Regulations on Trading Forex in Canada | fxcanada.com (see full article at bottom half of page with highlights, most importantly, [I][B]only IIROC regulated investment dealers can trade OTC forex contracts with Canadians[/B][/I])
The IIROC ([B]I[/B]'m [B]I[/B]rrationally [B]R[/B]etarded [B]O[/B]n [B]C[/B]ommand) have made sure that they are the biggest retards in all of Forex, and have gone the extra mile to do so AND make Canada the LEAST desired place to trade Forex in the entire World. I know B.C was ruined some time ago, I don’t know all the details but I do know in some places you can’t even trade Forex at all unless you have 1/4 million dollars, I mean how idiotic is this. I knew this day was coming since the USA did similar things and Canada just follows USA like a lost puppy, but I hoped it was much further down the road. [B] I was contacted by my UK Broker[/B] letting me know that all Canadian accounts are being scrutinized due to new regulation rules coming into effect. I have no idea how new this is ([B]I only signed up 3 months ago[/B], so seems pretty new), nor how many or which rules are all going to apply, but the link above seems to indicate many things, I cut and pasted the article below and highlighted the important things that stood out to me being in Ontario.
The USA imposed some pretty silly rules, like FIFO and 50:1 leverage maximum, restricting the opportunity people have and especially their choices forcing Brokers with good conditions to not even except USA clients, instead of letting them decide for themselves what is best for them, well here in Canada those rules look GOOD in comparison, and in both cases it all just stinks of protectionism, and encourages clients to actual do the opposite, find countries who offer better conditions and still accept you risking the regulation aspect.
Sure you can try to argue that trading with USA companies [I]should[/I] better protect the people since regulation is higher. Please tell that to former PFG clients. NOT. No, regulations are not worth the paper they are written on. Also note, the lower you make the leverage, the MORE money someone has to put into their account, which is now susceptible to loss either by Broker going tits up OR bad trading. This is protection? No, I think not folks, quite the opposite. Have these Morons not heard of a margin call? The whole leverage thing is really misunderstood and misinterpreted overall. Anyway that horse has been beat to death for years already, but the bottom line with these fantastic IIROC rules is someone who had 100:1 leverage now needs SIX TIMES more money in their account to trade the same position size as before. Not twice as much, as the USA imposed, SIX times as much for many many pairs. It gets worse from there too, Gold is TWENTY times more, with a whole 5:1 leverage now available. Have they seen the price of Gold? Good lord.
Canadian Margin Requirements | OANDA fxTrade Canada
Eur/Aud for example, 16:1 leverage, they are labelling as exotic and allow same leverage as Eur/Sek? EJ the same too? Do these people have any clue about Forex at all? Even EU the most traded pair, is now 33:1 leverage with a $USD account or even more laughable, [B]20:1[/B] if you have a Canadian dollar account. :30: :35:
Oh, the logic here my my, and as if new Forex Traders didn’t have enough things to be confused about, they go and make margin completely convoluted to the point no one can ever, easily figure it out, just asinine.
[B]Below is the article[/B] from the first link I posted, with important things highlighted, including ALL Canadians will now ONLY be able to trade with a IIROC regulated bodies. Bottom line is instead of forcing dealers into stricter regulation ensuring people have a better opportunity (like cutting out Virtual Dealer Plugin and other MM games) and that money is truly segregated and limits respected, check up on them every 3 months etc to avoid PFG scenario; they have forced clients into stricter regulation ruining their opportunity and making it impossible for some to trade and even more difficult than it already is for others.
Forex In Canada
Forex Trading (FX) Regulations in Canada
In Canada, the lack of a national securities regulator for the interbank foreign exchange (forex) market and the online trading of fx has led to a confusing conglomeration of different policies and rules from each province.
[B]Recently, some new developments have occurred that will change the face of forex trading[/B], especially for those either providing or trading in unregistered online forex.
Ontario and Quebec have been first in line to address the question of who can participate in forex after the Canadian Securities Administrators implemented harmonized requirements in 2009 for their jurisdictions. Until recently, there was no agreement even on what type of contract forex trading constituted, with some provinces calling it a derivative and some a security (and some both), and regulating it accordingly.
Quebec went with the derivative label, and enacted laws requiring anyone trading forex to be registered or seek an exemption. Ontario decided forex was a security, and thus would be regulated under the Securities Act, though it went on to amend this Act to allow derivatives to be included. This meant that whether a court declared forex contracts to be securities or derivatives, they would still fall under the same legislation. British Columbia has been regulating forex traders for over a decade now, and does so under the label of securities. Initially BC required its forex traders to register as exchange contract dealers, but has recently amended this to investment dealer with the Investment Dealers Association.
Membership in the Investment Industry Regulatory Organization of Canada (IIROC) allows individuals or companies to provide margin, and may exempt them from some provincial requirements under specific circumstances. But the formal position of the three largest provinces is now that forex trading on margin is a financial activity that requires registration.
The B.C. Securities Commission (BCSC) considers a forex contract to be a security because it is a forward contract involving a leveraged agreement between two or more parties to exchange different currencies at a future time or times. Although a forex contract is based on the spot rate, it is neither a spot contract in the traditional sense because it has no two-day settlement, nor is it a forward contract because it has no maturity date. There is also no mechanism or obligation for delivery.
Forex dealers are not required to register and provide a prospectus when trading OTC derivatives with “Qualified Parties”. Short-term forex is exempted from the BC Securities Act when the settlement of the contract is required within three business days. This does not include leveraged online forex, however. Commodity contracts that oblige the trader to take actual physical delivery of the commodity and not a cash equivalent are also exempted, though there is no clear direction as to what happens when the commodity involved is currency.
