Forex trading has become a more widespread practice nowadays, especially considering the much easier access to the internet. According to statistics, 43% of forex traders perform between 9 and 20 monthly trades. However, forex trades are different for each country. In 2022, the United Kingdom managed to climb to the top of the OTC foreign exchange market, having a 3.8 trillion U.S.-dollar average daily turnover.
The London Forex Market is also the largest one in the world, which is partly thanks to its liquidity. Clearly, the UK forex trading market is the largest in the world, but if you want to join the forex trading fund in the UK, you must become familiar with the area’s legalities and regulations.
This post will tell you more about UK forex trading and how it’s regulated on the territory, so let’s get started.
What Is the Legal Status of Forex Trading in the UK?
Unsurprisingly, it’s completely legal to trade forex in the United Kingdom. But as you might expect, forex is a niche with a lot of regulation, inflicted by the Financial Conduct Authority. The FCA oversees all financial markets in the UK, helps protect people’s capital, and regulates brokers. When it’s time to do some forex trading, you must choose a licensed broker that respects all the regulations imposed by the FCA.
The United Kingdom is no longer part of the EU, but EU regulations still apply to many forex trades in the country. These regulations involve investor protection measures and leverage limits, insisted upon by the European Securities and Markets Authority and the Markets in Financial Instruments Directive II.
How Are Investors Protected?
If there’s one thing that you probably worry about when it comes to doing foreign exchange trading in the UK, it’s probably your safety. The good news is that this is one of the main purposes of the FCA regulations. The FCA works to keep investors safe as they get involved in forex trades. Brokers are responsible for ensuring that their users’ money is kept in separate and protected places, meaning they will not get mixed with operational money.
Are All Brokers Licensed?
Before they get to offer their services to clients, all brokers in the UK that offer forex trades are obligated to get licensing from the Financial Conduct Authority. But this is not an easy and quick process. In order to get the licensing, brokers must be able to prove that they have advanced risk management systems and that they are financially stable. Moreover, they must also comply with KYC and AML procedures.
Not all brokers are licensed, though, as some didn’t bother to apply for a license or didn’t pass the testing phase. All traders must settle for licensed UK brokers only.
Final Thoughts
Forex trading in the UK is perfectly safe, especially as long as you choose a licensed platform. The FCA regulates UK forex brokers and trades. However, EU regulations also influence how leverage is limited and how users are protected trading in the forex market. Choose your broker carefully, and you will not have an issue with UK forex brokers.
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