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The single most important thing on the FOREX market is the exchange rate between two currencies a currency pair. In general, the currency exchange rates reflect the health of countries' economies. You decide to buy 1 euros against US dollars. If you look at the FOREX quotes on your trading platform you will see that there are 2 prices for each currency pair.
One is the price at which you can buy, referred to as the "ask price", and the other is the price at which you can sell, referred to as the "bid price". The difference between those two prices is known as the spread. The ask price is always higher than the bid price. With this leverage you can take a position with times larger value, resulting in times bigger profits or losses, therefore great care is required when placing your trade. Equities on the other hand are traded without leverage.
Then pick a currency pair e. Now you are a trader in a market used by millions of people all around the globe. Check out your current profit or loss in the Open positions window. You can keep this position as long as you like. And when you no longer wish to keep your position, just close your trade by pressing the X button in the Open Positions window. Therefore, to prevent such instances of financial fraud and scam practices, it is not uncommon for Canadian Forex traders to prefer FX brokers that are located in Canada.
An authorized Canadian regulator has the job of regulating financial companies that wish to set up their base of operations in Canada. There are no exceptions to the fact that the concerned agency must regulate all companies operating on the Canadian soil. Canadian financial market is divided into different territories that impose different regulations through multiple regulatory organizations.
These different regulatory agencies have different duties as far as regulating different types of firms are concerned. The following are the main Canadian regulatory authorities in charge of regulating companies:. Canada has the largest number of regulatory organizations in the world due to the lack of a central regulatory authority. Canada has conducted numerous case studies and has sought recommendations from experts to create a single regulatory authority that will be able to regulate and supervise all financial firms operating in the country.
Nevertheless, at present, Forex brokers in Canada are regulated according to the territory of operations. Existing Canadian laws state that any Forex broker can operate in Canada without a regulatory license. Of course, there are tax benefits and the renewed sense of trust from Canadian traders by getting regulated by a Canadian authority; however, the cost involved in setting up a company from scratch along with a confused Canadian regulatory structure can act as the primary deterrent for brokers.
The ultimate aim for any business would be to achieve consistent profits, which can only be gained through a stable marketplace. The Canadian regulatory structure is still in its primitive phase, and there is a lot of uncertainty surrounding the future course of action regarding the regulation of financial entities.
It is also common among Canadian traders to choose international FX brokers according to their trading requirements. Several brokers have different features and functionalities that are unique to a particular group of traders.
Therefore, it is close to impossible for companies to offer various services to a small group of traders, as it is more viable from a business point of view to provide services to traders from an existing platform. Some international regulatory agencies do have an excellent reputation, which ensures that their member firms adhere to all statutory guidelines of FX trading, irrespective of the geographic location of an investor.
Therefore, overseas brokers only need to set up a Canadian presence either through a website or through seasonal presentations and conferences to attract retail traders from that region. Forex brokers in Canada do not follow the same rules as adopted by American brokers. US Forex trading rules are considered to be highly restrictive, as the US regulatory authorities act as policy makers to prevent their citizens from losing money.
Although some regulatory changes of the US help in reducing risk, some are outright against the freedom of retail trading markets. On the contrary, Canadian Forex brokers do not enforce any trading restrictions; however, the country may change its policies from time to time to ensure that fraudulent financial practices are kept to a bare minimum.
Canada is also pretty lenient towards sending and receiving money from international brokers, provided that both the trader as well as the company adheres to all existing anti-money laundering laws.
In the US and several other countries, it is illegal to send funds to overseas FX brokers. The US also enforces strict regulations on international payments due to threats to national security; hence, US citizens have very limited freedom while moving their funds around. On the other hand, Canada does not have any such strict regulations, and traders are free to move their capital to any broker, provided that both the trader, as well as the broker, keeps accurate statements and records of transactions for future verification.
Disregarding the fact that Canadian citizens have the option of choosing any Forex broker of their choice, choosing FX brokers and other related companies in Canada provides unprecedented levels of security of client funds. The one thing that worries all investors worldwide is the security of funds, as there is a significant chance of a broker going bankrupt due to any unexpected market volatility.
Modern regulators factor in market eventualities while developing their regulatory guidelines, which help in preventing cases of broker insolvency, but no broker is completely safe against liquidation or bankruptcy. Under such circumstances, it makes sense for a trader to choose some of the best Canadian Forex brokers if they wish to trade with large sums of money. Due to the multiple regulatory agencies in Canada and the lack of laws that do not force brokers into setting up an office in Canada, it is indeed difficult to get a large number of choices for Forex brokers from Canada.
Nevertheless, there are a few FX brokers that have set up their offices in Canada to cater to Canadian investors, and some of these branches are from established mainstream companies.