Forex Trading in Hungary and MNB Forex Brokers
What was once the investment of choice for large companies and major banks is now an option for the ordinary man or woman on the street, with the introduction of online trading and online Forex brokers in Hungary. However, before you invest all your savings with a randomly chosen Forex broker, you might want to consider learning about Forex regulation, as this is one of the ways you can reduce the risk of being taken in by a scam, and protect your investment and your own personal rights as a consumer.
Before you start trading you are going to need to find the best Forex broker to act as your partner, and while your options may seem endless, you need to first concentrate on MNB-regulated brokers.
The Forex trading industry is not regulated on a worldwide basis, but instead individual countries are left to impose their own regulations, which of course is bound to mean that some offer better protection than others. Those of you considering a venture into the world of online trading in Hungary should first consider MNB Forex brokers.
What is the MNB?
MNB in Hungarian stands for Magyar Nemzeti Bank, and this is the country’s central bank, which has been tasked with the supervision of companies and people that fall under financial sector laws. It was first established in 1924 and took over the role of the Royal Hungarian State Bank. The Hungarian National Bank has a number of aims, one of which is the stability of prices, but it is also concerned with international monetary affairs, and actively participates in professional forums of economic and financial organisations such as the IMF. Its other roles in Hungary include the following:
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- Issuing the national currency, the Hungarian forint
- Controlling currency circulation
- Publishing exchange rates
- Setting the country’s base rate
- Managing foreign exchange and gold reserves
- Monitoring the various institutions that form the financial and capital markets.
The MNB performs the latter role by way of on-site and off-site inspections and market surveillance, and the use of various tools developed to protect consumers. The MNB also has the power to impose sanctions, fines or other forms of action against those found to be breaking the regulations.
The prevention and combating of both money laundering and the financing of terrorism are also important roles the MNB performs, as well as eliminating unlicensed and unauthorised financial service providers. A Forex broker wanting to offer its services in Hungary has to be authorised and licensed by the MNB.
How the MNB protects consumers
An organisation known as the Financial Consumer Protection Centre (Pénzügyi Fogyasztóvédelmi Központ) has been set up by the MNB in order to supply information to the general public, which is easy to understand and comprehensive. It mostly concerns itself with information that relates to products and processes in the financial sector, and the handling of complaints made by consumers. The Centre also provides a customer service, processes consumer claims made in writing, and provides direct and indirect information.
The Financial Consumer Protection Centre is also available to offer guidance relating to consumer finance, or if you need to report unusual or potentially illegal activity in the Hungarian financial services sector. It is possible to send an email, make a telephone call, or visit the customer service centre, which is located in Budapest.
Should you find yourself in an unfortunate situation and need to make a complaint, it is your responsibility to try and resolve your issue with the provider in the first instance. All communication with the financial services provider should be in writing, as this will be a record of what has happened, which may come in useful in the future. If you are unable to reach a satisfactory conclusion then you have the right to file a complaint with the MNB. If the complaint relates to contractual terms and obligations it has to be filed with the Financial Arbitration Board of the MNB. The aim of the Board will be to resolve the issue without involving the courts.
MNB-regulated brokers and passporting rights under MiFID
MNB Forex brokers are permitted to offer their services to other members of the European Economic Area under MiFID. The Markets in Financial Instruments Directive awards passporting rights to brokers regulated in a member country, which includes offering financial advice, setting up a base of operations, or running permitted activities, and they are able to do so across the whole of the European Union.
MiFID is a European Directive that came into force in 2007. It is currently under revision, but the current Directive still stands for the time being. The Directive was developed as part of an overhaul and expansion of EU single market legislation relating to securities. One important part of the Directive for those of you considering Forex brokers in Hungary is that any firms who want to engage in activities such as offering Forex brokerage services have to be authorised by a recognised regulatory authority in the country where they are located. In other words, Hungarian Forex brokers have to be authorised by the MNB, and as another example, Forex brokers wanting to operate in the UK have to be regulated by the UK’s Financial Conduct Authority.
Why you should choose an MNB-regulated broker
The advice is always to choose a regulated broker over one that has no authorisation. As well as it being the most sensible option, European legislation also dictates this course of action. Choosing a regulated broker will give you peace of mind because you can be confident that they are required to comply with certain rules and regulations; rules and regulations that aren’t imposed to make Forex trading difficult or complicated, but that have the protection of the consumer at the heart of the legislation. Segregated accounts, best market prices, and conflicts of interest are examples of the areas covered by regulation.
Choosing an unregulated broker will mean you are at a much greater risk of falling victim to a scam, and are using a financial service over which no regulatory body has control.
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