Unregulated Forex Brokers: points for and against

The foreign exchange market is the largest financial market in the world that has been around for a short period of time but has already obtained the status of great money gaining source. Forex trading is readily available, and people from all over the globe can have a shot at predicting the value of currency pairs. Just because the foreign exchange market does not have a centralized structure, it is operating 24 hours a day, five days a week, and this gives investors a wide spectrum of possibilities. Broker houses provide trading platforms, and they play a vital role in the entire trading process. Most of those brokers have a regulator-granted license. The regulated brokers provide a certain scope of credibility and sense of trust for potential investors. However, there is a relatively small number of unregulated Forex brokers who are active in the financial space as well. And that is happening due to a certain level of attractiveness for the potential traders.

AxiTrader

AxiTrader Review

Minimum deposit

$0

Regulation

FSA

Bonus

20%

Maximum leverage

1:500

Year founded

2018

Trading platform

MT4

XM Group

XM Forex Review

Minimum deposit

5$

Regulation

CySEC, FCA, ASIC

Bonus

30$, 50%+20%

Maximum leverage

30:1

Year founded

2009

Trading platform

MT4, MT5, WebTrader

IQ Option

An in-depth IQ Option Review of fees, opportunities and more

Minimum deposit

$10

Regulation

CySEC

Bonus

N/A

Maximum leverage

1:30

Year founded

2013

Trading platform

WebTrader

MultibankFX

MultiBank FX Review

Minimum deposit

$200

Regulation

ASIC, BaFin, FMA, CNMV, FSC, CIMA, RAK

Bonus

$50,000

Maximum leverage

500:1

Year founded

2005

Trading platform

MT4

HotForex

HotForex Review – Are they one of the best options out there?

Minimum deposit

$5

Regulation

FCA, SV, FSCA, DFSA, FSA

Bonus

100%

Maximum leverage

1:1000

Year founded

2010

Trading platform

MT4, MT5

Forex.com

Forex.com Review

Minimum deposit

250$

Regulation

FCA, NFA

Bonus

N/A

Maximum leverage

200:1

Year founded

1999

Trading platform

MT4

Plus500

Plus500 Review

Minimum deposit

100$

Regulation

FCA

Bonus

N/A

Maximum leverage

30:1

Year founded

2008

Trading platform

Custom

Trading 212

Trading 212 Review

Minimum deposit

100 GBP/EUR,150 USD

Regulation

FCA, FSC

Bonus

N/A

Maximum leverage

1:300

Year founded

2006

Trading platform

Trading 212

AMarkets

Why you should rely on AMarkets reviews

Minimum deposit

No limit

Regulation

FSA

Bonus

25%

Maximum leverage

1:1000

Year founded

2007

Trading platform

MT4, MT5, WebTrader

Z.Com Trade

Z.com Trade Review

Minimum deposit

5$

Regulation

FCA

Bonus

N/A

Maximum leverage

200:1

Year founded

2005

Trading platform

MT4

Trading.com

Trading.com review

Minimum deposit

N/A

Regulation

FCA

Bonus

N/A

Maximum leverage

N/A

Year founded

2019

Trading platform

WebTrader

CFDs that are lying in the heart of the Forex trading process, are complex instruments and come with a high risk of losing money rapidly due to leverage. Even though they are the ones that allow traders to benefit from currency price changes, CFDs are connected with a high level of uncertainty and, thus, risk. Therefore, you should consider whether you understand how CFDs actually work and whether you are eager to take the high risk of losing your capital without the possibility of having it back. The same implies to unregulated brokers as well. Meaning that in case something will go wrong, there is no upper-standing institution that would be able to help you.

Yes, trading with unregulated organizations can lead to a lot of problems, but on the other hand – these companies can even provide better services and features than the brokers who own permission to operate legally. In other words, the world of Forex trading can be an unpredictable arena, and it takes a lot of knowledge and experience to navigate this turbulent sea successfully. However, you need to also understand that those brokers might be even more beneficial and convenient for you to trade with due to a list of facts that, notably, will be mentioned shortly in the article. For instance, those brokers are free from decisions of the above-standing financial agencies like ESMA which, for instance, has recently announced the decision to restrict any activities connected with the CFDs. That, in turn, implies a great limitation on the leverage of the financial market as a whole. At the same time, unregulated brokers may enjoy lower operating costs. That leads to additions of benefits being transferred to the customer.

