German Forex Brokers

German Forex Brokers: Rules and Regulations

Germany is the strongest economy in the Eurozone and a major driver of events in the European financial markets. The country also has the greatest depth in the financial markets in terms of market capitalization and size of transactions. Regulation of German financial markets is very robust and is provided by the Federal Financial Supervisory Authority, otherwise known in German as Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN). BaFin is responsible for the regulation and supervision of close to 4,200 financial institutions in Germany ranging from banks, financial services institutions and insurance companies.

All financial activity in Germany without exception is regulated by BaFIN. This means that forex business and forex brokers in Germany are subject to regulation by BaFIN.


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Understanding the Regulatory Environment in Germany

BaFIN has sweeping regulatory powers. BaFIN maintains a database of all trading accounts located in all brokerage houses in Germany. Brokers are mandated by law to provide this information to BaFIN and to update the lists periodically.

Status of Forex Trading in Germany

About a decade ago, most forex trading was done via telephone. To place an order, you had to call your broker on phone and have the order executed for you by the broker. Automation has changed all that. Germany now accounts for a large proportion of the trade volume in the forex market, as most forex trading is now online. Forex trading in Germany is controlled by the Bundesbank (Germany’s central bank), hedge funds, commercial companies, forex brokers, authorized banks and investment management companies.

It is thought that the over 19% of all global forex trading can be traced to Deutsche Bank, which is one of the largest liquidity providers in the market. Multi bank forex portals are very popular in Germany and have fuelled the immense growth of the forex market in the country. Perhaps the growth of the forex market and the fast liberalization of the market came too fast for the country’s regulators to keep up with. The recent LIBOR scandal where major European firms and traders were accused of rigging the LIBOR rate and profiting heavily from it affected Germany as well. The Head of BaFIN has recently come out to say that the regulator has detected a number of criminal acts in the process of the LIBOR manipulations, and is set to prosecute errant companies and traders. This has led BaFIN to believe that a radical change in the way forex trading is offered by brokers is the best way to safeguard the integrity of the market.


The Future of Forex Trading and Regulation in Germany

The LIBOR rigging scandal was one of the major news items of 2013, threatening the integrity of the forex market. As such, the German government has started a push for a change in the way forex is offered to traders. It is now the belief of the government of Chancellor Angela Merkel that the trading of currencies and precious-metals should be taken off trading platforms and moves to physical exchanges. The German government is said to have decided to use this as a means of overhauling the global financial markets with its partners.

According to the German Deputy Finance Minister Michael Meister, stronger financial regulation was the way to go in order to counter any kind of manipulation of other forex benchmarks, and that the shift of trades of currencies and precious metals to regulated exchanges would enhance the integrity of price-setting,”

The idea of moving away from spot markets to regulated exchanges was first muted by Elke Koenig, head of BaFIN. Acording to the BaFIN Chief, making forex and commodity trading exchange-mediated investment vehicles would help uncover “trading patterns that manipulate prices”. Koenig has however admitted that any such moves are still too far-fetched and needed to be pursued in stages.

This move, if seen to its logical conclusion, will represent a major transition for the forex markets and CFTC regulated forex brokers, since US Forex Brokers are regulated by the CFTC – these new introductions of new measures to curtail retail participation in forex trading via a change in margin requirements for forex and options trading in 2010 will have much implications not just for the forex broker companies which fall under this regulation but for their clients as well.

Germany has been at the forefront of austerity measures and reforms for ailing EU states. It is no surprise that it is now thinking of taking regulation of German forex brokers to a whole new level. It is very possible that within 10 years, German forex brokers will be required to key in their clients into exchange-traded forex trading.

Until then, traders would make do with trading currencies on the platforms of today, majority of which are owned by German banks operating through smaller subsidiaries. The state of regulation of German FX brokers is very strong, and traders who participate in this market via German brokers can be assured that in BaFIN, they have a regulator with the balls to do what is required to protect their funds and sanitize the market.



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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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