FINMA regulated forex brokers in Switzerland
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FINMA is Switzerland’s independent supervisor of the financial market. It preoccupies itself with the regulation and supervision of banks, insurance companies, securities dealers, exchanges, fund management companies, and let us not forget, forex brokers. Its main duties are to protect the investors and creditors, while also ensuring that the Swiss financial market, as a whole, functions smoothly.
FINMA was established as a public law institution in order to maintain its institutional independence. The agency is managed by an executive board, compromising of a board of directors.
Because FINMA essentially functions independently from Swiss political authorities, neither the government nor the Swiss Parliament can issue directives aimed at its conduct and its regulatory methodologies. However, FINMA may be an independent authority, but it still forms a part of the country’s political structure as it takes care and supervises a crucial aspect of the country.
Every broker operating in Switzerland must hold a license from FINMA, as issued by the Swiss Bank Directive 3a. Getting a license is no easy endeavor as the Swiss market is known for its severity. For one, applicants must hold a minimum capital of CHF 20 million before applying. Also, a would be broker must be prepared to issue annual reports, half-year balance sheets, annual statements, and must maintain a solid inner organization. FINMA’s requirement are considered to be some of the world’s most demanding, at times being compared to the United States’ own set of uncompromising overseers.
Furthermore, Swiss brokerage firms have to sign the Swiss Banks and Securities Dealers agreement which helps protect customers if the broker cannot repay the trader as a result of the broker’s insolvency. The threshold of this protective fund is capped at CHF 100K.
Finally, since Switzerland is not a part of the EU, meaning that it is not bound by the leverage-limiting directive of ESMA, its brokers can offer significantly higher leverages, some going beyond 1:500.