework’s objective is to safeguard those having no or little knowledge of the financial markets through the following guidelines. 

1. Brokers must treat their clients fairly and make judgments that are in their best interests, even if the client does not specifically request such action.
2. FCA advises brokers that allow CFD trading to enforce orderly internal procedures to protect their business and their customers’ interests. 

Moreover, FCA encourages regulated brokers to seek help from the Financial Conduct Authority (FCA) whenever it is necessary. 

How FCA Regulation Protects Traders?

FCA uses rigorous standards to shield its customers from possible harm. The regulator’s response procedures may be broken down into three distinct phases: pre-, during-, and post-consumer stage.

Pre-Consumer Stage FCA Intervention

Consumers continue to benefit from FCA’s efforts to warn them of potential threats they face when dealing with financial institutions. It continually issues warnings about brokerages doing business without FCA’s authorization.

FCA’s ScamSmart programme educates people to avoid falling victim to investment scams. The regulator equips clients to do in-depth research about mysterious investing firms that promise unrealistic returns. 

The FCA’s InvestSmart initiative alerts novice investors to potential threats they might not have considered before. In addition, the regulatory authority works with consumer groups to promote awareness campaigns amongst the masses. 

Furthermore, the authority may take action to remedy a potentially hazardous situation in which a service is being marketed without first receiving a customer complaint. It has the authority to alter the course of development for products and services offered by regulated businesses.

Active-Consumer Stage FCA Intervention

The regulatory body also mandates brokers to provide products and services tailored to the needs of their clients. FCA-regulated brokers must put their customers’ well-being ahead of their own bottom lines as a result. Besides keeping clients’ funds in segregated bank accounts, FCA requires intermediaries to have adequate working capital to fill clients’ positions at any time.

Moreover, if the FCA is concerned that it was unable to prevent a potentially harmful service, it may take action, requiring the regulated firm to withdraw the service from the market and compensate any customers who have already availed of it. 

Post-Consumer Stage FCA Intervention

The post-consumer phase consists of reflecting on individual instances and taking corrective measures. FCA recommends that clients report their brokers for any fraudulent actions, threats, or other unethical behaviour. 

The regulatory body can punish or even shut down a business violating the code of conduct. According to the FCA, brokers who face liquidation issues or go into bankruptcy have to reimburse clients up to a specific limit, i-e, £85,000. 

Does the FCA put Limits on Leverage for CFD Trading on Trading Brokers?

Yes! Financial Conduct Authority (FCA) imposes certain limitations on the marketing, promotion, and distribution of leveraged-based tradable assets like contracts for difference (CFDs) and other similar options to retail clients.   

FCA mandates brokers to comply with the below guideline while facilitating leveraged trading. 

• Brokers should keep the leverage starting at 1:2 to a maximum of 1:30 across all financial markets. 
• When a client’s CFD account margin drops below 50%, brokers must close all open positions.
• Intermediaries are required to offer safeguards ensuring a client’s cumulative losses cannot exceed the value of their CFD account (negative balance protection). 
• Brokers are discouraged to offer any trading incentives, both monetary and otherwise.
• FCA regulated brokers need to adopt a uniform risk disclosure policy wherein businesses must inform prospective consumers of the risk involved in CFD trading and the percentage of accounts that incur losses on average. 

The Difference between FCA Regulated and FCA Licenced Trading Brokers

Regulations are the rules and legislation enacted by governing bodies that are specific to a given economic sector while Authorization entails permission to do business in a specific area. The scope of the applicable regulatory framework is the main differentiator between brokers who are regulated by the FCA and those who are just authorised by the FCA. 

When a broker is regulated, it must adhere to numerous guidelines and undergo a constant evaluation to ensure it is meeting those guidelines. Among the many powers granted by law to FCA over the regulated brokerages include conducting investigations, implementing disciplinary measures, and modifying or revoking their permits. On the other hand, holding a licence from the FCA means the entity is registered with the regulatory body and allowed to offer its services within a specific region. However, its business activities are not actively being monitored by the FCA. Brokers who wish to be regulated by the FCA need to fulfil all the prerequisites and then apply for a regulation status. Then it is at the discretion of FCA to approve or reject the application based on its assessment.  

Supervision, Authorization, and Implementation are the three main functions that make up FCA’s regulatory framework.

Supervision

FCA supervision includes proactive control of large enterprises besides reactive monitoring of events and thematic examination of industry or company-wide risks.

Authorisation

Financial intermediaries need to register with the FCA before the regulator starts keeping an eye on them to make sure everything is in order.

Implementation

The regulator enforces its guidelines through legislative powers. Companies and individuals who fail to comply with FCA’s requirements may face disciplinary action. The FCA has the authority to file criminal charges, compensate harmed customers, and shut down the business operations of the guilty enterprises.

How Does the FCA Intervene in the Case of Financial Abuse?

The regulator employs various enforcement tools, including criminal, civil, and regulatory measures, to safeguard investors and take action against businesses and individuals who don’t live up to FCA standards. For instance, the authority revokes their permits, imposes financial penalties and initiates legal proceedings against the regulated trading brokers found guilty of financial abuse.

Are FCA Regulated Trading Brokers Safe?

Yes! FCA regulated trading brokers employ advanced security protocols to safeguard clients’ financial data. Adhering to FCA regulations, brokers also keep investors’ funds in segregated bank accounts and offer compensation up to a specific limit in case they face liquidation issues or go bankrupt. Furthermore, clients have the option of legal recourse if FCA regulated trading brokers breach the code of conduct. 

FCA Regulated Trading Brokers Online Reviews

Reddit

People hold different opinions about signing up with FCA regulated trading brokers. Some clients say FCA regulated trading brokers are much more competitive and secure compared to brokers regulated by other authorities like FSC, CySEC, etc. However, other clients believe that there is no harm in opening an account with a non-FCA regulated broker as long as it holds regulations from other regulators as listed above.

However, nearly all Reddit members seem to agree on the fact that FCA is among the top regulatory authorities around the world. According to redditors, FCA doesn’t only protect clients’ financial and ethical interests but also bind brokers to compensate for the losses that may occur due to the broker’s negligence. 

Quora

Like Reddit, the Quora community also seemed to be rhyming about the benefits of signing up with FCA regulated trading brokers. While responding to a question raised by a Quora member concerning FSCS service in case a broker goes into liquidation, the community shared their opinion wholeheartedly. People seemed well aware of the fact that FCA-regulated trading brokers offer funds compensation up to a specific limit under such scenarios. 

Bottom Line

Traders who value dependability, transparency, and the sense of security that comes with a well-regulated financial sector more than anything would be wise to use FCA regulated trading brokers as their preferred choice. Whether a broker is based in the United Kingdom or provides online trading services to any part of the world, it must adhere to the rules and principles outlined by the FCA. Starting from the introduction to the in-depth debate on FCA regulated trading brokers this article covers almost all aspects of trading with an FCA regulated broker. Whether it’s about pros and cons, or the broker’s standard operating procedures, we decoded FCA regulated brokers layer by layer to help you understand better why signing up with them can be a smart choice.