Forex licensing glossary

Authorisation from a regulator to offer forex and CFD trading services.

Named differently by each regulator: dealer, broker-dealer, investment firm or financial services provider.

The public authority that licenses and supervises financial firms.

Examples: CySEC, DFSA, FSCA, FSC Mauritius, FSA Seychelles.

An onshore regulator with strong recognition and strict rules.

Typically requires significant substance, capital and reporting.

A licence from a jurisdiction designed for international business.

Faster and lighter than onshore licences; recognition varies widely.

A broker that takes the other side of client trades.

Needs a dealing-on-own-account permission and higher capital.

Passing client orders directly to liquidity providers.

Often allowed under a narrower agency licence.

Client trades hedged with liquidity providers.

The broker earns spreads or commissions rather than trading P&L.

Client trades kept in-house by the broker.

Requires a market-maker licence and strong risk management.

Using a licence from one EEA state to serve clients across the EEA.

Available to MiFID II firms such as Cyprus Investment Firms.

An investment firm licensed by CySEC under MiFID II.

Can passport services across the EEA.

The EU framework for investment services.

Sets organisational, conduct and reporting rules for EU investment firms.

A licence to deal in securities, including derivatives such as CFDs.

Used in Seychelles and other offshore centres.

A firm that trades for clients and on its own account.

The Bahamas registers FX/CFD brokers as broker-dealers.

The Mauritius FSC licence used by FX/CFD brokers.

Often the Full Service Dealer excluding Underwriting category.

A South African FSCA licence for financial services.

OTC derivative providers also need a separate provider licence.

Real local presence: office, directors, staff.

Increasingly required by regulators and for tax purposes.

Money Laundering Reporting Officer.

A required officer in almost every regulated jurisdiction.

The person responsible for regulatory compliance.

Usually approved by the regulator.

The regulator’s test of owners’ and managers’ integrity and competence.

Based on CVs, references, police records and experience.

The capital a licensed firm must hold.

Set by the regulator by licence category; highest for market makers.

Client money kept separate from company money.

A core client-protection rule in most regulated jurisdictions.

Insurance covering claims from professional errors.

Required by several regulators.

International Business Company.

An offshore company form; not a licence by itself.

Global Business Company in Mauritius.

Holds the Global Business Licence and the Investment Dealer licence.

A lawyer’s letter on whether a company may carry out an activity.

Used when no licence is held, e.g. for MT5 applications.

Anti-money laundering and countering the financing of terrorism.

Policies, KYC, monitoring and reporting required of every broker.

Jurisdictions under increased monitoring by the Financial Action Task Force.

Can make banking harder for companies based there.

Payment service provider.

Processes client deposits and withdrawals for brokers.

A bank or firm that supplies prices and executes trades.

Onboards brokers after its own due diligence.

Operating under another licensed firm’s platform or licence.

Faster, but dependent on the provider.