Best Hong Kong Forex Brokers
The importance of appropriate and truly reliable broker for successful work on the Forex market is difficult to overestimate. Hong Kong Forex brokers are among the best brokers to date. Not only can they provide their clients with the most favorable online trading terms, but they must also pass a licensing procedure with the respective regulators. This is the best guarantee of a reliable HK FX broker. This list includes the brokers of the Forex market who are officially registered or have physical representation in Hong Kong.
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- Lowest spread Forex Brokers
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- Banks with Forex Traiding
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Brief History of Forex Trading in Hong Kong
It is prudent to have an understanding of the history of forex trading in Hong Kong to understand the FX market in the country today. The Hong Kong Securities and Futures Commission was formed during a dark time in the history of financial markets. It was formed after the occurrence of Black Monday, a stock market crash that occurred in October, 1987. On this day, stocks all over the world were crashing with the stock values crashing in the shortest period ever. Although this problem started in Hong Kong, it eventually spread to Europe before hitting the United States of America. At this time, a lot of stocks had lost their margins. Before the end of this October, the world had seen a lot of stock markets fall with others crashing falling for more than 50% like in Hong Kong.
Another financial meltdown in Asia led by Thailand led to calls for better regulatory frameworks even in Hong Kong. This happened after the Thai currency collapsed after it lacked foreign reserves to support its peg to the USD. The country also had massive foreign debt, which almost led to bankruptcy. At this time, Hong Kong was bailed out with more than $1 billion that was provided by the financial entities in the country. However, the country was also lucky because it had about $80 billion in foreign reserves. At this time, forex trading was not developed in the country but the changes that followed to the regulations made the jurisdiction a good trading environment.
Regulation of FX trading in Hong Kong
Almost all the developed nations of the world has been moving towards improving the regulatory framework for financial markets. In some developing words, the regulation of securities markets is not clear while it may even be considered illegal for those that wish to trade currencies. In the western world, the trading of foreign exchange is legal but it is highly regulated. The various financial crashes that have occurred around the world such a the Black Monday have ensured that there are strict rules for forex brokers, lower leverages and an increased minimum capital requirements. This has also ensured that other unregulated forex brokers in the region have been ousted to pave way for more credible companies. Some countries that did not have a definite legal framework have created ways to improve monitoring and supervision of local FX markets.
Since Hong Kong is a serious financial center in the world, it also has some strict regulations that ensure forex trading in the country is conducive. This came about after the Black Monday crash where the newly founded regulator had to create these strict regulations to ensure that such a crash does not happen again in future. The company has had a number of duties since its establishment in 1987. These include:
- Developing and monitoring market regulations- One of the main roles of the Hong Kong Securities and Futures Commission is to ensure that it develops regulations for the financial entities in the securities market. This includes monitoring compliance of companies and determining what should happen if they flout these rules.
- Issuing licenses to financial firms that have been authorized to provide the financial services.
- Approving new financial products in the market and ensuring that consumers have knowledge about these products before they are offered to investors.
- Acting as a watchdog for market operators by improving infrastructure.
- Monitoring all the rules and regulations surrounding mergers, takeovers and acquisitions.
- Cooperating with the other four regulatory bodies in the country.
- Addressing the consumers needs with regards to market operation, offering insights in consumer rights, responsibilities and even educating them on the risks involved with the different forms of investing such as Forex trading.
Although there are about four regulatory bodies in Hong Kong, the Hong Kong Securities and Futures Commission works with all of these to maintain a high standard of conduct. They also help to identify and reduce the likelihood of financial crime or misconduct in the financial markets. All the forex broker that wish to offer their services to clients in Hong Kong need to have a license or need to be registered with the SFC. Of course there are a lot of exceptions to this but it does not apply to forex trading. There are a number of requirements that you need to meet if you wish to have a license. These include:
- An appropriate business structure, qualified staff and effective internal systems.
- Fulfill the necessary capital requirements
- Be competent in the provision of financial services
- Pass an assessment of your financial status, industry experience and other qualifications that are relevant.
