If you are in Malta and considering forex trading, it is important to choose a broker that is permitted to offer forex trading services within Malta. This means choosing a forex broker regulated by the Malta Financial Services Authority (MFSA) if they are located in Malta, and/or by a European financial services authority if they are offering passported services.
The MFSA has a list on their website of forex brokers they regulate. However, there are other legally acceptable options so you don't need to use an offshore or unregulated broker, which is never recommended.
Who is the MFSA And why use a regulated broker
MFSA regulates and supervises financial markets and activities within Malta. As a Forex trader, using an MFSA regulated broker means the broker complies with the operating standards of the Maltese financial market.
Financial regulators play an important role in protecting you as a client of a forex broker by ensuring that there are robust ground rules, a level playing field, transparency and ongoing supervision. In addition, claims against operators are covered by the arbiter for Financial Services, which is entitled to handle claims.
Ways regulators protect you include the requirement for:
1. Keeping clients accounts segregated accounts
2. Ensuring brokers hold a minimum capitalization
3. Making brokers provide a dispute resolution process
Regulators cannot force offshore and unregulated brokers to offer these protections so cannot help you if you choose one of these brokers and something goes wrong. For this reason, you should always choose a broker authorised by an EU regulator to provide investment services.
MFSA is a well-respected regulator that sets rigorous standards – and since Malta is part of the European Union – it complies with all the directives set by the European Securities and Markets Authority (ESMA), which oversees regulators in the EU.
Who is ESMA?
The European Securities and Markets Authority (ESMA) role is to “enhance investor protection and promote stable and orderly financial markets” for all 27 members of the European Union (EU). In short, ESMA sets directives for and oversees the compliance for all members of the EU so that markets are consistent across all EU financial markets.
“Several European National Competent Authorities (including MFSA) have implemented a number of National Product Intervention Measures, which mainly feature the following investor protection measures:”
1. Limit leverage when trading forex to 30:1 for major currency pairs
2. Broker must provide negative balance protection
3. Brokers must provide insurance protection
MiFID II also sets out rules to ensure traders receive the most favourable conditions on price, cost, execution speed when trades are executed.
Choosing a Broker if you are in Malta
Justin Grossbard of compareforeforexbrokers says that since EU regulators and brokers must comply with the requirements set out by national regulations in the country of registration as well as with ESMA’s – although these are often overlapping – (including as part of MiFID II directives), any broker regulated by the financial regulator of a country in the EU is suitable.
This means that if you are in Malta, you are not limited to operators regulated by the MFSA, you can choose brokers regulated by other financial regulators within the ESMA oversight; examples include:
1. Cyprus Securities and Exchange Commission (CySEC) based in Cyprus
2. Other EU National Competent Authorities
However, it is worth bearing in mind that, since Brexit, UK financial services providers cannot passport their services into the EU and operators would need to be authorised in an EU Member State if they wish to provide their services locally.”
Conclusion
Since ESMA ensures uniformity across all regulators in EU countries, you can be sure any broker authorised by a national regulator within the EU is a suitable choice to trade with and operates to the high standards you expect.
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