Jeffrey Wade
Forex trading is a risky business, with two out of three customers losing money. It is important to know whether your forex account is insured. The short answer is no—unlike a traditional bank account, your deposits are not protected by the FDIC. However, there are other ways to ensure your forex account is protected. For example, the Securities Investor Protection Corporation (SIPC) protects customer assets when a SIPC-member brokerage firm fails financially. FOREX.com, for instance, is a registered Futures Commission Merchant (FCM) and Retail Foreign Exchange Dealer (RFED) with the Commodity Futures Trading Commission (CFTC) and a member of the National Futures Association (NFA). FOREX.com also maintains capital levels well in excess of regulatory requirements and has an established global liquidity plan.
| Characteristics | Values |
|---|---|
| Forex accounts insured by SIPC | Protects customer assets when a SIPC-member brokerage firm fails financially. Does not protect foreign exchange trades. |
| Forex accounts insured by FDIC | Non-deposit investment products are not insured by the FDIC. |
| Forex accounts insured by banks | A bank may purchase a banker's blanket bond, a multi-purpose insurance policy to protect itself from fire, flood, earthquake, robbery, etc. |
| Forex accounts insured by brokers | FOREX.com, for example, keeps customer deposits separate from its own operating funds and distributes them across a global network of custodian banks and brokers. |
| Forex accounts insured by dealers | Dealers may disappear or go bankrupt, and you may not be able to get your money back. |
| Forex accounts insured by the CFTC | The CFTC advises the public to research dealers before making deposits or sharing personal information. |
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What You'll Learn
Forex accounts are not FDIC-insured
The Securities Investor Protection Corporation (SIPC) does, however, protect investors if their brokerage firm fails financially. This is a non-profit corporation created by Congress that has been protecting investors for 50 years. It steps in when a SIPC-member brokerage firm fails and customer assets are missing.
It is important to note that SIPC does not protect foreign exchange trades. Therefore, it is crucial to research forex dealers thoroughly before making deposits or handing over sensitive personal information. You should verify that the dealer and its employees are registered with the Commodity Futures Trading Commission (CFTC) and check their disciplinary history with the National Futures Association (NFA).
Some forex dealers, such as FOREX.com, adhere to strict standards and are regulated in multiple jurisdictions worldwide, including the US, Canada, and the UK. They may also be registered as Futures Commission Merchants (FCM) and Retail Foreign Exchange Dealers (RFED) with the CFTC and members of the NFA. FOREX.com, for example, undergoes regular audits and communicates service changes to its clients.
Additionally, some forex dealers offer their own insurance programs, such as FXCL Forex, which offers an Insurance Program for its trading accounts.
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Securities Investor Protection Corporation (SIPC) protects investors when brokerage firms fail
The Securities Investor Protection Corporation (SIPC) is a federally mandated, non-profit, member-funded corporation created by an act of Congress in 1970. It protects investors when brokerage firms fail by expediting the recovery and return of missing customer cash and assets during the liquidation of a failed investment firm. It does not, however, investigate fraud or securities crimes.
SIPC steps in when a SIPC-member brokerage firm fails financially and assets are missing from customer accounts. It works to restore investors' cash and securities, protecting customer assets. It has recovered billions of dollars for investors.
SIPC protects cash in a brokerage firm account from the sale of or for the purchase of securities. It covers stocks, bonds, Treasury securities, certificates of deposit, mutual funds, money market mutual funds, and certain other investments as "securities." It does not protect commodity futures contracts (unless held in a special portfolio margining account), foreign exchange trades, investment contracts (such as limited partnerships), fixed annuity contracts not registered with the US, or digital asset securities that are investment contracts not registered with the US Securities and Exchange Commission.
SIPC has a coverage limit of $500,000 (net equity) per cash/securities account and $250,000 for cash-only accounts. If an investor has multiple accounts at a failing brokerage, the $500,000 limit is not strictly applied per account. Instead, the notion of "capacity" is used, and the limit is applied per capacity. For example, if an investor has two Roth IRAs of $400,000 each and an individual account with $500,000, the two IRAs would be considered a single "capacity," and the $800,000 sum would only be covered up to the $500,000 limit. The individual account is a distinct capacity and would be covered for its full value.
