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In Europe services on over-the-counter (retail) currency market are mainly rendered by investment companies (according to MiFID terms). These companies ensuring conclusion of contracts for difference fall into legal competence of state regulation authority of the market of financial services, which sets rules of operation for both over-the-counter and stock financial markets.
MiFID (Markets in Financial Instruments Directive) set common market of financial services and unified standards for activity of investment companies in the European Union. This law is the part of EU plan aimed to create a common European market of financial services. Directive includes measures purposed to change and improve arrangement and operation of investment companies. Apart from requirements for transparency of transactions with securities, this paper expands range of instruments requiring authorization as well as provides investment companies with an opportunity to set branches in other countries of the European Union when license from national regulator is acquired.
Thus, separate licenses for participants of finance markets are not present on the territory of the European Union. License of investment company encounters types of activity permitted by regulating authority of a certain European state. Apart from that, license of one EU country allows investment company implementing broker and dealer activity and offer other associated services in other EU countries. Most part of European FOREX companies operate under licenses allowing to execute orders of clients for financial transactions and make operations with clients at company's expenses with derivatives (including CFDs), as well as to keep clients' assets. Due to peculiarities of national legislative system, in Great Britain financial betting is a permitted activity, however, such type of services cannot be provided in other European countries.
Investment company offering services on over-the-counter currency market falls into the category of the investment firm conducting operations at their own expenses and keeping clients assets, towards which MiFID sets the toughest standards regarding capital etc. Requirement of minimum own capital of investment company is 730 thousand Euro.
Apart from common standards and license mechanisms, in some European states centralized regulating entities with supervise and control functions on financial markets are present.
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Cyprus |
Cyprus Securities and Exchange Commission (CYSEC) |
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Denmark |
Danish FSA |
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Germany |
Federal Financial Supervisory Authority (BAFIN) |
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Spain |
National Securities Market Commission |
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Sweden |
Swedish Financial Supervisory Authority (Finansinspektionen) |
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Switzerland |
Swiss Financial Market Supervisory Authority (FINMA) |
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Great Britan |
Financial Services Authority (FSA) |
An important difference between American and European FOREX regulating models is an absence of prescribed marginal leverage allowing EU investment companies to offer their clients a more attractive leverage 1:500.
You also might be interested in:
Derivatives: evolution of regulation
National Association of Securities Market Participants (NAUFOR)
National Futures Association (NFA)
