O Canada! If you are a Canadian resident interested in participating in the vast $5.1 trillion a day Forex market industry, then you are in luck. Forex trading in Canada is very advanced and provides some of the best protections to traders compared to all other major Forex trading hubs in the world. Hence, it is advisable to choose Canadian regulated Forex brokers over the oversees brokers option. Not only do Canadian authorities provide protection to clients’ funds, but the trading conditions are also lenient compared to their United States neighbor to the south. These advantages place Canadian Forex traders at an advantage over other traders around the world, making the Forex industry in Canada very favorable.
Despite the various advantages of trading the Forex market in Canada, one must nonetheless be very cautious about the Forex broker they choose to work with. Even with strict and effective regulations, there have still been some occasions when some unscrupulous brokers have made it through the cracks and stolen traders’ capital. This is why you should still take a moment to carefully consider your option before making that first deposit. In this post, we are going to look at the most important aspects of a top Canadian FX broker every Canadian should consider in a Forex broker before making the final decision. A huge part of this decision shall depend on the regulatory framework and environment in the Canadian legislation since it is these that shall ensure fairness in the industry.
Apart from the legal factors, the rest shall be very particular, yet they are also very important. You see, choosing the best Canadian FX broker is very subjective, just like it is when shopping for groceries at a supermarket. Some might prefer the skim milk while others will opt for the whole milk. The same is true with choosing a Forex broker since there are some specific factors that may appeal to one trader and not the other. Take spreads and commissions, for example, there are some traders who prefer to pay a one-time commission while another will prefer to pay for spreads. Other factors include leverage, choice of trading instruments, etc. Such factors are also important, and we shall look at them too in detail.
There are currently only a handful of Forex brokers based in Canada due to the regulations regarding retail Forex trading in the country. Canadians are allowed to trade with offshore Forex brokers without any risk of penalization. Furthermore, offshore Forex brokers are also allowed to sign up Canadian Forex brokers even if they don’t have a license from the local financial regulator. As a result, many offshore Forex brokers choose not to set up shop in Canada or even acquire a license from the Canadian regulators. Nevertheless, the largest Forex brokers in Canada have made the move into Canada in order to better serve the Canadian residents, and these include:
FCA, CySEC, IFSC
The above are those Forex brokers who actually have a physical presence in Canada and are licensed by Canadian regulators. However, just as we mentioned above, some traders will be interested in different options. For those traders, you can still find some great options from overseas to trade with. It is still advisable, though, to work with Canadian-based Forex brokers as these make the most trusted Forex brokers in Canada.
The above Forex brokers do not have a license from Canadian regulators, but other reputable regulators from around the world regulate them. In the next section, though, you shall see why they may still not be the best option to go with if you are a Canadian resident, and it all comes down to the regulatory perks.
Before we even get to the topic question, it is important to first define the regulatory environment in Canada. There are several financial regulatory bodies in Canada, but the main financial regulator is the Canadian Securities Administrators (CSA), which covers the main financial markets. The one responsible for the retail Forex market in particular is the Investment Industry Regulatory Organization of Canada (IIROC). Several others exist too, but these are usually regional bodies like the British Columbia Securities Commission (BCSC), Alberta Securities Commission (ASC), Ontario Securities Commission (OSC), etc. without going into too much detail about the various regulators, just keep in mind that IIROC regulated Forex brokers are your best option.
The IIROC was created in 2008 around the time of the financial crisis to respond to the various problems in the Forex market. IIROC was to specifically license, regulate and monitor financial institutions engaging in the Forex market, including best Canadian FX brokers. IIROC regulations have not been as restrictive as those observed in the US, fortunately, and they allow great freedom to traders. For example, there has never been a limit on leverage as the NFA did in the US – placing a 50:1 limit on leverage. Besides, other NFA regulations have not been adopted by the IIROC covering hedging or the first-in-first-out principle. This means that the flexibility available to Canadian residents is unprecedented, even when compared to other regulators like CySEC and the FCA.
One main reason to go for an IIROC regulated FX broker is for the Canadian Investor Protection Fund (CIPF). This fund is set aside for all the best Canadian Forex brokers that have a license from IIROC for a refund to their clients in case the company goes bust. Many Forex brokerages have, in the past, experienced problems that led to their downfall. In many cases, the clients lost all their investment, but the CIPF insures all clients for up to $1 million. Compared to even other major financial regulators like the FCA that offers a £50,000 insurance, Canadian brokers offer far more protection to clients’ funds.
However, some provinces in Canada have their own regulations overriding those of the IIROC. One particularly differing regulator is the Autorite des Marches Financiers (AMF) in Quebec that requires all Forex brokers be registered with the AMF and members of IIROC. In Alberta, the conditions are even more punitive, requiring that traders be ‘accredited investors’ before they can trade. The condition dictates that Albertans wishing to join top Canadian FX brokers must have $200,000 income assets of at least $1 million and a $5 million net worth. Of course, such measures put Albertans at a difficult position since most retail traders don’t have that much capital.
Fortunately, most regions of Canada only rely on IIROC regulation, therefore an IIROC regulated Forex broker is a good enough option. Given the advantage of trading with these IIROC regulated brokers, you shouldn’t even be tempted to go for the offshore brokers. not only do they not offer the fund security, but they don’t have any other advantages over locally regulated brokers.
We have looked at how the financial environment is in Canada and the advantages to dealing with locally regulated brokers. There are other factors to consider as well, most important of which being the financial instruments made available to the traders. If you want to trade the Forex market, you are obviously going to need a wide variety of currency pairs. The average number of currency pairs is usually about 30, but the best brokers should offer more than 50 currency pairs. With this huge variety, you get the flexibility to try new opportunities and make even more profits. Additionally, you should also look for those brokers offering other trading instruments beyond Forex. The best Canadian CFD brokers should provide other instruments in the form of derivatives.
For example, stocks, indices and commodities can all be provided in the form of derivatives in order to expand your portfolio. More recently, cryptocurrencies have become all the rage, and there are already some IIROC cryptocurrency brokers. Even though cryptocurrencies have not been legalized in Canada, these brokers treat them as over-the-counter derivatives. Under the label, they are allowed to offer cryptocurrencies like bitcoin, Ethereum, Litecoin, etc. as options. In case you had an interest in cryptocurrencies, you will now have the opportunity to trade them through your Forex broker.
Finally, check other offerings by the broker before making the final decision. Take money transfer options, for example. A good Forex broker should have various avenues for you to make your deposits and withdrawals easily and quickly; preferably in Canadian dollars. As you know, currency fluctuations can have a huge impact on the amount of capital you have, so it’s even better to work with a broker that allows Canadian dollars as the base account currency.
As in any business, the seller is going to tell you everything they think you want to hear. Every broker’s website is going to claim to be the best and most trusted worldwide, but only trusted Canada Forex broker reviews can tell you the truth. There are many forums and broker review websites available where traders discuss their experiences. Make sure to go through all of these beforehand in order to avoid falling into one of the several Canada Forex scams.
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