CySEC is abbreviated for “Cyprus Securities And Exchange Commission”. It is a regulatory body that takes care of the regulations of numerous financial service providers across Cyprus, including the financial markets. Thus, CySEC regulates both the stock and the forex market. Read More
CySEC : A Flagship Regulator In Europe
CySEC has a significant role to play in Europe’s financial markets. Since the investment-friendly laws have attracted many brokers to offer Forex as well as CFD trading services, the role of CySEC has become more significant in overseeing the financial service industry. CySEC-regulated brokers are highly trustworthy among traders across the world. Before registering with a broker, discover all there is to know about cysec brokers by reading brokers review.
Who Is CySEC Responsible To?
CySEC is a member of the EU and a signatory to MiFID/MiFIR; it operates according to the rules of ESMA (European Securities And Markets Authority). Thus, CySEC is required to follow the rules and guidelines of ESMA as far as its operations are concerned. For Example, when ESMA banned the trading of binary options, CySEC had no other option but to end the licensure of companies that offered this product. The other companies who already had the license were forced to switch to other product offerings or close their business. Furthermore, CySEC also has to follow the leverage and margin requirement restrictions imposed by the EU. Thus, CySEC is directly answerable to ESMA.
Also read : Why Should Traders Choose Low Spread Brokers?
Basic Requirements For CySEC-Regulated Brokers
CySEC oversees that all the brokers adhere to certain rules set to ensure they remain transparent in their business conduct in the financial markets. Their main objective is to instill confidence into traders so they can invest their hard-earned money without stress and tension. Following are the basic requirements that all brokers have to follow who wish to work under CySEC’s oversight:
Every brokerage that is subject to be regulated by CySEC is called CIF (Cyprus Investment Fund). There are several forex brokers that are minimum deposit brokers, which might be a fantastic choice for traders. These brokerages need to have an appropriate license. There are specific requirements for obtaining a broker license in Europe:
- The license information should be displayed on the home page of the broker’s website.
- According to CySEC’s license system, the broker is alloted a registration number which also needs to be shared by the broker on the website as well.
- ESMA rules also require all CySEC-regulated brokers to mention the number of their clients who have lost money by trading with them. In addition, they must comply with the leverage and margin requirements for Forex and CFD trading.
A significant feature of CySEC is that it regulates CIFs and also the employees who work there. All the employees, from entry-level to managerial positions, are covered by CySEC. Consequently, CySEC requires all the people working with a CIF must have the required qualifications. Furthermore, CySEC has certification registers with all the information of the persons qualified to work in CIFs. There are two examinations that CySEC requires you to pass to work in CIFs: the Basic Exam as well as the Advanced Exam. Both of these exams are meant to test people’s knowledge about Cyprus’s investment culture. Hence, individuals who wish to execute the job role in a CySEC-regulated firm are required to pass both the examinations designed by CySEC. If they pass, they will be able to execute the following responsibilities:
- Receiving and sending orders for financial instruments
- Executing orders on behalf of clients
- Managing portfolios and providing investment advice
CySEC-regulated brokers can take customers outside of Europe. However, the below guidelines must be followed with respect to conduct, trade practices, and reporting conditions. Some of them are:
- The brokerage can never be a sole proprietorship, meaning two or more persons should be responsible for managing the brokerage’s operations and affairs.
- The brokerage must have a physical presence in Cyprus with appropriate staff and personnel with suitable CySEC qualifications.
- The services offered by CIF must be included in the application sent initially with respect to the CySEC license.
- The broker is required to contribute to CySEC’s Investor Protection Fund and have a working capital of €750,000.
- Brokers must be insured between €1m and €1.5m to compensate for losses from negligence.
- All CySEC-regulated brokers are required to submit reports to CySEC for client deposits and withdrawals as well as the brokerage’s transactions.
- CySEC has a list of regulated brokers on its website and offers information about not-so-reputed brokers in the market.