If You’re Considering Forex Trading in Hungary Read our Guide to MNB Forex Brokers
Forex trading has taken the world by storm, and the influx of online Forex brokers means it is possible for the likes of you to take part. Before you jump straight in and start looking for Forex brokers in Hungary read about Forex regulation and how you can best protect yourself and your investment. Choosing the best Forex broker is possibly more important than deciding on a trading strategy. There is no denying the choice of Forex broker is endless, and more brokers are entering the industry and touting their services on a daily basis. While it is good for you that there are so many to choose from, you have to be careful not to be tempted by a scam. On the whole, brokers tend to be fair and honest, but there is a small selection who only want to take your money and give nothing in return. In order to protect investors and bring more regulation to the industry, most countries will have a financial regulator. But sadly, all regulators are not the same, and some offer much better protection than others. So, who is the regulatory body for Forex brokers in Hungary?
The Hungarian National Bank (MNB) regulates Hungarian brokers
Hungarians will know this organization better by the initials MNB which stand for Magyar Nemzeti Bank. This central bank is authorized with the supervision of people or companies covered by the financial sector laws. The bank was established in 1924 and took the place of the Royal Hungarian State Bank. The National Bank is particularly interested in international relations and participation in professional forums of international economic institutions and financial organizations such as the IMF, BIS, and OECD. However, its principal aim is the stability of prices. Issuance of the national currency, the Hungarian forint, is another of its responsibilities, along with controlling the currency in circulation, setting the Base Rate, and publishing exchange rates. It also manages foreign-exchange reserves and gold in order to influence those exchange rates. But the role you will be most interested in is the monitoring of institutions which make up the financial and capital markets. This supervisory role is enabled by on-site and off-site supervision, market surveillance and tools for the protection of consumers. Should it be necessary, the National Bank has the power to take the necessary action. The National Bank of Hungary also monitors financial institutions in relation to preventing and combating money laundering and the financing of terrorism. It is also committed to the protection of consumers and to eliminate unlicensed and unauthorized financial service providers. Any Forex broker offering its services in Hungary has to be licensed and authorized by the MNB. There aren’t too many MNB regulated brokers to choose from, but you would be wise to consider them as your first option.
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MNB Forex brokers and consumer protection
The central bank is responsible for an organization known as the Financial Consumer Protection Center (Pénzügyi Fogyasztóvédelmi Központ). The main function of this consumer friendly branch of the central bank is to supply information which is comprehensive and easy to understand. The main bulk of the information pertains to products and processes in the financial sector and handling consumer complaints. The roles of the Financial Consumer Protection Center include the operation of the customer service center, processing written consumer claims along with the provision of information both directly and indirectly. So what should you do if you find you need to raise a complaint regarding an MNB regulated broker? Your first step will be to raise the issue with the financial provider and try and reach a resolution. And make sure you raise the complaint in writing, as this will serve as a permanent record and can be used if you need to take the complaint further. If the complaint you raised with the financial institution is denied or you fail to get an answer you are entitled to file an official consumer claim. If your claim relates to contractual terms and obligations you will have to make an inquiry with the Financial Arbitration Board of the MNB. The Arbitration Board provides a free mediation service between consumers and financial institutions. With the aim of resolving the complaint and removing the need to take the matter to court.
MNB Forex brokers and MiFID
Hungary is a member of the European Economic Area and as such MNB regulated Forex brokers have passporting rights to offer financial services in other EEA member states. Forex brokers in Hungary are allowed to offer financial advice, set up a base or run permitted activities in an EEA member state by applying for a passport to do so. EEA states list can be found here.
What is MiFID?
MiFID stands for Markets in Financial Instruments Directive and it is a European Directive which was implemented in 2007. It is currently undergoing revision and MiFID II should be implemented sometime in 2018. But for now, the original Directive is still in place. MiFID was developed to overhaul and expand EU single market legislation for securities. A requirement of the Directive is for firms which engage in certain services and activities, for example, financial brokers, to be authorized by competent authorities in the country in which they are located. For example, UK Forex brokers have to be authorized by the FCA. And likewise, Hungarian Forex brokers have to be authorized by the MNB. Those of you looking to trade Forex in Hungary, are therefore advised to look for MNB regulated Forex brokers with whom to do business. European legislation dictates this, but it is also the most sensible option. A regulated broker has to comply with certain rules and regulations which have been developed for your protection. Choose to use an unregulated broker and you will be leaving yourself wide open to all kinds of problems.