How Regulated is Forex Trading in Estonia? Read our Guide to MTR Forex Brokers
Holding the title of one of the smallest EU countries, with a relatively small population and a surprisingly small presence, Estonia is nevertheless embracing the world of Forex trading. The number of Forex brokers in Estonia is not as large as many other European Union member states, but it looks like things are changing. One of the reasons there are so few MTR Forex brokers is the passing of MiFID (Markets in Financial Instruments Directive). This Act allows brokers licensed by other EEA regulatory bodies to offer services in other member states. Estonia is an excellent choice for brokers looking to expand their operations, by virtue of its lower level of regulatory enforcement. Forex brokers wishing to offer financial trading services to investors in Estonia are required to obtain EFSA licenses and for the company details to appear in the MTR.
What is MTR?
MTR stands for Majandustegevuse Register, which is an online resource that was developed by the Ministry of Economic Affairs and Communications (Majandus-ja Komminikatsiooniministeerium). This government ministry of Estonia is located in Tallinn. Using a very simple search option it is easy to find details of MTR regulated brokers, so it is possible for you to check the reliability of any MTR Forex broker before you sign up and open an account. There’s really not a lot we can say about the register, so why don’t you carry on reading and we’ll give you some information about the EFSA, as well as some useful tips and hints.
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The EFSA and Forex brokers in Estonia
The Estonian Financial Supervision Authority (EFSA) is responsible for regulating financial markets and performs several functions to achieve its goals. It was formed in 2000 when the Estonian government and the Central Bank decided there was a need for an independent organization responsible for regulating financial entities. The main purpose of its creation was to protect the consumer. An added advantage would be the overall improvement in the transparency of the financial sector. The EFSA has been able to introduce a number of policies designed to safeguard investors and reduce financial abuse and malpractice. The regulations are in compliance with MiFID. What is MiFID? It a European Economic Area piece of legislation which provides a framework of EU legislation, with regards the provision of investment services. The idea behind the legislation is to provide the environment for harmonized regulation of investment services across EEA member states. The policies of the EFSA satisfy the regulatory framework and its standard set of guidelines. The EFSA is not a government agency and operates as an independent agency financed through membership fees and fines, not taxpayers money. The EFSA is considered an authentic, reliable and well-respected regulatory broker. While it may not go above and beyond, like some more renowned regulators, it nevertheless meets the necessary standards to operate in accordance with MiFID.
There aren’t too many EFSA and MTR Forex brokers
You may find your choice of broker a little limited when you’re looking for Forex brokers in Estonia. You should, however, be able to find yourself an MTR regulated broker offering a good trading platform. There are even a couple of mainstream brokers currently offering their services in Estonia. Be very careful when looking for an EFSA/MTR Forex broker as there a number who claim to be licensed when they clearly aren’t. It is easy to be caught out if you don’t perform due diligence. It is important to check out any claims a broker may make with regards a license. There is a search function on the EFSA website for your convenience.
What support is available for traders in Estonia?
In a very similar way to a number of other regulatory bodies, the EFSA does not include direct intervention between a broker and a client. No assistance or arbitration services are available for an investor to make a complaint. It does, however, provide an excellent consumer education portal, muniraha.ee, with heaps of great advice covering many different areas, including Forex brokers in Estonia. There is information relating to various financial products, investment advice, insurance guidelines, calculators and a range of tools to help investors make the best decisions. The EFSA may not be one of the better known regulatory agencies, but there are alternatives available as Estonia is a member of the European Economic Area. As such an EFSA regulated broker will also operate in accordance with MiFID, allowing it to offer services in all member states. And the reverse situation is also permitted. As in a broker regulated in another EEA member state is allowed to provide its services in Estonia. This privilege is known as passporting rights.
Why it’s important to choose a regulated broker
There is a lot of risk in choosing a Forex broker that is unregulated. And don’t be thinking there won’t be many either. Forex trading is a risky enough investment without adding another risk factor. Regulated Forex brokers will give you some peace of mind because they should be following recognized guidelines and providing a certain level of service. There will be a lot of restrictions in place regarding the operation of a regulated broker, most of which were developed with consumer protection in mind. One of these is the use of segregated accounts, which means your funds can’t be used for anything other than trading. Should there be a problem with a regulated broker the regulatory authority will often step in and try and resolve the situation. And if the broker is found to be breaking the rules and regulations it will be liable to sanctions, possibly a fine, or even at risk of losing its license. You should now appreciate the value of choosing a Forex broker regulated in Estonia, you should also understand it is also possible to trade Forex with a broker regulated in another European Economic Area member state. Which means you should also be able to find the best Forex broker for your other trading needs.