Recently, restrictions and regulations have become part and parcel of online forex and CFD trading. International scrutiny in these trading instruments has increased, causing a ripple effect, and that is exactly where offshore brokers come in.
Offshore forex brokers are a good option, mainly if the brokers in your jurisdiction are restricted in one way or another. And there are benefits with the offshore forex brokers such as higher leverage, improved incentives such as bonuses and rebates, and simpler onboarding.
We briefly discuss five of the best offshore forex brokers to help you make an informed decision.
What are Offshore Forex Brokers?
Offshore brokers have recently emerged as viable investment instruments, especially for people living in countries without a robust financial or investment sector. Forex trading has lower margin requirements, and a single account gives you access to numerous asset classes.
Forex brokerage has grown to be a vast and lucrative industry, attracting both scrupulous and unscrupulous businesses in its fold. Where there is profit, there will you also find people looking to make a quick buck unethically and head for the hills.
Many unethical companies have used aggressive marketing and promises they are unwilling to fulfill to grab the market segment that doesn’t understand the concept that well. This has caused a flurry of complaints to regulators and the resulting restrictions and advisories.
Offshore forex brokers are in lightly regulated jurisdictions such as Cyprus and Malta and enjoy lots of freedom in how they operate.
How Offshore Forex Brokers work
The best offshore forex brokers are in countries or jurisdictions with regulatory frameworks and jurisdictions considered favorable by many brokers. For instance, Plus500 is regulated in Seychelles but publicly listed in the London Stock Exchange. It is now possible to work with a broker registered away from home, which was an uphill task years ago.
The main attraction of offshore brokers is higher leverage. It is possible to get leverage as high as 1:2000 and attractive incentives. They do not have competency questions and the sort to determine your eligibility to trade in certain asset classes.
Best 5 Offshore Forex Brokers
Choosing Offshore Forex Brokers
- The regulatory jurisdiction of the forex broker is as important as the investment. Be sure to check where the forex brokers are registered and determine if it is safe. But why do we say so? Jurisdictions such as St. Vincent, Dominica, and Grenadines do not actively regulate brokers registered in the country. They do not monitor or officially authorize forex traders operating from the country, which somehow exposes traders to risks. Dominica has a regulatory authority but does not have a regulatory framework for forex trading. An unscrupulous and unchecked company in such jurisdiction can use price manipulation and cause loss of money for investors. Brokers that are not made to provide execution and operation reports to the regulator can get away with anything.
- Every account has a trading fee. Keep an eye on this as well. After all, the goal is to end up with the best margin and laugh all the way home with profits. What is the commission per lot round turn? What about the spread? The commission of $2 per lot is the lowest and significantly reduces your trading costs. However, that shouldn’t be the only trading cost variable that you should track. What is the spread plus commission? What are the swap rates? Swap rates are a significant factor to consider depending on whether you are a day trader or someone that holds their position open for more than a week.
Offshore forex brokers are excellent investment vehicles for people looking to expand their portfolios. However, you should exercise due diligence. Don’t jump right in head first without proper scrutiny of the firm you intend to use to invest. One offshore jurisdiction is not the same as another, and it is not every company that operates with the same standard.
What is the difference between onshore and offshore forex brokers?
Offshore brokers have a significant amount of operating freedom, thanks to their lightly regulated jurisdictions. Examples include Vanuatu, Seychelles, Belize, Grenadines and St. Vincent. Vanuatu has more than 114 licensed firms that can deal with securities such as forex. In contrast, onshore brokers are in tightly regulated jurisdictions such as Japan, Canada, Europe, the US, Singapore and Australia.