Forex Trading in Malta and MFSA Forex Brokers
Malta is quite fortunate in that it has a very central and strategic location and has become quite a powerful force in the world of financial market trading. It also gained further benefits when it joined the European Union as a full member in 2004. It has become a very attractive proposition for offshore brokers and financial service providers looking for a base of operations because it is located right in the middle of Europe. Many of the country’s financial sectors are experiencing strong growth and you will find an increasing number of MFSA regulated brokers to choose from.
Does the MFSA have a good reputation with regards regulation?
The Malta Financial Services Authority (MFSA) is the regulatory body charged with regulating the financial industry in Malta. It has received rave reviews for its well-developed infrastructure and framework as well as for the sophistication of the financial market.
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The Financial Services Authority of Malta has also gained a good reputation for the high compliance standards it works hard to maintain. From an investor’s point of view, it has helped to eliminate the general complexities and uncertainties.
It is also Malta’s banking system which has gained a reputation, backed up by the traditional principles credit institutions have chosen to stick to. In the area of foreign exchange, a number of very experienced market players have been tempted to the island of Malta. Not just Forex brokers but asset managers, and developers of Forex trading platforms. With all these positive benefits and a superb central European location, it’s no wonder the country has become so popular and for an increasing number of financial services providers to be looking to the MFSA for official recognition.
MFSA regulated brokers and MiFID
As you are now aware there are a number of reasons for Forex brokers to be interested in setting up a trading business in Malta. The benefit of its central location is further improved by the country’s membership of the European Union. As a member, it is able to take advantage of passporting rights provided by MiFID. These passporting rights allow a broker operating out of Malta to offer services to clients in other European Economic Area member states. Without the need for further regulation.
Perhaps we should explain what MiFID is before going any further. MiFID stands for the Markets in Financial Instruments Directive. This is a European Directive, currently under revision, which aims to harmonize the authorization and operation of investment firms which operate within the EU.
The role of the MFSA within Malta
The Malta Financial Services Authority performs a number of important functions. These include:
- The regulation and supervision of the financial services industry in Malta
- Protecting consumer and investor interests
- The management of Malta’s Registry of Companies
- Encouraging operators in the financial services industry to provide a service of the highest possible standard
- Working on initiatives which will improve the standard of education and training for those involved in the financial services industry
- Keeping investors informed with regards local and global developments in the financial industry
- Improving existing legislation and creating new legislation if necessary
- Issuing licenses subject to an initial assessment
- Inspecting licensed businesses on a regular basis to ensure compliance with current regulations
- Issuing guidance notes and directives to the financial services industry
- Communicating with national and international organizations with regards the industry
The different types of licenses issued to brokers regulated by the MFSA
Providing investment services in Malta requires a license issued by the MFSA, according to the Investment Services Act Chapter 370 of the Laws of Malta. There are a number of different types of license depending on the activity of the applicant.
Category 1a – The holder of this type of license is authorized to receive and transmit orders relating to one or more financial instruments, and also to provide investment advice and place instruments without any commitment
Category 1b – This type of license holder is able to place instruments without any firm commitment on behalf of professional clients
Category 2 – This type of license holder can provide an investment service which includes controlling clients money, but not dealing on their own account or to place instruments on a firm commitment basis or to underwrite
Category 3 – This type of license permits the holder to provide investment services and hold and control clients money or assets
Category 4 – A Category 4 license holder is permitted to act as custodian or trustee of collective investment schemes
Category 3 and 4 licenses are the ones you need to be most concerned with if you are looking for regulated Forex brokers in Malta. A Category 3 license is issued to a financial services provider that deals on its own account. But a white label partner or one who matches trades with a single entity and acting as a counterparty to the trade will need to apply for a Category 2 license.
License holders are able to deal in financial instruments on their own account as well as providing clients with different types of investment service, but it requires different types of license for each individual type of activity.
The future’s looking bright for Forex brokers in Malta
Malta is working hard to improve the strength of its operational and service framework. The setup costs and ongoing expenses of setting up a financial services business in Malta are definitely favorable and the country’s regulatory processing efficiency is commendable. All of which makes Malta an attractive location, and leads to increased benefits for Forex traders in Malta. As a final piece of advic,e you should remember that choosing an MFSA regulated broker is going to offer you the best protection for you and your investment. While an unregulated broker may appear to be a more attractive proposition there will be nothing to help you if things go wrong.