MiFID Regulated Forex Brokers

MiFID Regulated Forex Brokers

MiFID stands for the Markets in Financial Instruments Directive (2004/39/EC). This is a European Union law regarding the financial services sector which provides for a harmonization of the regulation of investment services all over the 30 European Economic Area member countries.

 

MiFID Forex Brokers 2017

The table below shows our top recommend forex brokers regulated by MiFID:

Broker Info Bonus US Traders Open Account
IronFX Spread: 2-3 pips
Leverage: 500:1
Minimum Deposit: $500
Demo Account: Open
60% Welcome Bonus plus Trading Contests Visit BrokerRead Review
HY Markets Spread:
Leverage: 300:1
Minimum Deposit: $50
Demo Account: No
35% First Deposit Bonus! Visit BrokerRead Review
Admiral Markets Spread: 1 Pip
Leverage: 1:500
Minimum Deposit: $10
Demo Account: No
Seasonal Offers and Demo Trading Contests Available USA AllowedVisit BrokerRead Review

mifid regulationMiFID took effect as from November 1st 2007, replacing the Investment Services Directive (ISD). However, the global financial crisis of 2008 severely put MiFID to the test and exposed some inherent deficiencies in the protocol. As such MiFID was modified with the introduction of new and more extensive requirements that financial services firms (including forex brokers) have to adapt to, especially in the way they conduct their businesses as well as in their internal organization. This new rule which is also known as MiFID II of MiFIR, affects all market participants from buy and sell side firms to vendors and exchanges. MiFID II took effect in October 2010.

 

Who Qualifies To Be a MiFID Forex Broker?

In order for a broker to be classified as a MiFID forex broker, such a firm must satisfy the following requirements:

a)    MiFID forex brokers must be licensed, authorized and regulated in their home countries. So it is impossible for a forex broker to achieve MiFID status without being regulated in the country where it holds a registered office.

b)    MiFID forex brokers are required to place their clients into categories. Terms such as “eligible counterparties”, “professional clients” and “retail clients” are ascrived to the three categories of clients that MiFID forex brokers must place their customers into. This is to serve the purpose of properly ascribing the levels of protection that each of these client classes can get. Furthermore, the categorization of clients by MiFID forex brokers is used to assess how suitable an investment product is for those clients.

c)     MiFID forex brokers are required to collect information when accepting a client’s orders, so that orders from different clients are properly aggregated and handled.

d)    MiFID forex brokers are required to adhere to a pre-trade and post-trade transparency code by publishing information such as the five best price levels on the buy and sell side, the best bids and offers of market makers, as well as the price, volume and time of all trades in listed assets.

e)    MiFID forex brokers must guarantee the best possible executions of an order for a client in terms of cost, speed, and likelihood of execution/settlement.

MiFID forex brokers are by virtues of the new rules, required to properly state who they are broker, asset manager or proprietary trader), clearly state how they will protect investors, and properly declare their cross-border brokerage services.

One major change will also occur in how MiFID forex brokers operate their Broker Crossing Networks (BCNs) and Multi-lateral Trading Facilities (MTFs). All internal crossing of order flows within the algo trading businesses of MiFID forex brokers is no longer allowed as the new rules have stipulated that brokers covered by MiFID shut down their BCNs.  Dark pool activity is also going to be limited as execution prices will be curtailed to midpoint levels as described earlier.

Total and individual volume of trades across all dark MTFs is to be capped at 4% of the total volume of trade in the overall market (individual), and at 8% of the total volume of trading (aggregated dark pools).

 

Conclusion

It is very clear from the above that traders who intend to use MiFID forex brokers should be conversant with the new rules that the MiFID II/MiFIR revised regulations are going to bring their way. These rules are to enhance trader protection and make the markets transparent. So next time you see a broker with MiFID regulation, you would at least know what level of protection you would be getting from such a broker.

We have compiled a list of MiFID forex brokers for you to make a choice in case you want to trade with one. You would most likely be trading with one if you live in the Eurozone. Feel free to choose any one which matches your needs.

Adam

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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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