Does CMC Markets fall under FCA regulation as of November 2023?
We have good news for you! Yes, CMC Markets is regulated by the FCA.
CMC Markets is considered reliable as it has multiple top-tier regulation, including FCA in the UK, CIRO in Canada, and ASIC in Australia. It means that your investments are protected, and you are covered up to £85k to UK clients, €20k to EU, CAD 1mn to Canadian, $0 to other clients.
Here are the key info snippets you need to know!
- Under FCA regulation, an investor protection scheme provides coverage up to £85,000 for losses if the broker goes bankrupt.
- FCA sets limits on leverage to help retail traders better manage the risks they take.
- Remember, all the brokers you find on BrokerChooser are regulated by at least one top-tier financial authority.
Why is FCA regulation important?
The UK's Financial Conduct Authority (FCA) is widely considered as being one of the top-tier regulators in the brokerage world. Brokers and other financial service providers overseen by the FCA are held to a high standard of conduct and must comply with strict regulations. This could provide extra layers of safety and protection for you.
In this article, we will focus on brokers that offer CFD trading, as it is a high risk instrument. You trust CMC Markets with your money, so it is crucial to know, if it is regulated by a trusted authority, and what level of protection you can expect when trading CFDs.
Keep in mind that the layers of protection offered by FCA, including their specific investor protection scheme, is only available to you, if you open an account with the broker's entity that falls under the UK regulation, the FCA. So you either need to reside in the UK, or open an account with the broker’s UK entity - and several brokers allow non-UK residents to do that. In any case, it is a great sign of safety if a broker is regulated by the FCA.
Why is FCA regulation important for CFD?
Let's dive into the details why it is great news that CMC Markets is overseen by FCA, and what it means for CFD trading.
CFD trading is a popular form of trading that allows you to speculate on the price movements of various assets, such as stocks, currencies, and commodities, without actually owning them. You can learn more about what a CFD is here. One of the key features of CFD trading is leverage, which means you can basically borrow money from the broker and trade with a smaller amount of capital and potentially earn larger profits, or suffer bigger losses. The FCA has set out several measures to help protect retail clients, including limits on leverage, negative balance protection, and an investor protection scheme.
Watch out if you want to trade crypto CFDs. The FCA in 2020 banned crypto CFDs by financial service providers that they oversee, citing - among other issues - extreme market volatility, no reliable basis for crypto valuation, and the prevalence of market abuse.
What is FCA regulation for CFD traders?
The FCA provides a number of layers of safety for CFD traders. Here are some of the key measures:
- Client money protection: FCA-regulated brokers are required to segregate client funds from the firm's own funds, which means that client funds are kept in separate bank accounts and are not used to cover the broker's own expenses or debts.
- Negative balance protection: Brokers are required to provide negative balance protection, which means that clients cannot lose more than their account balance. If a trader's account balance becomes negative due to market movements, the broker is required to absorb the losses.
- Disclosure of risks and costs: Brokers need to provide clear and transparent information about the risks and costs of trading CFDs.
- Leverage limits: FCA-regulated brokers are required to set leverage limits on CFD trading. The FCA has set maximum leverage limits for retail traders, its size depending on the different assets.
- The FCA operates the Financial Services Compensation Scheme (FSCS), which gives you protection up to £85,000 if your financial service provider goes out of business. The FSCS itself is free to consumers.
FCA leverage limits on CFDs
Leverage can be a very attractive but also risky tool when it comes to trading. The FCA has set limits for retail traders to limit the risks they take.
As of 2021, the FCA has set the following leverage limits on CFDs for retail clients:
- 30:1 for major currency pairs (e.g., EUR/USD, GBP/USD)
- 20:1 for non-major currency pairs, gold, and major indices (e.g., FTSE 100, S&P 500)
- 10:1 for commodities other than gold and non-major equity indices
- 5:1 for individual equities and other reference values
These limits apply to new positions and to any increase in position size.
How do I know if my CFD broker is FCA regulated?
We have checked it for you, and CMC Markets is regulated by the FCA.
To make sure you are protected, you need to know if you have signed up with the broker's entity that is covered by the FCA. Different countries or regions set different rules for financial service providers, so brokers sometimes have different entities in different countries or regions.
By and large it is your home country (i.e. your residence, not your passport) that will determine under which regulator you'll fall, should there be more than one regulator. Also, check the broker's website for information about its regulatory status. The website is likely to display the broker's regulatory status and the name of the regulatory authority at the bottom.
To double check if your CFD broker is under FCA regulation, you could also check on FCA's website:
- Go to the FCA's Financial Services Register.
- Enter the name of your CFD broker or its registration number (which you can usually find on the broker's website).
- Look for your broker in the search results.
- Check the details of the broker's registration, including its regulatory status and the services it is authorized to provide.
If your CFD broker is regulated by the FCA, its details should be listed on the Financial Services Register.
The FCA also keeps a useful list of companies that attempt to scam traders, check it out.
Looking for a CFD broker?
If you are looking for the brokers that offer the best CFD trading conditions, check our top recommendations of the best CFD brokers in the world.
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