Forex Brokers in the UK
If you are looking for a forex broker in the UK, then you will find some of the best forex brokers are based there. The FCA is the regulated of UK forex brokers and is considered to be top tier when it comes to financial regulation. Dealing with financial firms that are authorised or registered by the FCA gives you greater protection if things go wrong. For this reason, many forex traders choose to open an account with an FCA regulated forex broker in the United Kingdom.
Best forex brokers in the UK
Due to the increasing popularity of trading and investing online, there are new brokers in the UK opening all the time. This can make it difficult to choose the best UK forex broker according to your individual requirements.
We have conducted many hours of in-depth research and analysis into the products and services of hundreds of UK forex brokers. This has enabled us to collate what we consider to be amongst the most important factors to consider when choosing a forex broker and allocated them an unbiased broker rating based on our findings. You can see a selection of our best UK forex brokers in the table below.
ASIC, BaFin, CFTC, DFSA, FCA, FINMA, FMA, FSA, FSCA, JFSA, MAFF, MAS, METI, NFA
How to choose a UK forex broker
First and foremost, we ensured that the UK forex broker was regulated and authorised to provide online forex trading services to clients in the UK. Once that had been established, we look at other important features including spreads, commission fees, platforms, tools, educational content, account types, account funding options, execution policy and customer support.
Forex Regulation in the UK
We believe one of the most important factors to consider is that a broker providing forex trading services to clients in the UK is authorised and regulated to offer financial services in the UK. If a broker has been licensed to operate in the United Kingdom (UK), they are given a registration number. This number can usually be found near the footer of a broker’s website where they state that they are regulated.
You can then check on the regulators website if the registration number is valid and up to date. It has been known for some scam brokers to fake registration, some even going as far to clone another broker. When you look up the registration number you should find details of the brokerage firm including their website, contact details and if they have had any cases brought against them or warnings.
Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) is an independent public body that regulates the financial services industry in the United Kingdom. Its role is to help protect consumers, keeping the industry stable, and promoting healthy competition between financial service providers.
The FCA was established from the Financial Services Act 2012 replacing the Financial Services Authority (FSA). Its purpose was to create a new regulatory framework for financial services, including brokers. The FCA is funded through charging fees to members of the financial services industry. It is, however, still accountable to the Treasury and to Parliament.
The FCA has the power to regulate how financial products are marketed and to set minimum standards and requirements on products that firms offer. They also have the power to investigate financial organisations and individuals. With the possibility of imposing bans on those who breach the regulations put in place to protect investors. The FCA is able to ban financial products for up to a year while considering an indefinite ban. Further, the FCA is able to freeze assets of individuals or organisations under investigation.
By trading forex online with a broker that is regulated by the FCA, there is also the benefit of protection under the Financial Services Compensation Scheme (FSCS). FCA regulated firms are required to become a member of the FSCS. The aim of this scheme is to offer the possibility of compensation to eligible clients if the broker runs into financial issues.
We believe that a broker who is authorised and regulated can give traders peace of mind that they are using a brokerage firm which must abide by strict rules and regulations put in place to protect them. It is worth noting that some non-UK brokers can still solicit clients located within the UK whilst UK brokers are also able to offer online trading services to clients located in some countries outside of the UK. In this instance, it would be a wise idea to make sure that they have the relevant regulation within the jurisdiction that they operate from.
Forex Trading Platforms
The best UK forex brokers should have a variety of different forex trading platforms for multiple devices including desktop, web and mobile forex trading apps. The brokers trading platforms should be user friendly, with plenty of trading tools and advanced functionality for all types of trading strategies. You will find that there are lots of MetaTrader brokers which is one of the most user-friendly forex platforms that gives convenient market access for manual and automated trading strategies. If you don’t have the time or skills to trade and want to copy forex trading signals, you should look for a social trading platform.
The brokers should provide UK traders with a wide range of trading instruments across multiple asset classes including Forex, Commodities, Cryptocurrency, Stocks, Indices, Options, ETFs, CFDs and Futures. The more choice that the broker has, the easier it would be to expand your portfolio in the future, should you wish to do so.
When you place a trade position with a broker, you will usually need to pay the forex spread which is the difference between the bid and ask prices at the time of executing your order. In general, the lower the spreads, the cheaper the trading costs can be and the better the prices you may have your trade executed at. Although, this can also be dependent on other factors such as the brokers liquidity, slippage and execution model.
Many UK forex brokers will charge a small commission fee for each trade that you place with them. The lower the commission fee per trade, the lower your overall trading costs can be in the long term. Some forex trading strategies actually depend on low commissions. Thus, the best UK forex brokers should have the most competitive commissions.
In addition to the spreads and commissions that forex brokers may charge, there can be additional fees. These include overnight swap fees, funding fees, platform fees, trading tool fees, educational resource fees, etc. Any other fees charged by the broker should be competitive and transparent to the trader. If you are looking to save as much as possible on your trading costs, you can take a look at our best discount brokers.
The execution speed can determine the price your order will be executed at. Instant execution should mean that the order is placed as close to your desired price as possible. The best forex brokers in the United Kingdom should have rapid execution speeds with minimal slippage so that traders get the best available prices more often than not. Some trading strategies such as scalping are dependent on reliable execution speeds which is where an ECN forex broker can come in handy. They tend to have the tightest spreads and fastest execution speeds when compared to market maker forex brokers.