- Proving to the SFC that they are ethically and morally fit to serve as a financial services firm.
Features of forex trading in Hong Kong
The platform that you decide to adopt when you choose to trade currencies or even other types of securities will largely determine your success. You need to review all the platforms that the local Hong Kong brokerage companies offer before you select one. It is often recommended that you get a demo of your trading platform and use it to familiarize yourself with trading before you go live. What do you get from experimenting with a demo version first? You will get to see if it is good enough for your needs, if its easy to use and if the platform has all the features that you desire in a forex broker. If this is not what you want then you can easily explore other brokerage companies. Today, most people offer the popular MT4 trading platform that also has a web version of it. Remember, you can choose any trading platform that you desire but never forget to test it before you open a real money account.
Commissions and Spreads
You have to know that your broker will get paid on each trade that you decide to make How is this possible? The short answer is through a spread, which is essentially the difference between athe buy and sell prices of a currency pair. EUR/USD, the most popular pair has a spread of about 1 or 2 pips that is spread between the buying and selling price. Your broker's commission will thus be the loss of these 1 or 2 pips that you have when you open a trade. Always choose a broker that has a significantly lower spread as it will eventually reduce your profit if the spreads are low.
Types of Account
There are various types of accounts that forex brokers offer in Hong Kong. After trading with a demo account, you will have to open a real account depending on the different choices that your forex broker in Hong Kong has. These include
A Micro Account
This is a good choice for those with little money to invest that typically ranges from $100 up to $500. Brokers that give you this option allow you to trade some money without all the necessary risk that is involved. A micro lot size will be $1000 and a pip price is $0.10. This is also a great option for novice traders.
Do you wish to upgrade from your micro account? Or do you just want to simply trade in larger amounts of money? With a mini account, you can use $500 to $2000 with a trading lot of $10000.
If you want to be a professional trader with a portfolio of more than $10000 then you should consider opening this type of account. A standard account requires an optimum investment of $20000 with a standard lot size of 100000. It is, however, worth noting that your financial risk increases with the amount of money that you trade and so you will have to ensure that you only risk what you can bear.
Another great feature to consider before choosing a forex broker in Hong Kong is the type of customer service. Of course not every broker treats their clients right or equally. With the financial risk that you are incurring, it is only rational that you get the brokerage firm with the greatest care for their clients. The minimum you should accept from your forex broker is having services provided in your native language, live chats and a 24/5 availability. This will ensure that the customer service line is accessible on all working days to help address any problem that you may meet when trading.
A good forex broker should not only offer you the minimum features that is required to trade but should go out of their way to offer additional services. A brokerage firm that invests its money to ensure clients return their investments as much as possible is a sign of a good business culture. For example, some forex brokers hire financial analysts and economists to write and interpret the global news and state of economies. These brokers may gift you free ebooks, trading contests or even social trading services such as the one by eToro.
Reporting complaints of an HKSFC FX broker
Hong Kong has a special company, the Investor Compensation Company Ltd that is sthe subsidiary of SFC. It was primarily founded to investigate and administer any claims that arose against the investor compensation fund of Hong Kong. This means that a special body of the SFC has been separated to help deal with any claims of investors that have lost their funds. The Investor Compensation Company receives, evaluates and makes the final decision as to whether a claim is valid. If it is so, the company will make the payments and try to recover any further losses. The functions of this company are set out in the Securities and Futures Orded and include
- Managing and administering the funds
- Making Notices to invite claims from the public
- Determining if complaints are lodged in the necessary time limit
- Accepting claims
- Processing the required documents or records
- To issue a notice of determination
- Assessing whether claims are valid for compensation
- Making payment of claims and deciding the order of these payments
When are you eligible to make a claim? You may ask. According to the forex trading rules in Hong Kong, you are eligible to make a claim if the losses that you accrue while trading can be attributed to a regulated broker in the country or an authorized financial entity. You are also allowed to file a complaint with the HKSFC for various reasons such as when you suspect