The best regulated forex brokers in Quebec and Canada

This article is for our Canadian friends, especially those from Quebec.

Why should you choose a Canadian forex broker while there are so many other options on the market?

The main advantage of choosing a regulated forex broker in Canada is the Canadian Investor Protection Fund (CIPF), which guarantees Canadian traders up to $1 million in the event of a broker's bankruptcy or if the parent company is liquidated for any reason. One million dollars, that's a lot of money, especially compared to the UK's FCA which provides maximum compensation of £50,000 or Cyprus' CySEC which only offers clients maximum protection of 20,000€ in the event of a broker's insolvency. As a result, Canadian brokers provide more leeway and protection for traders who have a significant amount to invest in the foreign exchange market.

Which regulatory agency oversees forex brokers in Canada?

The Canadian financial market is divided into different jurisdictions that impose different regulations via a variety of regulators.

The main regulator of Canada's foreign exchange market is the Investment Industry Regulation Organisation of Canada. The Investment Industry Regulation Organisation of Canada is a not-for-profit agency that oversees brokerages and the activities they market to their clients. It's overseen by Canada's CSA agency.

In Canada, forex trading is regulated as trading securities or as derivatives, depending on where the forex broker is registered. Brokers that intend to market their services to Canadians must have IIROC membership and likewise in the province where they will operate (for example, Quebec's AMF) if they want to be able to offer margin trading.

In an attempt to cover in more detail the forex transactions that are legal in Canada, we will list the answers to the most frequently asked questions.

What forex brokers can accept Canadian customers?
Under the rules adopted by the Canadian Securities Administrators (CSA) in 2009, forex brokers that are not members of the IIROC cannot offer trading to Canadian citizens.

How do I ensure that a forex brokerage is legal and not a scam?
On its website, the IIROC offers prospective traders the opportunity to obtain information on the background, skills and discipline of Canadian brokers. You can also perform the same type of search on CSA's site.

How are Canada's brokerages different from brokers based abroad in terms of regulation?
As we've already mentioned, the Canadian market is strictly regulated. When you compare it to other markets around the world, like the US or UK's forex market, you can see that the security it offers against scams and frauds is unmatched.

Can Canadians open an account with a U.S.-based brokerage?
For a US forex broker to do business with a Canadian citizen, two criteria must be met. First of all, the broker must have a physical presence in Canada and, second of all, it must be registered as a securities dealer in Canada.

Can I be involved in a fraudulent transaction with a broker that's regulated in Canada?
Canadian forex brokers are so heavily regulated that it's almost impossible to be the victim of a scam. If there is a situation in which a Canadian broker scams you via misinformation or deception, that broker will be heavily penalised and stripped of its license.

How can I avoid being involved in a scam with a broker?
Always check that the broker you are dealing with is registered with the CSA, that it complies with IIROC rules and also with specific provincial or regional laws (for example, the AMF in Quebec). However, there is always a risk that you could fall victim to the deceptive techniques and methods used by fraudsters. If this happens, you are probably not dealing with a broker that is regulated in Canada.

Do all Canadian provinces comply with the same laws?
No. Different provinces may have to comply with additional rules and requirements unless an exemption is granted. British Columbia, Ontario and Quebec are among these provinces.

The use of leverage in Canada

Because of strict rules, Canada's brokers feature lower leverage compared to those from abroad. But it's not as bad as you might have heard.

In fact, let's take a look at an example. The leverage for the USD/CAD is 45.5:1. In a situation where you have a $1,000 account, this means that with this leverage you can control $45,500. However, if your trading position drops by only 2%, you will have lost all of your money.

For your average trader, the pitfalls of high leverage are often greater than the benefits. Canadian regulators have realised this quickly and traders should appreciate the protection afforded them.

The forex market in Canada and Quebec

Canada's market is among the most regulated worldwide. Private investors and small businesses therefore benefit from increased security in an often turbulent market. Here are a few important rules that Canadian forex brokers are required to comply with:

• The maximum leverage available varies depending on the currencies that are traded;
• No hedging is possible during trading;
• Each individual trader entering the forex market must have a minimum income, financial assets or a minimum net worth as specified by the regional or provincial governing body.

It is clear from the above rules that Canada has very strict regulatory procedures. For example, the maximum amount of leverage that is allowed, which varies from one currency to another, is higher for major currencies and lower for the more exotic or minor currencies.

It is actually even lower than the leverage cap applied in the USA. And everyone knows that the US market is very heavily regulated by the NFA and the CFTC.

And as with all regulated markets, the Canadian market also considers that hedging within the same client account is illegal, even though currency traders often try to find ways around this problem.

Lastly, because regulators impose a high min. income and personal asset-level, lots of Canadians have a hard time jumping into the forex market. In short, this means that if you have enough capital to enter the market, you will be participating in the safest forex market in the world. However, if you don't have the minimum capital required, you may have to turn to a foreign broker, which means that you will be involved in riskier transactions.

Recommended brokerages for trading in Canada (incl. Quebec)

AvaTrade, a long-standing forex broker, has partnered with Friedberg Direct, one of Canada's most respected brokerage houses, providing Canadian and Quebec residents with access to its trading platforms. Founded in 2006, AvaTrade has developed a worldwide presence. Headquartered in Dublin, Ireland, the brokerage has 16 offices around the world. Currently, AvaTrade operates with six regulatory agencies in the European Union, Japan, Australia, South Africa, the British Virgin Islands and the Middle East.

Friedberg Direct is a subsidiary of Friedberg Mercantile, and a member of the IIROC, the Canadian Investor Protection Fund (CIPF) and Canada's stock market exchanges. Friedberg Mercantile Group Ltd's main office is located at 181 Bay St., Suite 250, Toronto, ON M5J 2T3, Canada. Accounts are opened with Friedberg Direct, which clears transactions through a subsidiary of the AvaTrade Group.

Regulation	Canada (IIROC) Quebec (AMF) Protection Fund (CIPF)	Regulated in over 150 countries
Trading instruments	Currencies, Cryptocurrencies, Metals, Commodities, Stocks, Indices, ETF CFDs, Government bonds, Vanilla options
Minimum deposit	$250
Trading platforms	MetaTrader 4, AvaOptions, Automated trading
Leverage on EUR/USD	33:1 (USD margin: 3%) 20:1 (CAD margin: 4.90%)	Regular traders 30:1 Professionals 400:1
EUR/USD spread	1.3 pips	Regular traders 1.3 pips Professionals 0.9 pips

A CFD is an advanced investing tool that carries a significant risk of quickly losing money due to leverage. 71% of individual investment accounts lose money when trading these instruments. You must make sure you understand how a CFD works and whether you have sufficient capital to sustain a loss.