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$50.85 $63.99
FOREX.com US is regulated and registered in multiple jurisdictions
As a regulated entity, FOREX.com adheres to strict standards and undergoes regular audits, which include reviewing procedures to ensure the protection of customer assets and that their best interests are served. The company also communicates service changes to its clients, maintains transparent pricing, and separates customer deposits from its own operating funds, distributing them across a global network of custodian banks.
FOREX.com actively complies with all Anti-Money Laundering and anti-terrorism laws and regulations, and it reviews account activity for any suspicious transactions that may indicate money laundering. The company is committed to financial strength and security, maintaining capital levels above those required by regulators, and has an established global liquidity plan providing access to significant resources.
FOREX.com's parent company, StoneX Group Inc., is a publicly traded company on NASDAQ, meeting the highest standards of corporate governance, financial reporting, and disclosure. StoneX has a proven record of financial strength and stability, giving confidence to customers and partners that the company is well-managed and capitalized.
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FXCL Forex offers insured trading accounts
Typically, forex accounts are not insured. For example, the US Federal Deposit Insurance Corporation (FDIC) does not insure non-deposit investment products, even if they are purchased from an FDIC-insured bank.
However, FXCL Forex offers insured trading accounts through its Insurance Program. This program allows clients to insure any range from 10% up to 100% of their funds, with a minimum deposit of $500 or its equivalent in the account's currency. There is no maximum insured deposit. FXCL Forex will pay out the insurance to the client when an insurance event has occurred and the client has met the trading volume requirements. The insurance event occurs when the account balance reaches 10% of the insured amount. The trading volume requirements depend on the size of the insured amount, and the client has 365 days from the insurance registration date to meet them. If the client does not complete 100% of the required trading volume, they will receive a partial payment of 30% of the insured amount if they have completed more than 50% of the required volume.
To apply for the insurance payments, the client should send a request by pressing the "Apply for the insurance payments" button inside Trader's Cabinet. The insurance payments will be credited to the client's trading account within five business days after the compliance of the Program requirements is verified. All positions on the trading account should be closed at the moment of the request for insurance payments. The client can make withdrawals and internal transfers from the insured trading account, but the account's balance should not be less than the insured amount size after the transaction.
FXCL Forex's Insurance Program provides security for traders who are concerned about the safety of their funds. By offering insured trading accounts, FXCL Forex helps to protect its clients' funds and provides peace of mind for traders.
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OTC forex trading is not an open market
Foreign exchange (forex) is an over-the-counter (OTC) market. OTC markets are decentralised, with no physical location, and are the opposite of exchange-based markets. OTC forex trading is not an open market because it is not reliant on an exchange being open. Instead, it operates through a global, decentralised network where currencies are traded directly between participants, rather than through a central exchange. Retail traders access this market via brokers, allowing them to trade currency pairs 24 hours a day, five days a week.
OTC markets are loosely regulated and have less regulation than centralised exchanges. They involve trading securities not listed on formal exchanges and are facilitated by broker-dealer networks. This lack of strict regulation can increase potential risks for the parties involved. Counterparty risk, for example, is a frequently cited danger of OTC markets. This occurs when one side of the transaction defaults and does not meet its contractual obligations.
OTC forex trading allows for privacy, flexibility, and customisation. It is a specialised space that is essential for international trade and finance. It is also popular because it provides access to small or foreign companies, certain bonds, and flexible derivatives.
OTC markets gained a reputation for being illiquid, but advancements in electronic quotation systems have largely resolved this issue. These advancements have also increased the information available to traders. Examples of OTC financial products include bonds, derivatives, unlisted stocks, and currencies.
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Frequently asked questions
It depends on the account and the institution. For example, FOREX.com US maintains capital levels well in excess of those required by the regulator and has an established global liquidity plan. However, Forex accounts are not insured by the FDIC.
The Federal Deposit Insurance Corporation (FDIC) does not insure non-deposit investment products, even if they were purchased from an FDIC-insured bank.
The FDIC insures traditional checking and savings accounts.
The Securities Investor Protection Corporation (SIPC) protects customer assets when a SIPC-member brokerage firm fails financially. SIPC does not protect foreign exchange trades.
The benefit of using a Forex account that offers insurance is that your deposits are protected in the event that the dealer disappears or goes bankrupt.
