Forex Trading in the United Kingdom

Forex Trading in the United Kingdom

London has been one of the largest trading hubs historically and to this date is the largest in competition mainly with New York. It has a long history and at the end of 1913, almost half of all forex transactions were done using a sterling pound or GBP for short.

Today, according to the Bank for International Settlements (BIS), 36.7% of total trading volume is traded in London. Therefore, GBP is still to this date is one of the most popular currencies

The so-called London trading session starts around 7-8 GMT and lasts until 16-17 GMT. Together with other important European financial centers such as Frankfurt and Amsterdam, they form the European trading session.

Important is also the fact that the New York session overlaps with London during the evening. Therefore, it is no surprise that a lot of traders are paying attention and potentially opening trades during the London session.

Read more on the London session.

Global organizations such as the International Monetary Fund still use the London market price when calculating the value of special drawing rights.

Regulations

Financial Conduct Authority (FCA) is the main regulating body that oversees forex brokers in the United Kingdom.

FCA is responsible for 58,000 businesses and employs 2.2 million people. Therefore, it is one of the largest financial regulatory bodies around the world. It is financed by membership fees from the industry and regulates both retail and institutional service providers.

It specifies standards and requirements and investigates any misconduct. It can ban financial products and service providers and freeze any assets while an investigation takes place. Companies are required to meet minimum capital requirements and submit regular financial reports.

According to FCA`s Financial Services Compensation Scheme, clients’ investments are held in segregated accounts for extra protection and are insured by up to 85,000 GBP if the firm failed after the 1st of April, 2019 and 50,000 GBP if it failed before that.

https://www.fscs.org.uk/what-we-cover/investments/

There are three categories of licenses that a Forex broker can obtain:

1) Dealer License – a full license allowing “Market Making” and the option to trade as the client’s counterparty. Requires 730,000 EUR minimum capital to obtain in addition to other requirements.

2) Intermediary License – allows for Straight-Through-Processing (STP) of orders.

3) Restricted Broker License – allowing sales and marketing but not the ability to hold client funds.

Overall, the United Kingdom`s FCA is a highly reputable regulating agency. Therefore, when choosing a broker that is regulated by them, the risks are very low and any investor can be sure of receiving good service.

More information about FCA and the list of brokers that it regulates can be found here.

TAX obligations:

Forex Trading in the United Kingdom is subject to tax. Her Majesty’s Revenue and Customs (HMRC) is the regulatory body for taxation in the UK.

The tax year is recognized starting from the 6th of April and ends on the 5th of April for the next year.

Generally, Capital gains are taxed at 18 percent. Whether you are subject to it, however, can vary based on how your trading activities are recognized:

  • Private investors are subject to capital gains tax.
  • Self-employed traders are liable to pay tax in the same way as a general self-employed person.
  • Speculative trading, however, is not subject to taxation as long as it remains as a secondary income.

Additionally, whether the tax applies is based on whether you are spread betting or trading CFD`s. Spread betting is free of any capital gains tax as it is recognized in a similar way as recreational gambling. However, actual trading in CFDs is subject to taxation according to the previously mentioned classification.

A personal allowance that is not taxed is set at 12,500 pounds. Additionally, losses from trading activities can be used to obtain tax relief.

Read more about taxation in the UK on Wikipedia.

ThinkMarkets

It is a UK based forex brokerage firm established in 2010 and headquartered in the United Kingdom with regional offices in Australia and Bermuda.

It is regulated by:

  • Financial Conduct Authority (FCA) in the United Kingdom
  • Australian Security and Investment Commission (ASIC) in Australia.
  • Financial Sector Conduct Authority (FSCA) in South Africa.

