The Cyprus Securities and Exchange Commission (CySEC) is the supervisory and regulatory authority for investment services firms in Cyprus and a member of the Committee of the European Securities Regulators (CESR).

How to choose CYSEC regulated forex brokers

Before you start trading forex with your hard earned cash, you must answer yourself few important questions:

In 2004, Cyprus was accepted to become part of the European Union. With the country's new status, CySEC automatically becomes a subsidiary of MiFID, a European regulatory organization. CySEC regulated brokerages are permitted to carry out their business activities in the European region.

CySEC stands for Cyprus Securities and Exchange Commission, which is a regulatory agency based in the Republic of Cyprus.

CySEC is the preferred choice amongst a wide range of brokers because Cyprus has lenient tax laws, easy and simple business set up procedures, and compared to many other – relaxed rules and guidelines for creating a financial company.  For these reasons, Forex brokers find it easy to set up their brokerage in Cyprus to capture the immense majority of Forex traders in the EU, which is one of the primary reasons why Forex brokers prefer CySEC over any other regulatory agency in the world.

CySEC allows brokers to cater to any region in the EU owing to the EEA agreement, which binds all of the EU nations together, tapping into the highly lucrative trading market in the EU without having to set up a representative office in any other countries.

There are few genuinely strong regulators in the world; the UK’s Financial Conduct Authority is one, the Australian Securities and Investments Commission is another, and most would agree that CySEC is also a member of this group. After a shaky start as a regular, in recent years CySEC has built a reputation for guaranteeing trader security and dealing harshly with bad brokers, especially since the tightening of ESMA restrictions across the EU. We will talk about those restrictions in more detail below, but first, let’s look at the current benefits of trading with a CySEC-regulated broker.

• Segregated Funds: All trader funds are kept in a segregated trust account which the broker cannot access. This prevents the broker from using trader funds for operational purposes. It also ensures that in the case of broker bankruptcy, trader funds can be refunded.
• Capital Adequacy: CySEC requires all regulated brokers to hold enough capital to meet the capital adequacy ratio requirement. This decreases the likelihood of broker failure in the event of significant losses.
• Reports and Auditing: Because brokers are required to submit regular financial compliance reports to CySEC, it is very difficult for brokers to hide any wrongdoing. Similarly, because these brokers are also subject to independent audits and visits from CySEC investigators, any wrongdoing will be exposed.
• Compensation Fund: All CySEC-regulated brokers are required to join the Investor Compensation Fund Scheme. Under this scheme, traders are liable for compensation up to 20,000 EUR in the case of broker bankruptcy.
• Insurance Coverage: CySEC demands that all licenced brokers maintain insurance coverage of at least 1.5 million EUR for losses resulting from negligence.
• Transparency: CySEC expects to have a complete overview of all products that a broker is planning to offer, and that these products are the same as the products provided to clients.

These protections are enshrined in regulatory law and brokers who are found to be in contravention are penalised and can even have their operating licence removed altogether.

CySEC’s official website provides also provides a platform where traders can scroll through multiple FX brokers and choose a broker that meets their specific needs.