The United Kingdom is home to the oldest stock exchanges in the world. The London Stock Exchange has a market capitalization of more than USD 4.60 trillion as of date. An interesting fact is there was a time when brokers were prohibited due to their bad manners. They gathered at the nearby coffee houses when they traded popular commodities like sugar, salt, paper, and coal.
Fast forward to the present day; the UK has the most major trading markets in the world. The forex traders now enjoy a firmly regulated reading market. There is a wide range of licensed brokerage firms (local) to choose from, and the UK Forex brokers are now well known for their high quality, transparency, and reputation.
Types
Any forex broker looking to operate in the United Kingdom must first get the necessary permit and license from this watchdog. A broker must have any three of the following licenses – Dealer license, Intermediary license, or the Restricted broker license. Although a restricted broker can market and sell products to the UK people but do not have the right to hold on to investor funds.
The first two types allow brokers to sell CFDs (Contracts For Difference) for commodities like gold, silver, shares, currency pairs, and so on. However, a restricted license holder can only introduce customers to firms having a dealer or intermediary license.
Requirements
Licensed companies are obliged to have a physical presence in the United Kingdom. Qualified CEO (Chief Executive Officer) and Compliance Officers are mandatory and are also obliged to participate in the FSCS (Financial Services Compensation Schemes) that support the investors in case the brokers shut down their business. Brokers, along with companies, are strictly prohibited from resorting to manipulations to attract investors. There are also strict restrictions that do not allow you to get into positions against the traders or extend financial advice. It holds right, especially in cases that involve high-risk trading decisions.
FCA
The local financial watchdog, Financial Conduct Authority (FCA), ensures no compromise of the various trading rules and regulations. It has emerged as one of the most challenging financial regulators and functions independently of the government. It is funded by the market participants who are the beneficiary of this body. The power of this body is considerable. It can freeze the assets of individuals and organizations in case of any inconsistency.
Interesting Facts
More than 40 percent of all forex transactions happen in the UK. In the US, the same is less than 20 percent. As a result, the London Stock Exchange has emerged as a trading hub for numerous forex deals. Furthermore, the Internet has revolutionized the way forex trading is done these days. Maximum happens online than on the exchange floors.
Best UK Forex Brokers
To check whether a forex broker is licensed to operate in the UK, the registration number from the disclosure text must be checked. A few reputed names are as given below:
- Plus 500.
- CMC Markets.
- Saxo Bank.
- City Index.
- Forex.com
- Swiss Quote.
- XTB.
- FXCM.
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