Key details:

  • Minimum trade size of 0.01.
  • Maximum Leverage of 500:1
  • 1-dollar minimum deposit requirement.
  • More than 35 currency pairs.
  • More than 5 Cryptocurrencies
  • More than 1200 CFD`s in Gold, Silver, Other Precious Metals, Stocks, Stock Indexes, Bonds, Oil, Other Commodities.
  • MT4, MT5, Trade Interceptor trading platforms.
  • Mobile and web applications are available.
  • It has multiple deposit options including Bank Wire, VISA, MasterCard, PayPal
  • Withdrawal Methods of Bank Wire, VISA, MasterCard, Neteller, SkrillRatings:

Rating:

At the time this article is written, ThinkMarkets.com is rated 3.4 out of 5 based on 100+ traders reviews.

Please click here to read and contribute reviews for ThinkMarkets.com

Admiralmarkets.com

AdmiralMarkets is located in the UK with regional offices in Australia, Cyprus, Estonia and Latvia

AdmiralMarkets is regulated by:

  • Financial Conduct Authority (FCA) of the United Kingdom.
  • Australian Securities and Investments Commission (ASIC) of Australia
  • Cyprus Securities and Exchange Commission (CySEC) of Cyprus
  • Estonian Financial Supervision and Resolution Authority (EFSA) of Estonia

Key details:

  • Minimum deposit of 200 USD
  • More than 45 currency pairs.
  • More than 30 Cryptocurrency pairs.
  • More than 3780 CFD`s in Gold, Silver, Other Precious Metals, Stocks, Stock Indexes, Bonds, Oil, Other Commodities.
  • Deposit options including Bank Transfer, Mastercard, Visa, Skrill, Neteller, Klarna and more.
  • It supports MT4 and MT5 trading platforms.
  • Both web and mobile applications are available.

Rating:

At the time this article is written, AdmiralMarkets.com is rated 3.7 out of 5 based on 100+ traders reviews.

Please click here to read and contribute reviews for AdmiralMarkets.com

Key takeaways.

  • Pound sterling (GBP) is among the most popular currencies traded.
  • London trading session is still the largest by volume traded.
  • Financial Conduct Authority (FCA) is the main regulating body that oversees forex brokers in the United Kingdom.
  • Clients’ investments are insured by up to 85,000 GBP by FSCS.
  • Private investors do not pay any capital gains tax as long as it can be considered as a secondary income.
  • Spread betting is not subject to any tax
  • Her Majesty’s Revenue and Customs (HMRC) is the regulatory body for taxation in the UK, therefore, contact them to find out whether you will be subject to tax.

 

Author Profile

Fat Finger

Fat Finger

Hello everyone!

My name is Phat Fin Ge, but most people just call me Fat Finger or Mr. Finger.

Many years ago, I was a trader on the Hong Kong Stock Exchange. I became so successful that my company moved me to their offices on Wall Street. The bull market was strong, but my trading gains always outperformed market averages, until that fateful day.

On October 28th, 1929, I tried to take some profits after Charles Whitney had propped up the prices of US Steel. I was trying to sell 10,000 shares, but my fat finger pressed an extra key twice. My sell order ended up being for 1,290,000 shares. Before I could tell anyone it was an error, everyone panicked and the whole market starting heading down. The next day was the biggest stock market crash ever. In early 1930, I was banned from trading for 85 years.

I went back to Hong Kong to work at my family's goldfish store. Please come and visit us at Phat Goldfish in Kowloon, only a 3 minute walk from the C2 MTR entrance.

I thought everyone would forget about me and planned to quietly return to trading in 2015. To my horror, any error in quantity or price which cause a problem kept getting blamed on Fat Finger, even when it was a mix up and not an extra key being pressed. For example, an error by a seller on the Tokyo Stock Exchange was to sell 610,000 shares at ¥6 instead of 6 shares at ¥610,000. That had nothing to do with me or with how fat the trader's finger was, but everyone kept yelling, "Fat Finger! Fat Finger!" In 2016, people blamed a fat finger for a 6% drop in the GBP. It really was a combination of many things, none to do with me or anyone else who had a wider than average finger.

Now that I can trade again, I'm finding forex more interesting than stocks. I've been doing some research on trading forex and other instruments and I'll be sharing it here.

If you see any typing errors, you can blame those on my fat finmgert. If you see any strange changes in price, it's not my fault.

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