When we founded ForexBrokers.com back in 2016, one of our goals was to find a way to help forex traders across the globe easily identify trustworthy brokers versus those who warrant a closer consideration before opening an account.
This effort ultimately lead us to develop Trust Score, a proprietary algorithm that incorporates data we collect from each forex broker to determine overall trust.
Each Trust Score is a numerical 1 - 99 rating, with 99 being the highest.
Trust Score Variables
So what goes into calculating Trust Score? Variables tied into calculating Trust Score include total years in business, which regulatory licenses each firm holds, corporate structure (specifically, if the firm is publicly traded and if it is a bank), as well as an overall opinion score from our in-house industry expert, Steven Hatzakis.
Here is a list of the regulatory licenses we incorporate currently. It is important to note that not all licenses are weighted equally. For example, becoming licensed by the Commodity Futures Trading Commission (CFTC) to operate in the United States is far more complicated, expensive, and, as a result, more significant than registering with the Financial Sector Conduct Authority (FSCA) in South Africa.
Here is a list of the regulatory licenses that are currently tracked and factored into Trust Score (ordering by tier, alphabetical by Country):Tier-1 Jurisdictions (High Trust):
- Australian Securities & Investment Commission (ASIC) - Australia
- Investment Industry Regulatory Organization of Canada (IIROC) - Canada
- Securities Futures Commission (SFC) - Hong Kong
- Japanese Financial Services Authority (JFSA) - Japan
- Monetary Authority of Singapore (MAS) - Singapore
- Swiss Financial Market Supervisory Authority (FINMA) - Switzerland
- Financial Conduct Authority (FCA) - United Kingdom (UK)
- Commodity Futures Trading Commission (CFTC) - United States
- China Banking Regulatory Commission (CBRC) - China
- Cyprus Securities & Exchange Commission (CySEC) - Cyprus
- Israel Securities Authority (ISA) - Israel
- Financial Markets Authority (FMA) - New Zealand
- Central Bank of Russia (CBR) - Russia
- Financial Services Board in South Africa (FSB) - South Africa
- Securities and Exchange Commission (Thailand) - Thailand
- Dubai Financial Services Authority (DFSA) - United Arab Emirates
- BVI Financial Services Commission (FSC) - British Virgin Islands
- Mauritius' Financial Services Commission (FSC) - Mauritius
- Offshore - Any Offshore Jurisdiction (St. Vincent, Venuatu, Nevis, etc.)
Each year, we work to expand our database of countries we track and monitor. In fact, ForexBrokers.com is currently home to the largest independent database covering forex regulators on the web.
Trust Score Risk Levels
To simplify interpretation, we think of trust as three separate levels of counterparty risk: low, average, and high.
Low-Risk: 85 - 99
Low-risk firms are considered the most trustworthy. Put simply, we would not hesitate to open and fund an account with a low-risk broker (and we have numerous times). It is important to note though that low-risk firms are not immune from running into trouble, and our assessment of risk is by no means a guarantee of solvency for the indefinite future. Events like the Swiss National Bank abruptly removing its euro ceiling in 2015 are impossible to predict, and such market anomalies can have catastrophic effects on forex brokers.
Average-Risk: 70 - 84
Average-risk firms are firms we consider to be safe, but worth a closer inspection before opening and funding an account. At the least, we encourage traders to check the regulatory licenses for these firms to make sure they are regulated in the Country they reside in. By being regulated in the country of residence, typically there are additional protection provisions in place in the case of a broker going under or getting into legal trouble.
High-Risk: 69 or below
High-risk firms should be scrutinized and carefully reviewed before opening an account. These forex brokers are, in most cases, operating without credible regulatory licensing and likely have a history of legal or financial issues. Before considering an account with a high-risk firm, we recommend checking the country rankings for your country of residence to see if a higher trusted firm is available.
Have an idea for how we can improve our scoring methodology? Email us, we'd love to hear from you.
Forex Risk Disclaimer
"There is a very high degree of risk involved in trading securities. With respect to margin-based foreign exchange trading, off-exchange derivatives, and cryptocurrencies, there is considerable exposure to risk, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or related instrument. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses." Learn more.