Why regulation matters, how CySEC, FCA, BaFin, and ESMA protect you as an EU retail trader, and how to verify any broker's licence before you deposit.
All brokers on CompareFX hold active licences from CySEC, FCA, or BaFin.
When you deposit money with a forex broker, you are trusting them with your capital. An unregulated broker can disappear overnight, manipulate spreads, refuse withdrawals, or simply steal your funds. This is not a rare event — forex scams are among the most common financial frauds targeting EU consumers.
Regulation creates a legal framework that forces brokers to behave honestly. A regulated broker must:
The most common EU forex regulator. A CySEC licence is passported across all 27 EU member states under MiFID II. Verify at: cysec.gov.cy → Regulated Entities. Client protection fund (ICF): up to €20,000.
Germany's financial regulator — strict, well-resourced, and widely respected. BaFin-regulated brokers can passport across the EU. Verify at: bafin.de → Company Database. Compensation fund: up to €100,000 (EdB/EdW).
France's market regulator. Also maintains a blacklist of unregulated brokers targeting French consumers (ACPR Blacklist). Verify at: amf-france.org → Regulated Entities.
UK regulator — highly respected globally. Post-Brexit, FCA-only licences no longer passport into the EU, but many brokers hold both FCA and CySEC licences. Verify at: register.fca.org.uk. FSCS client protection up to £85,000.
ESMA (European Securities and Markets Authority) is the pan-EU financial regulator. In 2018 it introduced product intervention measures for retail CFD and forex traders that became permanent law under MiFID II. Every EU-regulated broker must comply.
The four key ESMA rules for retail forex traders:
| Asset class | Max leverage (retail EU) | Example pair |
|---|---|---|
| Major forex pairs | 30:1 | EUR/USD, GBP/USD, USD/JPY |
| Minor forex pairs + Gold | 20:1 | EUR/AUD, GBP/JPY, XAU/USD |
| Major equity indices | 20:1 | DE40, UK100, US30 |
| Minor equity indices + Other commodities | 10:1 | IT40, Brent crude, Natural gas |
| Individual equities (CFDs) | 5:1 | Apple, Tesla, BMW CFDs |
| Cryptocurrencies | 2:1 | BTC/USD, ETH/USD |
| Protection | EU Regulated | Unregulated offshore |
|---|---|---|
| Segregated client funds | ✓ Required by law | ✗ No guarantee |
| Negative balance protection | ✓ Mandatory (ESMA) | ✗ Often absent |
| Compensation fund | ✓ Up to €20k–€100k | ✗ None |
| Regular audits | ✓ Annual minimum | ✗ Self-reported |
| Transparent pricing | ✓ Best execution required | ✗ Spread manipulation possible |
| Legal recourse in EU courts | ✓ Full EU consumer law | ✗ Jurisdictional nightmare |
| Prohibited deposit bonuses | ✓ Bonuses banned — safer for you | ✗ Bonuses used as traps |
Every regulated broker must display their licence number and regulator name in their website footer. Write down the exact licence number — for example "CySEC Licence No. 123/10".
Never trust a search result that goes to a third-party "check" site. Go directly to: cysec.gov.cy, bafin.de, register.fca.org.uk, or amf-france.org. Look for a "Regulated Entities" or "Financial Services Register" search.
Fraudulent brokers sometimes copy the name of a legitimate regulated entity. Always search by the exact licence number the broker claims. If the licence number returns a different company name, that is fraud — do not deposit.
Some brokers hold licences for other financial activities (like payment processing) but are not licensed to offer forex or CFD products to retail clients. Confirm the licence scope includes "Investment Services" or "Portfolio Management" for retail clients.
Licences can be suspended or revoked. Verify the status shows as "Active" or "Authorised" — not "Withdrawn", "Suspended", or "Under Investigation". A revoked licence means the broker is no longer legally allowed to accept new clients.
Every broker in our comparison holds an active CySEC, FCA, or BaFin licence. We verify licences before listing.
See our regulated broker comparisonAn EU-regulated forex broker holds a licence from a national regulator (CySEC, BaFin, AMF, or similar) that has been passported across the EU under MiFID II. This means the broker must segregate client funds, maintain minimum capital, provide negative balance protection, cap leverage at ESMA limits, and submit to annual audits. If it fails, clients are covered by an investor compensation scheme (up to €20,000 under CySEC's ICF).
Go to the regulator's official website and search for the broker by name or registration number. CySEC: cysec.gov.cy → Regulated Entities. BaFin: bafin.de → Company Database. FCA: register.fca.org.uk. Always search the official register directly — never trust a 'Regulated by...' badge on the broker's own website without verifying it yourself.
ESMA is the European Securities and Markets Authority — the EU-wide financial regulator that sets overarching rules that all national regulators must implement. ESMA's 2018 product intervention measures capped retail leverage at 30:1 for major forex pairs and mandated negative balance protection across all EU member states. These measures are now permanent law under MiFID II.
CySEC (Cyprus Securities and Exchange Commission) is the most common regulator for EU-passported brokers. It is a full EU member and brokers regulated by CySEC can operate across the entire EU. FCA (UK Financial Conduct Authority) is a post-Brexit UK regulator — highly respected, but FCA-only brokers no longer have automatic EU passporting rights. Many brokers hold both licences to serve both markets.
Partially. EU regulations require client funds to be held in segregated accounts, separate from the broker's own capital. If the broker becomes insolvent, these funds should not be part of the bankruptcy estate. Additionally, CySEC-regulated brokers must participate in the Investor Compensation Fund (ICF), which covers up to €20,000 per client. This does not cover trading losses — only the broker's failure to return client money.