Forex Brokers for EU traders (accepting EU clients)

Regulatory changes all over the world are starting to serve as a way of segmenting traders and brokers alike according to the regions or jurisdictions they operate in. In 2018, the European Securities and Markets Authority came out with a comprehensive set of rules which are to govern how forex and CFD brokers offer their products to their clients. Brokers covered by these rules are found in the EU and the United Kingdom. Since then, there has been some sort of rearrangement within brokerages, as traders try to make sense of the new rules and brokers try to make the adjustments that will make them compliant with these rules. What this means is that brokers offering forex and CFD products for EU traders can now be classified into two:

A) EU-based brokerages (which will naturally accept EU traders). Here, you will find brokerages located in Cyprus, UK, Germany, Malta etc.

B) Internationally-based brokerages. Here, you will find brokers located around the world, including such broker-friendly countries as Australia, New Zealand, Vanuatu, Belize, Seychelles etc. And in this class, you will actually find two types of brokerage sets:

• On one hand, you will find brokers that have multiple branches located not only in Europe, but in many other jurisdictions. These brokerages are regulated both in the EU and in offshore locations. What is important, some of these brokers provide their EU traders an option of choosing to trade with either the EU branch (and being subject to ESMA regulations), or trade with the offshore branches of theirs.
• On the other hand, you will also find brokers that are 100% Non-EU and based either in Australasia region or offshore zones. These have no physical presence in European countries, are not subject to ESMA’s EU regulations, but still accept EU traders.

Offshore Brokers (Entities) for EU Traders: What are the Benefits?

You may be asking: why should an EU trader open an account and trade forex or CFDs with an offshore broker (or EU broker’s offshore entity) rather than stick with the numerous brokers that are found in UK, Cyprus and other EU countries? Well, there are a lot of benefits and some of them will be touched on below.

High Leverage

The benefits of high leverage have already been discussed in a page devoted to the high-leverage forex brokers. But we would like to break it down for the EU traders and show them how high leverage can benefit their trading when compared to the low leverage conditions that they are forced to trade with under ESMA’s conditions.

First, what does high leverage translate to in terms of margin requirements when compared to the EU conditions? Forex trading in the EU brokerages comes with a leverage cap of 1:30 for forex majors and 1:20 for forex minors, which comes to a margin requirement of 3.33% and 5% respectively. To clear up any confusion as to how these margin requirements were derived, see the formula below:

• Margin = leverage X 100%
• So if leverage is 1:20 (i.e. 1/20 or 0.05), margin is 0.05 X 100 = 5%
• If leverage is 1/30 (i.e. 1/30 or 0.0333), margin is 0.0333 X 100 = 3.33%
• If leverage is 1/500 (Australian leverage cap), then margin = (1/500) X 100 = 0.2%

The margin is a fraction of the total amount that is required to setup a position in the financial markets (in this case, the forex market). So if the trader wants to trade a Standard Lot on the EUR/USD (a popular pairing for EU traders), the fractions displayed above will represent the % of the total capital required for trading a Standard Lot on the EUR/USD.

It costs $100,000 to setup a Standard Lot position on the EUR/USD. This pair is a major forex pair so the leverage cap on an EU brokerage will be 1:30, requiring at least 3.33% of $100,000 to setup a trade size of 1.0 lot on the EUR/USD. This comes to a margin cost of $3,330.

If the EU trader were to trade 1 Standard Lot on the EUR/USD with Australian-based broker GO Markets, a margin requirement of 0.2% will come into play. This comes to a figure of $200.

If you compare $200 with $3,330, you will see that there is a massive difference in capital requirements. In a market where many traders do not have access to so much capital, it simply makes sense to use a regulated high leverage trader, and combine the use of high leverage with appropriate risk management practices to ensure that the account is not subjected to excessive risk.

Tax Status

There is another benefit to using offshore brokers that accept EU traders, and that is the tax benefits that these brokerages offer. Proceeds of trading on many offshore brokerages, especially those based in the Caribbean such as TradeView and Anzo Capital, will not incur excessive taxes. This is because many offshore locations offer a tax-free status as part of the incentives that are aimed at attracting foreign portfolio investments such as those from EU forex traders.

Crypto Funding Options

What is the big deal with crypto funding options available on the offshore brokerage platforms? It has everything to do with security and transferring funds with the lowest possible fees. Not many EU brokers will feel comfortable submitting their fiat payment information on offshore websites. Furthermore, funding offshore account from the EU may be expensive and not very convenient. For such traders, the ability to use crypto funding options presents a very good alternative. Crypto funding is fast and is quite cheap too. Furthermore, there are several fiat-crypto exchanges in the EU, permitting EU traders to acquire crypto quickly and fund offshore trading accounts just as quickly.

Less Restrictive CFD Trading

CFD trading in the EU has become quite restricted. Apart from the severe leverage capping that has been implemented, any incentives offered to traders by their brokers to trade CFDs (such as volume cashbacks) have been prohibited by ESMA. Furthermore, margin close out requirements have also been stepped up from 10% to 50%. If an EU trader decides to cross the oceans to trade with a broker located in the Caribbean or Australia, these restrictions do not apply. This allows the EU trader a lot more flexibility with CFD trading.

So for EU traders who feel dissatisfied with the new ESMA trading conditions, there are alternatives. The list featured below showcases the forex and CFD brokers that will accept trading accounts from traders all over the European Union nations, and provide more flexible and favorable trading conditions when compared to the EU-based platforms.

The list features a mix of brokers. There are brokers drawn from Australia, where forex regulation is very strong but still allows brokers to offer high leverage and friendlier trading conditions than is obtainable in the EU. There are also brokers that are located in Level D and Level E jurisdictions, featuring brokers that are either mildly regulated or unregulated. Whichever category of brokers you choose to use for your trading, the list provides you with the greatest power you have as a consumer: the power to choose.