Before we start discussing the topic it is important to note the key features of Canada itself as a country. As you may already know, being one of the most developed countries in the world, generates a good financial industry. Canada is one of those countries, therefore, expect the market to be quite vibrant. However, there are some issues that many would think that plague the Canadian Forex market. With copied laws from the US regulators and questionable decisions. However, every regulator comes with its disadvantages, even though they would love to see their population succeed in trading Forex, it is still very important to keep them safe.
Thanks to that mentality Forex brokers regulated by the Canadian financial watchdogs like the CSA and IIROC are one of the most trustworthy and reliable ones out there. But even though all of these good features may tell you something about the brokers, it is important to answer additional questions like what do the regulators do and how brokers are able to work with them.
The guidelines for Forex brokers willing to establish themselves in Canada are quite simple really. Don’t be a scam! But that’s way too vague. Let’s discuss why it is a good place to operate. First things first, Canada is the home of one of the world’s major currencies the CAD, therefore brokers tend to have better deals with pairing it with something else.
One of the primary aspects of the Canadian regulators is also the fact that they require all of the brokers to register multiple times. Why? The reason is, of course, the multiple provinces that the country has. For example, all of the provinces feature their own financial watchdogs which may have guidelines that are slightly different or add some additional requirements.
To bring this into perspective, a Forex broker operating in Toronto may have a completely different experience of operations compared to a Forex broker in Quebec.
Although the Main regulatory body is considered to be the CSA, IIROC the Investment Industry Regulatory Organization of Canada is the one that deals with most of the applications. For example, if a broker wants to register for services connected to margin, they will have to apply with them.
The regulatory bodies are not to be joked around with. They are quick on their feet and are always conducting surveillance of the brokers. This creates a compliance system for all of the brokers, a system that may cost them quite a lot of money. However, in order to be the best accessible market, it could be the CSA and IIROC aren’t as concerned with customer profits as much as they are concerned with their safety.
This mentality is what birthed the leverage reduction amendment with the watchdogs. Seeing how many traders would get themselves into a lot of trouble, the regulators saw it necessary to reduce the maximum leverage a broker could offer.
However, there are people criticizing this, saying that lower leverage doesn’t eradicate safety issues, it actually increases it. With no leverage, traders start to deposit their own money for higher volume trades. Because of this, they are more susceptible to losing money they can’t gain back or may find it hard to gain back. Sure this may help with loans and what not, but having the extra option of higher leverage was still a good feature, maybe not needed to tamper with.
Even though there are concerns about the stringent guidelines, the Canadian Regulators are by far one of the best ones in the world. Their budgets and experience help them to conduct constant surveillance of the brokerages, weeding out scams before they sprout out of control. The Canadians had good case studies from the Americans, which they were able to analyze and optimize.
Thanks to the years of research, we no have a better regulated, safer environment for Forex enthusiasts.