The best forex brokers in the UK should have top liquidity providers (LPs) with deep liquidity pools so that they can offer competitive bid/ask prices along with reliable trade execution speeds. If you trade with a dealing desk forex broker, there can be some interference between your trades which may cause slippage. For this reason, many forex traders would like for a no dealing desk forex broker where there is no potential conflict of interest.
Forex Trading Tools
Whilst the forex trading platforms offered by brokers will usually have more than enough trading tools for the average trader, there are some brokers who offer additional trading tools such as economic calendars, trading calculators, forex market analysis, forex trading signals and more. The best forex brokers in the UK will usually offer some additional trading tools to support traders with their daily trading activities.
Educational resources can help forex traders to improve their trading skills and knowledge. They also encourage informed trading. The best forex brokers will usually offer clients a range of free educational materials such as tutorial videos, forex trading guides, forex eBooks, trading glossary, FAQs, webinars and seminars. If you are new to trading and need as much guidance as possible, you might want to explore our best brokers for beginners.
Forex Account Types
Trading brokers can have a variety of different forex account types that are designed to cater to the differing needs of clients. The accounts can vary according to the minimum deposit required, leverage offered, execution type, spreads, commissions, instruments, additional services and more. The best UK brokers should have a selection of account types for different experience levels and trading strategies. Forex demo accounts can be useful to practice trading online with virtual funds whilst Islamic swap free accounts that comply with Sharia law support Muslim traders.
Account Funding Options
In order to trade online, you will need to be able to deposit and withdraw funds to and from your forex trading account. Brokers can offer a range of different account deposit and withdrawal methods. This will often include bank transfers, credit/debit card and online payment processors such as Skrill, Neteller and PayPal. The best forex brokers in the UK should have a variety of convenient funding options. It is worth considering the time taken and any fees involved for processing funds.
Most brokers can be reached via telephone, email and live chat. It is worth ensuring that the broker can be reached in a way that is convenient for your needs. The brokers customer support team should be prompt, polite and efficient in their responses to all clients general and technical questions. You may wish to consider if there is any different between your time zone and the brokers support hours, as this could have an impact on response times.
Is forex trading legal in the UK?
Under the Financial Services Act of 2012, the UK’s Financial Conduct Authority (FCA) oversees the foreign currency trading business. All financial services in the nation are now governed by a new regulatory structure that was effectively formed by this piece of law.
To conduct business in the UK, forex brokers must first obtain the required license from the regional watchdog. The first of three different licensing categories is the Dealer License, which is given to so-called “market makers.”
The Straight-Through-Processing (STP) of traders’ orders is the only activity that brokerages may engage in under the Intermediary License. The Restricted Broker License comes last. Brokers are permitted to offer and sell their products to UK citizens, but they are not permitted to store clients’ money.
The first two license types, the Dealer and the Intermediary License, also give brokerages the ability to sell futures and share contracts for difference (CFDs) to retail and institutional traders. A business with a Restricted License, however, is only allowed to refer clients to companies holding Dealer and Intermediary licenses.
To receive FCA licenses, brokers must satisfy strict minimum capital criteria. Market makers require a minimum of €730,000 in capital. Intermediary Licenses and Restricted Broker Licenses have requirements of €125,000 and €50,000, respectively.
To be authorized, licensed businesses must be physically present in the UK. The must select qualified Chief Executive Officers and Compliance Officers who are based in the nation and have their appointments approved by the regional regulator.
Trading companies with UK licenses must also take part in the Financial Services Compensation Scheme (FSCS), which protects clients in the event that their brokers go out of business. The program attempts to increase customers’ trust in the regional financial system. The FSCS’s compensation cap increased from £50,000 to £85,000 per person as of April 2019.
Since the United Kingdom is going to leave the European Union, there are a lot of concerns surrounding the local foreign exchange market (EU). However, the Markets in Financial Instruments Directive (MiFID) is still in effect in the nation for the time being. Many of the MiFID laws would likely continue to be in effect even after Brexit is formally confirmed.
Licensed UK brokers are required by one of the MiFID’s rules to separate customer funds from their own capital. This makes guarantee that brokers never utilize trader funds to pay for operating costs.
It is strictly forbidden for businesses to use deceptive tactics to draw clients. Additionally, they are prohibited from taking positions opposed to their traders’ positions or giving them financial advise, particularly when it comes to making high-risk trading decisions.
The sale, distribution, and marketing of CFDs to retail clients are a few of the regulatory obligations. To disclose the percentage of retail traders that lose money as a result of leverage, all vendors of leveraged derivatives on the local market are required to print risk disclosure disclaimers.
Additionally, there are restrictions on leverage. The European Securities and Markets Authority, the EU regulator, proposed caps for retail consumers, which the UK adopted (ESMA). The modifications went into effect at the start of August 2019. Depending on how volatile the traded assets are, different caps apply.
Leverage is therefore restricted to a maximum of 30:1 for major Forex pairs, 20:1 for gold, major indices, minor pairings, and exotic pairs, 10:1 for all other commodities and non-major indices, 5:1 for individual stocks, and 2:1 for cryptocurrencies. The broker must immediately close the position down to protect the client from suffering a severe loss if a trader’s position falls below 50% of the margin required to keep it open.
Conclusion: should I trade with a UK forex broker?
If you are based in the United Kingdom, then it could be a good idea to stick with FCA regulated forex brokers. They may not be able to provide you with some forex trading products and services that an offshore forex broker can, but you will be able to trade forex with peace of mind. There is no shortage of UK forex brokers, so take your time to have a look around and see which broker meets all of your requirements.
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