Unregulated Forex brokers list in the trading world

unregulated brokers scamsOffshore Forex brokers that do not hold any regulation are not a common thing on the currency market, but they are still present. Thus, they often might cause confusion with new traders and people who are just starting their adventure in the Forex ‘waters’. One of the reasons for this state of events is probably hidden in the fact that the Forex market does not have a universal, overarching regulatory structure. Meaning that even though Forex trading is a globally-spread phenomenon, there is no single organization that would “cover” the entire field, and experts are already looking into ways of how this issue might be resolved.

What this means is that we now have separate regulatory bodies which are governing unregulated Forex brokers, and these structures are in charge of regulating the whole market as well. Making sure everything runs as smooth as possible. These agencies are spread out across different territories, but they all have similar duties and almost identical methodologies. Some of these regulatory bodies have more integrity and better reputation than others, but they all offer high levels of security and protection. And, notably, that is always important to check up on the existence of regulatory governance when it comes to choosing brokers.

However, there are still some of the unregulated Forex brokers you can actually trust with your funds. Those include but are not limited to:

  • PaxForex

unregulated brokersThat is an offshore Forex broker with the minimum deposit of $10, the maximum leverage of 1:500, and is the platform that hosts traders from approximately 2000 countries. Thus, even though it is not regulated by any of the regulatory bodies, it is still a trustworthy platform to trade on.

  • AmegaFX

regulated vs unregulated Forex brokersThat broker, in turn, has a minimum deposit of $0, which is very rare on the market and the maximum leverage of 1:1000. The platform is relatively young as it was established only in 2017. Despite that, it has already managed to gain the appreciation and trust of traders from all over Russia and other CIS countries.

  • Schatz Markets

best offshore Forex brokersThe minimum deposit of that unregulated broker is $500. The maximum leverage rate reaches 1:300. That is the UK broker that offers great benefits to its users by avoiding paying fees for a license from the regulators.

  • FreshForex

offshore Forex brokersThat broker has a minimum deposit of only $1, the maximum leverage is 1:2000. However, the broker also allows the trade to start trading with no deposit whatsoever, as they provide their customers with the great bonuses. The platform has already been 11 years on the market and showed impressive growth rate among traders from different countries.

Why are some brokers not regulated?

As we just mentioned, offshore registration can have its pros and cons, and one of the primary benefits of these areas is that tax evasion can significantly reduce the operating costs of your company. In other words, the best unregulated Forex brokers can benefit from not having a license by saving the money that would otherwise go to governments and regulatory structures, and these funds are later usually used as a marketing tool, which we will explain shortly. Furthermore, lower taxes and similar benefits are connected with not so strict rules in other areas of operations as well, which means that unregulated brokers are not obliged to perform certain actions and activities that regulatory brokers have to conduct on a regular basis. For instance, audits and frequent check-ups by regulatory bodies are a norm in this business, and no one will knock on the doors of unregulated brokers and go through their books and documents.

Similarly, the actual cost of getting the license can be a compelling reason to deter some members of offshore Forex trading from applying for the license. It is well-known that the process of obtaining a permit can be a long-lasting and time-consuming project, and this costs money. Since regulatory bodies are, in most cases, independent, i.e. they are not financed by their governments, they are forced to charge a fee for their services. And, this fee can often be in the form of six figures, which can present an insurmountable obstacle for young broker houses. For that reason, broker companies often decide to work as an unregulated entity for a while, before applying for the license once they collect enough funds and acquire a sufficient number of loyal customers.

Yet another reason for the brokers not applying for the license from the regulator body is that they might be based on the so-called tax heaven territory. Meaning that they are free from any tax burden and don’t need to obtain a license for any of operations.

offshore ForexOn top of all of that, unregulated Forex trading brokers are free from the decisions made by the financial bodies and institutions of the country. Just to provide you with the cleat example, we would like to remind the recent announcement of ESMA or the European Securities and Markets Authority made in March 2018. The announcement included the restriction for all retail clients of the EU-based companies to comply with the specific limitations on new positions, as well as the prohibition of benefits that are used to incentive the trading. That, of course, limits the scope of Forex trading. However, at the same time, that does not affect the unregulated Forex brokers in any way. Thus, not limiting the ability of traders that are operating with those to gain profit on Forex trading.