Trading forex contracts with Quebec clients is regulated as an over-the-counter currency derivative. The authority regulating this is the Autorite des Marches Financiers (AMF).
Dealers may get an exemption from qualifying requirements if they:
provide the client with a risk information document
use an electronic platform as their principal method of trading
have sufficient resources to carry out trading activities and to comply with regulation
provide the registration information of its officers or directors to the AMF
provide a website detailing information about the derivative, its characteristics, its risks, its trading method, its margin requirements and the costs of trading
assess the client’s level of knowledge, experience and risk tolerance in respect of the derivative
register with the AMF and be an IIROC member
Until the publication of its formal position, Ontario [B]was[/B] open to offshore and unregistered dealers, despite several court cases that clearly showed forex to be within the purview of the Ontario Securities Commission. The difficulty of prosecuting overseas traders offering online platforms was significant. The stated policy now is that forex contracts are securities, and may be considered derivatives as well, as determined by the OSC who will then declare them “designated derivatives”.
Trading in a designated derivative will be prohibited except where a disclosure document has been filed with the OSC, providing retail investors with disclosure of both product features and counter-party risk. Prospectus requirements and related regulations will not apply to designated derivatives, standardized (exchange-traded) derivatives or derivatives traded in any other marketplace, if certain conditions are satisfied.
So far, no other provinces have enacted legislation to control forex trading, instead relying on national associations to regulate the industry.
In 2009, the Canadian Securities Administrators adopted new rules to reform the process of registration for anyone offering securities or investment advice. [B]These regulations do not specifically address forex trading, but the only reasonable conclusion from the changes is that dealers who are not IIROC members will no longer be able to sell to Canadians.[/B]
B.C., Ontario and Quebec have established that trading forex contracts on margin with investors is a registrable activity under relevant legislation, regardless of whether such contracts are traded with retail or accredited investors, and that the appropriate category of registration for forex dealers is the “investment dealer” category, which requires IIROC membership.
IIROC Minimum Margin Requirements
IIROC members are required to margin the unhedged foreign exchange positions of clients. For their part, the IIROC monitors all major currencies for volatility on a daily basis.
The nature of the online forex market makes it practically impossible to sanction unregistered dealers, particularly those offshore. Though most of the world’s forex dealers charge 1% minimum margin rates, the IIROC keeps theirs higher, ostensibly to encourage fair competition. [B] But Canadian companies currently lose clientele to dealers based in Cyprus or Belize, for example, because of the much more advantageous margin rates.[/B]
How, then, to encourage Canadians to use local forex dealers, especially for online trading? If a foreign forex dealer commits fraud or declares bankruptcy, Canadians have very few avenues to recover their investment dollars. Certainly the extra protection offered by using a Canadian company is a plus, but many traders aren’t swayed by this in the face of higher margins. Bargain shopping is the norm in most areas these days, and forex is no exception.
[B]The IIROC has been criticized on a number of levels for the way it approaches forex. The main sticking point is the high margin rate, high even compared to the Chicago Mercantile Exchange. [/B][B] Industry commentators frequently mention that the benchmark rate of 1-2% in major currency pairs like the USD/EUR is already matched to the expected volatility of those currencies, and thus is a fair rate not requiring further adjustment. Other complaints are that the individual margins in non-USD and non-CAD currencies are skewed when matched up with each other, and that the market already mitigates risks for dealers and investors with readily available tools such as stop-loss and take-profit points along with auto-liquidate levels.[/B]
It remains true that margin rates should accurately reflect the risks of the currencies being traded. What needs to be addressed is a method of ensuring fairness across the board for IIROC members and unregistered dealers.
A registration requirement for anyone wishing to sell to Canadians would accomplish this, but would be onerous to enforce against companies from lightly-legislated countries. [B]It would seem, then, that the logical direction to take is to offer incentives rather than threatening penalties.[/B] [B] For example, if the minimum margin requirements were to be more competitive, there would be little benefit in trading with a foreign dealer over a Canadian one.[/B] ([B]yes no sh*t you Morons[/B]) Most Canadians would prefer the extra security of a local, IIROC-regulated dealer as long as the margin difference was very slight. This would keep more investors under the umbrella of the IIROC, and offer more protection for forex traders on both sides of the deal.
Margin rates are a hot topic, especially in the current financial climate where excessive leverage has been blamed for sparking the global meltdown. Canadian banks fared well throughout, thanks to strict legislation that limits their investment margins to 18:1, compared to 40:1 and up for American and some European banks. Very few governments can be expected to encourage more leverage in favour of less, or less regulation rather than more.
Outside North America, though, there are only a few national regulators capping forex leverage. The Hong Kong Securities and Futures Commission places their limit at 5% initial/3% maintenance/1% liquidation. The Monetary Authority of Singapore restricts leverage to 50:1 for forex. Japan has recently brought in higher margin requirements, phased in over several years.
[U][B]Summary of Changes to Registration Requirements[/B][/U]
[B]Only IIROC regulated investment dealers can trade OTC forex contracts with Canadians.[/B]
[B]In the provinces of BC, Ontario and Quebec, dealers must comply with [U]additional[/U] prospectus and qualifying requirements, unless an exemption is granted.[/B]
For salespeople at registered dealer firms, futures proficiency is required to trade forex contracts. In Ontario and BC, additional proficiencies may apply.
Only registered portfolio managers can advise clients and manage forex accounts on a discretionary basis.
A fund that trades forex contracts will likely require registration as an Investment Fund Manager. If the fund distributes its units to the public, it would also require dealer registration.