Best IIROC Forex Brokerages
For those of you looking to invest in Forex trading in Canada things can be a little confusing when it comes to regulation. There are a number of choices open to anyone living in Canada. The first option is to pick a broker regulated in Canada. The second choice is to choose a broker regulated in another jurisdiction. And finally, you could choose an unregulated broker. Which, of course, we would never recommend. If you decide to choose a broker regulated in Canada, you need to be looking for one which is regulated by the IIROC.
What is the IIROC?
IIROC stands for the Investment Industry Regulatory Organization of Canada. It is responsible for regulating Canadian financial markets at a national level. However, and here’s where it gets a little confusing, financial regulation is also done on a provincial level. The bodies responsible for provincial regulation are the Ontario Securities Commission (OSC) which covers the Toronto region. The British Columbia Securities Commission which covers British Columbia and surrounding areas. And the Autorité des Marchés Financiers (AMF) which covers Quebec and Montreal. We should also point out that where the Forex industry is concerned IIROC federal regulations will always take precedence over provincial ones.
Best forex brokers regulated by IIROC
What does the IIROC do?
There are a number of functions the IIROC has to perform including:
- Writing rules which set high standards for the investment industry
- Screening investment advisors employed by IIROC regulated firms. This is to ensure only those of good character, who are properly trained and have completed the required educational courses, programs, and background checks are employed by regulated firms
- Sets minimum capital requirements and conducts financial compliance reviews
- Performs reviews to check member firms have all the correct procedures in place for properly supervising the handling of client accounts and any advice provided is appropriate for individual clients needs
- Performs reviews to check member firms trade-desk procedures and to ensure they are compliant with regulations
- Investigate any misconduct from member firms and bring disciplinary proceedings if necessary. These could be penalties, fines, suspensions, permanent bans or termination of membership.
How the various Canadian commissions work together
Historically, there has been a lack of uniformity in the Canadian Forex industry, leaving Forex brokers with two sets of rules to follow. It was pretty obvious this couldn’t be allowed to continue and efforts were made to harmonize the regulations. A new set of rules were developed guiding Forex brokers and the general conduct of Forex trading in Canada. A big part of the initial problem was in relation to the differences in classification of what type of trading instrument foreign currency trading involved. Each provincial body had its own opinion, and thereby a different set of rules to follow. In Quebec, it was considered to be a derivative instrument. In British Columbia and Montreal it as considered to be a security and came under a different set of rules altogether. The new harmonized set of rules, developed by the IIROC and the three provincial bodies have changed the way Forex brokers in Canada do business.
Businesses intending to offer Forex products in Canada have to be IIROC registered
Any Canadian Forex brokers considering providing Forex trading services to Canadian residents now have to be registered with the IIROC. There is now an agreement as to what type of instrument foreign currency is and that any firm performing a registrable activity is categorized as being an investment dealer. As such Forex brokers have to be IIRO members. Only IIROC regulated Forex brokers can claim to be Canadian Forex brokers. One of the new rules put in place relates to margin requirements. All IIROC Forex brokers are required to set a limit of 18:1. This is a much lower figure than the margin limits currently in place in the USA. This has meant that Canadian Forex brokers tend to attract clients with much larger amounts to invest. The provincial regulators also have their own requirements, in addition to being IIROC members. All sales people working for Forex brokers in Canada have to be able to prove their proficiency in trading of Forex contracts by way of certification. They have to be able to show they are qualified to be futures traders. Additionally, portfolio managers working in Canadian Forex brokers have to be appropriately qualified. It’s not possible for just anyone to set up and manage accounts on behalf of individuals. Paper qualifications are a vital requirement.
What the new rules mean for Forex traders in Canada
The new rules for Forex trading haven’t gone down too well. And the IIROC is trying to enlighten traders and explain why the rules were put in place. Nevertheless, it seems a number of Canadian Forex traders are choosing to trade with offshore brokers. Basically, the new rules and regulations have been put in place not just to ensure maximum security for clients funds, but also to make sure it is only those with the money and thirst for such a risky investment that are able to trade in the Forex market. A number of Canadian Forex brokers have already made the necessary adjustments and a select few have created new IIROC registered companies which operate independently of the parent company and are specifically designed with Canadian Forex traders in mind. It is very easy for traders in Canada to check whether a broker is IIROC registered, with a quick search using the commission’s website. It is possible to perform due diligence as it provides a central registry with all the most important information regarding registration, approval, and disciplinary history. It is now possible for anyone intending to trade Forex with an IIROC registered firm to feel confident they are making the right choice of broker. And in the long run, this shouldn’t be seen as a negative thing, because the safety, protection, and education of Canadian Forex traders are at the very heart of the new rules and regulations.