Is forex trading legal in the UK?

In Britain, opening an account and trading currencies is legal for individuals. The broker carries the legal duty set by the Financial Services and Markets Act 2000 and the Regulated Activities Order 2001. Firms that offer currency trades in the UK must be permitted by the Financial Conduct Authority, known as the FCA.

Contracts for difference, known as CFDs, and spread betting cover most everyday currency trading in the UK. You don't own the currency itself with either product. You simply bet on whether the price rises or falls. Both products fall in the same group under FCA rules, as does rolling spot foreign exchange. Without FCA authorisation, any firm offering these trades in the UK breaks the law. Our list of FCA-regulated forex brokers lets you compare authorised firms.

Since 1 July 2019, FCA limits have capped the risks brokers can pass on to retail clients. Every year, the rules stop nearly 400,000 people from risking more than their stake, and they give protection of between £267m and £451m.

Leverage means borrowing from the broker to control a larger trade than your cash deposit alone would cover. UK rules cap leverage at between 30:1 and 2:1 depending on the asset. Brokers must close your position once your funds fall to 50% of the margin deposit required to keep it open. The total funds in your account are the most you can lose. Cash bonuses and other inducements can't be offered by brokers to retail customers. Each firm must show a risk warning giving the share of its retail accounts that lose money.

Stay alert when a broker tries to turn you into an elective professional client or sends you to an offshore branch. An everyday trader becomes an elective professional client by agreeing to professional classification and giving up retail protections. Funds may be taken out of your segregated client money accounts. If the firm fails, your money faces a greater risk of loss.

Pay money only after you confirm the FCA authorises the broker and that it has permission to offer contracts for difference. Some firms are registered with the FCA only, rather than authorised. Without authorisation, you can't reach the Financial Ombudsman Service if you need to complain. The Financial Services Compensation Scheme also won't protect you if the firm goes out of business.

These are the 4 steps we use to check a firm:

1. Look up the firm on the FCA Firm Checker or the Financial Services Register to confirm it's authorised.
2. Skip any firm whose listing says it is no longer authorised or revoked, has applied to cancel, or is in supervised run-off
3. Your contract is with a specific legal entity, so read the firm's terms and conditions to confirm who it is and where it's incorporated.
4. If a firm works as an appointed representative, ask its principal firm which activities it may carry out.

Search engines and social media are channels that unauthorised forex firms often use to target UK residents. They promise high or guaranteed profits through copy trading, managed accounts or daily trading tips. Social media influencers promoted 1 unregulated offshore firm, where more than 90,000 people lost around £75m over 4 years. Many people say they received small payouts early on so the trading would appear successful. Add more money and the returns stop, your account gets suspended and the firm then cuts off contact with you.

Clone firms deserve the same caution. A clone firm is a fake broker. It copies the name and registration number of an FCA-authorised firm, along with its address. Scammers hand out a phone number and website of their own, and sometimes say the FCA Firm Checker details are out of date. When you reply, use only the contact details the FCA Firm Checker lists. If a firm can't be found on the checker, or you suspect a scam, ring the FCA on 0800 111 6768 After losing money, watch out for follow-up scammers who offer to recover your funds for a fee.