Eternity Law International — News — Segregated Forex Brokerage Account

Segregated Forex Brokerage Account

Published:
December 8, 2020

“Segregated account” concept means separation of client savings and operating funds of the Forex broker. This scheme helps to ensure complete security of trading operations carried out within the foreign exchange market. The segregated account is guarantee that any fees associated with trading transactions, in particular, commissions, will be charged fairly, and this is a “stop-tap” for broker in overusing of their own professional powers.

Forex sphere widely involves this solution, because if it is available, consumer can be sure that his/her account is not used for the goals of a broker. In addition, purpose of establishing a segregated account is also to encourage the consumer to invest, since he/she will always know where his funds are and how they are employed.

Benefits of having a segregated account

Let’s pay attention to advantages of segregated account.

  1. Using the segregated accounts, companies can automate outgoing and incoming bank transactions.
  2. Such accounts prevent data confusion, thereby creating a high level of safety. Thus, client can be sure that in extreme conditions, for example, in case of company bankruptcy, his/her funds will remain intact.
  3. Client is able to control his/her funds at any time – 24/7.
  4. Absence of unnecessary and dangerous risks for the business project.
  5. Improving the level of transparency of operations.

Reliable Forex brokers offer segregated accounts to their consumers. This way, clients can be assured that they can directly contact those offering investment solutions. This, in turn, makes it possible to control risks of liquidity of savings fully.

Usage of segregated account

Since segregated accounts are an important part of the business, authorities, supervising providers of forex services, in each jurisdiction monitor their use. In Britain, the FCA has established certain organizational requirements, principle of segregation and rules for reconciliation and usage of segregated account.

Regarding the segregation and functioning of customer cash accounts CASS 5.5 FCA provides the following:

  • “One of the goals of CASS 5.5 is to provide assurances that, unless otherwise specified, customer money is kept separate from company funds. In case of bankruptcy of the company, the separation of funds will become the basis for the effective functioning of the mechanisms for protecting clients’ money. The goal is to draw a clear line between the client’s money and the funds that may be encroached on by creditors in the event of bankruptcy.”

CySEC also oversees the firms under its jurisdiction. Section 18 (2) (j) of the CySEC Act clarifies the following: “CIF is committed to taking all necessary steps to protect customer funds held by the entrepreneur. It is not allowed to use consumer funds for the purposes of the organization.”

Summary

Generally, Forex is considered as a high-risk business, as these activities are very unpredictable. The utilization of segregated account by dealers significantly increases the degree of certainty and reliance. The segregated accounts empowers brokers to secure customers’ funds.

In this way, the firm controls the assets, yet can’t utilize them to cover the organization’s costs or to invest. What is additionally significant, is that the customer’s funds are saved if the broker is bankrupted.

Eternity Law International will provide you with expert advice on opening a segregated account in a suitable jurisdiction. If you have any questions or need advice on opening a segregated account or obtaining forex broker license, call us at the phones indicated on the site, or write to CRM form, our specialists will answer you online.

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