Comparison between regulated vs. unregulated Forex brokers

The benefits of trading with regulated brokers

Even though those are quite obvious, we have still decided to direct your attention towards the benefits of trading with the brokers that have obtained the valid license from the regulatory body of the country they are operating in. The main reason is the ability of traders to defend themselves in case if something goes wrong with the regulated broker. Meaning that they are secured from the market fluctuations, hacking attacks, as well as fraudulent actions of the broker himself. Therefore, traders might be calm about the safety of their funds and the transparency of the broker’s actions.

The drawbacks of trading with regulated brokers

By deciding to go with the regulated brokers only, the trader might limit him/herself in the choices available on the market. As truly there are some of the Forex traders that do not hold the license. However, are much pleasant and beneficial to trade with compared to those regulated ones.

The benefits of trading with unregulated brokers

Best offshore Forex brokers are not necessarily malicious and fraudulent, and this is an important element to take into consideration. Because of various reasons, these companies can operate without a seal of approval from a reputable regulatory body, and this fact can even lead to some advantages to “ordinary” traders.

For instance, some of the best offshore Forex brokers for US citizens might not hold the license issued by CFTC,  but still offer a spectrum of benefits even the professional traders won’t be able to say no to. Unregulated brokers have lower operating costs for their enterprise, and, therefore, they can invest more funds into no deposit promotions, deposit bonuses, signals, webinars, analyses, and other goodies. Simply saying, they are transferring all of the costs saved to the customers in order to benefit the latter. Not all investors are interested in these “generous gifts,” but the vast majority of traders are attracted to websites that promise large bonuses and free stuff. Our basic human instincts are probably at the bottom of this behavior, but either way – lucrative bonuses can be a good thing, in theory.

Another significant advantage of trading with unregulated Forex brokerages is the fact that these companies will not impose any regional restrictions on you, and this will allow you to join the trading terminal from any country in the world. This element is of particular importance to American traders, who are currently prohibited from trading on Forex and binary websites from EU. Legal issues and even political circumstances are less important when you decide to trade with an unregulated broker, and that is why these companies can come in handy when you want to invest your money in the foreign exchange market.

The drawbacks of trading with unregulated brokers

Even though certain benefits of trading with unregulated Forex brokers do, in fact, exist, it is always a better idea to sign up with a company that is reliable and trustworthy. Of course, the best offshore Forex broker could potentially offer you much better services than any regulated one could, but this is rarely the case in reality. The licensing process is designed to investigate even the smallest details of operations of broker houses, and this gives a strong guarantee to prospective investors. In essence, they can have their peace of mind if they sign up with a legitimate and professional company, and they will be sure that their funds and personal information will be kept safe and protected.

Unlike the top unregulated Forex brokers, which can basically do what they want and how they want, licensed companies are obliged to comply with a particular set of rules and protocols. For example, they have to keep the client’s funds on segregated accounts, which will prevent the problems with withdrawals in case of insolvency of the company in question. Also, regulatory bodies will make sure that the funds are insured and that the advertising methods are fair and realistic. What this means is that bonuses and promotions will have terms and conditions clearly displayed on the site and not tucked away somewhere in the corner where no one can ever find them.

The bottom line

Trading with unregulated Forex brokers can pose a certain risk, but this does not have to be a rule written in stone, and some of these companies can deliver highly professional services and reliable trading products. Moreover, risk comes only if you have decided to trade with one of the unreliable and scam unregulated brokers on the market. Therefore, it is imperative for you to perform a little bit of research before you enter the Forex trading world, and this will enable you to make an informed decision. Signing up with the right company can make all the difference, and this step is crucial in your Forex trading career. No matter if you choose an unregulated or regulated broker, it is vital that the company in question is professional and has sufficient tradition and integrity in the financial world.